early 2010 Heavy357 ( December 31, 2010)

It does not constitute a case in which profits have been distributed by new shares allotment method;

In case where a corporation, which is a shareholder, etc., distributes profits to another shareholder, who is a person with a special relationship, due to the waiver of all or part of the right to receive new stocks in the increase of its capital, such profits shall be included in the gross income. In this case, the person who received profits shall be the corporation, and the person who received profits shall be the shareholder, etc., although this case does not meet the requirements, it does not constitute a case where profits have been distributed.

2011Guhap1895 Revocation of Disposition of Imposing Corporate Tax

XX Stock Company

O Head of the tax office and one other

April 28, 2011

May 26, 2011

1. On July 1, 2010, Defendant XX director of the tax office revoked the disposition of imposition of corporate tax of KRW 429,174,160 against the Plaintiff for the business year of 2006.

2. On July 1, 2010, the disposition of imposition of corporate tax of KRW 57,267,040 on the Plaintiff for the business year of 2005 shall be revoked.

3. The costs of lawsuit shall be borne by the Defendants.

The same shall apply to the order.

1. Details of the disposition;

A. On July 6, 2006, the Plaintiff acquired all shares of 180,000 shares (hereinafter “instant shares”) that were the representative director and shareholders of XX when offering shares for capital increase in XX, in the manner of third party allotment. The Plaintiff had a special relationship with the Pacific at the time.

B. XX Co., Ltd., on Oct. 6, 2005, acquired 70,000 shares (hereinafter “instant 2 shares”) that were the representative director and shareholders of the Central OO Co., Ltd., a third party in the manner of allocating 70,00 shares (hereinafter “the instant 2 shares”) that have waived acceptance at the time of capital increase by issuing new shares of the Central OO Co., Ltd.

C. On July 1, 2010, Defendant XX head of the tax office received the distribution of KRW 1.29,174,160,00 for the total of KRW 11,670,00, the difference between the appraised value of KRW 11,670 per share after capital increase by the Plaintiff’s acquisition of the shares of this case 5,00,00 per share at par value (hereinafter “first gain”) by deeming that it falls under Article 88(1)8(b) of the Enforcement Decree of the Corporate Tax Act and imposes corporate tax of KRW 429,174,160 for the business year 2006 (hereinafter “first disposition”).

D. Meanwhile, the company XX was merged with the Plaintiff on June 1, 2009. After that merger, the head of the defendant's office imposed KRW 57,267,040,040 on the Plaintiff on July 1, 2010, on the ground that: (a) prior to the above merger, the company X acquired the shares of this case 2 in the face value of KRW 10,000,00, a total of KRW 12,166, the difference between the appraised value per share after the capital increase and KRW 12,166 (hereinafter referred to as the "second profit of this case") by taking over the shares of this case in the face value of KRW 12,16,00 (hereinafter referred to as the "second disposition of this case").

E. On September 1, 2010, the Plaintiff filed an appeal with the Tax Tribunal on each of the instant dispositions, but all of the appeals were dismissed on December 31, 2010.

[Ground of recognition] Facts without dispute, Gap evidence 1-5, 6, Gap evidence 2-5, 6, Eul evidence 1-2 and the purport of the whole pleadings

2. Related statutes;

Any statutes cited in the attached Form (hereinafter referred to as "Acts and subordinate statutes") shall be as shown in the attached Form.

3. The assertion and judgment

A. The plaintiff's assertion

1) The acquisition of new shares issued by another corporation constitutes the purchase of investment assets for tax accounting purposes, not for capital transactions. Since each of the instant benefits is evaluation marginal profits, it cannot be included in gross income pursuant to Article 18 subparag. 1 of the Corporate Tax Act. Furthermore, the time when the profit and loss of investment assets accrue is not the business year which includes the date when the assets are transferred and the proceeds are liquidated, not the business year which includes the date when the assets are acquired. Accordingly, each of the instant dispositions that are calculated by deeming the acquisition of shares in the instant case as capital transactions and calculated by adding them to gross income for the business year which includes the date when

2) Article 88(1)8(b) of the Enforcement Decree of the Corporate Tax Act applies to the case where a corporate shareholder, etc. distributes profits to another shareholder, etc. who is a specially related party, i.e., the case where profits are distributed among the shareholders, etc., and at the time of the Plaintiff’s acquisition of the instant 1 shares issued by the Plaintiff, the Plaintiff was not a shareholder of XX, and the said provision cannot be applied since the Plaintiff was not a shareholder of the Central OO corporation at the time of acquiring the instant 2 shares

B. Determination

1) According to Article 15(1) of the Corporate Tax Act and Article 11 subparag. 9 of the Enforcement Decree of the Corporate Tax Act, profits distributed by a person with a special relationship as a capital transaction under Article 88(1)8 (b) of the Enforcement Decree of the Corporate Tax Act shall be included in gross income as profits. In other words, Article 88(1)8 (b) of the Enforcement Decree of the Corporate Tax Act embodys the type of “capital transaction”, so it is not necessary to separately consider whether it is a “capital transaction.” Accordingly, the Plaintiff’s assertion that each of the instant shares acquisition is the purchase of investment assets is rejected.

2) According to Article 15(1) of the Corporate Tax Act and Article 11 subparag. 9 and Article 88(1)8(b) of the Enforcement Decree of the Corporate Tax Act, where a “corporation, etc., which is a stockholder, etc., distributes profits to a “other stockholder, etc., who is a person with a special relationship” due to the waiver of all or part of the right to receive new stocks in the increase of corporate capital, the profits shall be included in the gross income. In other words, according to Article 42(1) of the Enforcement Decree of the Corporate Tax Act, stockholders, employees, or investors mean stockholders, employees, or investors. In other words, the above provision under item (b) requires

On the other hand, according to the evidence No. 1-2 and evidence No. 2-2, the Plaintiff was not a shareholder of XX at the time of acquiring the shares of this case, and the Plaintiff was not a shareholder of the Central OO corporation at the time of acquiring the shares of this case. There is no evidence to deem otherwise that at the time of the Plaintiff’s acquisition of the shares of this case, he was either an employee or investor of the PO corporation at the time of the acquisition of the shares of this case, or that the Plaintiff was an employee or investor of the Central O corporation at the time of the acquisition of the shares of this case. Accordingly, the Plaintiff and the Plaintiff, who received the shares of this case, did not belong to the “shareholders, etc. of the newly issued company” of the PO corporation and the “PB corporation,” and therefore, Article 88(1)-2 (b) of the Enforcement Decree of the Corporate Tax Act does not apply to this case.

3) Therefore, the Plaintiff’s above assertion is reasonable, and each of the dispositions of this case, which was made on a different premise, must be revoked in an unlawful manner.

4. Conclusion

If so, all of the plaintiff's claims are reasonable, they are accepted.