Incheon Harbor Corporation (Law Firm LLC, Attorneys Lee Jong-moo et al., Counsel for the plaintiff-appellant)

Seo-gu Incheon Metropolitan City and two others (Attorney No-gu et al., Counsel for the defendant-appellant)

August 31, 2018

Incheon District Court Decision 2016Gahap57549 Decided October 27, 2017

1. The part against the Defendants in the judgment of the first instance is revoked, and the Plaintiff’s claim corresponding to the revoked part is dismissed.

2. All costs of the lawsuit shall be borne by the Plaintiff.

1. Purport of claim

A. Defendant Seo-gu, Incheon Metropolitan City pays to the Plaintiff money of KRW 134,019,319 and KRW 64,268,810 per annum from September 30, 201, KRW 69, KRW 764, and KRW 247 from September 25, 2012, KRW 16,262 from October 16, 201 to October 20, 201, KRW 5% per annum from October 21, 2016 to October 20, 2016, and KRW 15% per annum from the next day to the day of complete payment.

B. Defendant Jung-gu, Incheon Metropolitan City shall pay to the Plaintiff the amount of KRW 2,231,354,787 and KRW 1,057,842,63 as to KRW 1,154 from September 30, 201, KRW 1,173,512,154 from September 25, 201 to October 20, 201, KRW 5% per annum from October 21, 201 to October 27, 2016, and KRW 15% per annum from the next day to the date of full payment.

C. Defendant Incheon Metropolitan City pays to the Plaintiff money of KRW 473,010,319 and KRW 224,411,072 per annum from September 30, 2011, KRW 248,595, and KRW 995 per annum from September 25, 2012, KRW 3,252 from October 16, 2012 to October 20, 2016, KRW 5% per annum from October 21, 2016 to October 27, 2016, and KRW 15% per annum from the next day to the day of full payment.

(The plaintiff reduced the plaintiff's claim against the defendants in the trial).

2. Purport of appeal

The part against the Defendants in the judgment of the first instance is revoked, and the Plaintiff’s claim corresponding to the revocation part is dismissed.

1. Basic facts

A. The Plaintiff is the owner of each land indicated in the “Seo-gu Public Facility Land” indicated in the attached Form, 1, 639, Seo-gu, Seo-gu, Incheon, Seo-gu, Incheon (hereinafter “Seo-gu Public Facility Land”), 2, 5-32, including attached Form 1, Jung-gu, Jung-gu, Incheon, stating the details of payment on September 30, 201 and the details of payment on September 25, 201 of the land for Jung-gu Public Facility” (hereinafter “B-gu Public Facility Land”; and hereinafter “instant land” in combination with the land for the Seo-gu Public Facility.

B. From 2011 to 2012, the head of Seo-gu Incheon Metropolitan City, the head of Seo-gu, the head of Jung-gu, Incheon Metropolitan City, issued a disposition imposing property tax and local education tax (hereinafter “instant disposition”) on the land of public facilities in Jung-gu as indicated below, and the Plaintiff paid property tax, etc. upon the Defendants.

In the case of the Seo-gu head of Seo-gu, Incheon Metropolitan Government on September 30, 2011: 128, 537, 619 25, 707, 527, 267, 423, 114, 244, 24, 2222,886, 822, 145, 2012, 32, 5246, 5248, 296, 284, 297, 296, 297, 296, 296, 205, 206, 205, 206, 205, 206, 306, 294, 306, 294, 205, 296, 206, 506, 506, 206, 2012.

C. The property tax paid by the Plaintiff was reverted to each Defendant, Seo-gu, Incheon Metropolitan City, and local education tax was reverted to Defendant Incheon Metropolitan City.

D. Meanwhile, the land of Seo-gu public facilities is the land determined by the urban planning facilities (harbors) as prescribed by the Incheon Metropolitan City Notice No. 2002-168 on July 22, 2002, and the topographical map is publicly announced. The land of Jung-gu public facilities is the land determined by the following public announcement numbers and public announcement dates: “The details of payment on September 30, 201 for the land of Jung-gu public facilities” and “the details of payment on September 25, 2012 for the land of Jung-gu public facilities” and “the details of payment on September 25, 2012 for the land of Jung-gu

E. The statutes related to the instant case are as indicated in the attached Form “related statutes.”

[Basis] Facts without dispute; Gap evidence 1 through 3, 6 through 11 (including each number; hereinafter the same shall apply); Eul evidence 1 through 7, 10 through 20; Eul evidence 7 through 12; and the purport of the whole pleadings;

2. The plaintiff's assertion

Article 84(2) of the former Restriction of Special Local Taxation Act provides that property tax shall be reduced by 50/100 in the case of the land for public facilities under Article 2 subparag. 13 of the former National Land Planning Act, for which the determination of an urban management plan and a topographical map concerning an urban management plan are publicly announced pursuant to Articles 30 and 32 of the same Act (hereinafter “instant mitigation provision”). The instant land owned by the Plaintiff also constitutes the land for public facilities under Article 2 subparag. 13 of the former National Land Planning and Utilization Act, for which the determination of an urban management plan and a topographic map concerning an urban management plan are publicly announced pursuant to Articles 30 and 32 of the same Act, and thus, property tax thereon shall be reduced by 50/100 pursuant to the mitigation provision of the instant case.

However, the portion equivalent to 50/100 of the instant disposition is not subject to the instant mitigation provision, but subject to the imposition of property tax and local education tax. Therefore, it is unlawful, and its defect is significant and apparent, and thus, it is null and void.

Therefore, according to the instant disposition, the Defendants are obligated to refund the amount equivalent to 50/100 of the property tax and local education tax paid by the Plaintiff as unjust enrichment.

3. Determination

A. Whether the disposition of this case is unlawful

For the following reasons, this case’s land constitutes land subject to the mitigation provision of this case’s land, and thus, the instant disposition of this case is not subject to the mitigation provision of this case’s land, but is erroneous for imposing property tax and local education tax.

① The instant land constitutes the land for a harbor, green belt, road, etc., which is a public facility as prescribed by Article 2 subparag. 13 of the former National Land Planning and Utilization Act and Article 4 subparag. 1 of the Enforcement Decree of the former National Land Planning and Utilization Act, and for which the determination of an urban management plan and the announcement of a topographic map concerning an urban management plan has been made pursuant to Articles 30 and 32

② Defendant Jung-gu, Jung-gu, Incheon Metropolitan City, asserts that the instant mitigation provision applies to land, the exercise of private rights is limited in the absence of the completion of the project, and thus, the instant land already completed is not subject to the said provision.

Under the principle of no taxation without law, a tax law shall be interpreted in accordance with the text of the law unless there are special circumstances, and it shall not be permitted to expand or analogically interpret without reasonable grounds (see, e.g., Supreme Court Decisions 2016Da21272, Oct. 12, 2017; 2015Du45700, Apr. 20, 2017).

In addition, the mitigation provision of this case only provides that property tax shall be reduced on the land for public facilities under Article 2 subparag. 13 of the former National Land Planning Act, for which the determination of an urban management plan and a topographical map as to an urban management plan are publicly announced pursuant to Articles 30 and 32 of the same Act, and does not provide that property tax shall be reduced on the land which is not yet executed after the determination of an urban management plan and the announcement of a topographic map as to an urban management plan is made, and thus, it is not permissible to interpret the mitigation provision of this case as applicable to “where the exercise of private right is restricted on the land for which public facilities under Article 2 subparag. 13 of the former National Land Planning and Utilization Act is not implemented after the determination of an urban management plan and the announcement of a topographic map as to an urban management plan is made pursuant to Articles 30 and 32 of the same Act.” On any other premise, the assertion among the Defendant of

③ In addition, Defendant Jung-gu, Jung-gu, Incheon Metropolitan City, asserts to the effect that the failure of the instant mitigation provision to apply the instant mitigation provision to the land of Jung-gu, as the Plaintiff did not file an application for local tax reduction or exemption pursuant to Article 98(1) of

The main text of Article 98(1) of the former Restriction of Special Local Taxation Act provides that a person who intends to obtain local tax reduction or exemption shall file an application for local tax reduction or exemption, but in light of the fact that the head of a local government can ex officio reduction or exemption if he/she knows such reduction or exemption, the above provision on application for reduction or exemption is merely a provision on the procedures for handling affairs for the convenience of handling reduction or exemption (see, e.g., Supreme Court Decision 2001Du10639, Jun. 27, 2003). The argument in Jung-gu Incheon Metropolitan City, which is the defendant on a different premise, is without merit.

④ Meanwhile, Defendant Seo-gu, Seo-gu, Incheon Metropolitan City, asserts that the pertinent disposition of this case cannot be deemed unlawful unless it is deemed that it deviates from or abused the scope of discretion, in violation of the principle of proportionality, etc., since it belongs to the discretion of the tax authority whether to reduce property tax pursuant to the mitigation provision

However, since the mitigation clause of this case provides that property tax shall be reduced for land meeting certain requirements, the argument of the defendant Seo-gu, Seo-gu, Incheon Metropolitan City on the premise that there is discretion as to whether to reduce property tax pursuant to the mitigation clause of this case is reasonable.

B. Whether the instant disposition is void as a matter of course

1) In order for a taxation disposition to be deemed null and void as a matter of course, the mere fact that there is an illegal ground for the disposition is insufficient. The defect must be objectively obvious as it seriously violates the important part of the law. In determining whether there is a significant and apparent defect, the purpose, significance, function, etc. of the law, which serves as the basis for the taxation disposition, should be examined from a teleological perspective at the same time as well as reasonable consideration on the specificity of the specific case itself. In addition, in a case where a taxation disposition is made by applying a provision of a certain law to a certain legal relationship or factual relationship, the legal principles clearly indicate that the relevant provision cannot be applied to the legal relationship or factual relationship, and thus, if there is no room for dispute over the interpretation of the law, the defect is significant and obvious. However, even if there is a room for dispute over the interpretation of the law because the legal principles that the pertinent provision cannot be applied to the legal relation or factual relations clearly show, it is merely a mistake in the fact of taxation (see Supreme Court en banc Decision 2017Da2409, Jul. 19, 2018).

2) According to the evidence employed prior to the instant disposition, the evidence submitted by the Plaintiff alone is insufficient to acknowledge that the defects in the instant disposition are objectively apparent, and there is no other evidence to acknowledge the same differently.

A) Whether the instant land is the land whose execution has been completed under the urban management plan

On July 11, 2005, the Plaintiff was established for the purpose of fostering the Incheon port as a competitive shipping logistics-centered base by raising expertise and efficiency in the development and operation of harbor facilities with the land of this case received from the Republic of Korea as an investment in kind. At the time of the instant disposition, the land was already used as a harbor, green area, road site, etc., which was public facilities after the completion of the enforcement of the urban management planning in accordance

B) The purpose, meaning, and function of the mitigation provision of this case

① The instant mitigation provision was enacted to support individual real estate owners whose private rights are restricted due to non-execution after the determination of the original urban management plan. In light of the aforementioned legislative background, it seems that the instant mitigation provision was introduced to compensate for losses in the event it was not executed but did not mean that it would be applied to land, the use of which was completed according to the urban planning purpose.

② The instant mitigation provision was amended to the effect that “in the case of land for public facilities (including land annexed to a house) under Article 2 subparag. 13 of the National Land Planning and Utilization Act, after the determination of an urban management plan and a topographical map regarding an urban management plan was publicly announced pursuant to Articles 30 and 32 of the same Act, property tax on the relevant portion shall be reduced by 50/10 until December 31, 2018, in accordance with the original legislative intent by Act No. 14477, Dec. 27, 2016.”

③ The amendment draft of the Restriction of Special Local Taxation Act (No. B. 2) submitted by the Government at the time of the amendment, states that “for supporting the owners of individual real estate, the private rights of which are restricted due to non-execution after the determination of urban management planning, it is the original legislative intent of the mitigation provision of this case and is to eliminate the controversy in interpretation by clarifying the amendment draft of the Restriction of Special Local Taxation Act.”

C) Whether there was room for dispute over the interpretation of the instant mitigation provision at the time of the instant disposition

① Giving preferential treatment to a specific class without any justifiable reason is not to place a specific taxpayer on a tax burden at another taxpayer’s Gun, and thus, the basis for tax reduction or exemption should also be determined by law in compliance with the principle of national sovereignty or the principle of the rule of law. Preferential treatment for tax reduction or exemption is against the principle of tax equality and is also a waiver of financial resources of the State or local governments, and it is not desirable to restrain as much as possible, and to expand the scope thereof. Therefore, in particular, if necessary to achieve the policy objective, it should be exceptionally permitted within extremely limited scope (see Constitutional Court Order 93Hun-Ba2, Jun. 26, 1996). Therefore, the provisions on tax reduction or exemption under the principle of no taxation without law and tax equity should be strictly interpreted.

② Article 84(1) of the former Restriction of Special Local Taxation Act provides that “The reduction of and exemption from property tax on land, building, and housing (limited to the corresponding portion) under subparagraph 3 of Article 104 of the Local Tax Act shall be reduced by 50/100, and the tax amount imposed under Article 112 of the Local Tax Act shall be exempted pursuant to Article 112 of the same Act on land, etc. which have not been implemented for a long time for at least ten years after the determination of an urban management plan, among urban planning facilities under subparagraph 7 of Article 2 of the National Land Planning and Utilization Act, as stipulated under the same subparagraph.”

③ In light of the legislative background of the mitigation provision as seen earlier, the purpose, significance, function, structure, language, and language of the provision, and general interpretation standards of the provision on tax reduction and exemption, etc., there is room to interpret that even if the mitigation provision itself does not specify, land, the execution of which was completed according to the urban planning, like the instant land, does not fall under the scope of application of the mitigation provision.

④ Although the instant disposition was made after the instant disposition, on June 28, 2012, the Ministry of Government Legislation responded to the effect that “The purpose of the instant mitigation provision is to reduce property tax on the land for public facilities” is that “Where an urban management plan is decided pursuant to Article 30 of the National Land Planning and Utilization Act, the site for urban planning facilities is scheduled to be installed even before the public facilities are installed, which would result in the restriction of property rights on the site for urban planning facilities, such as being contrary to the contents of the urban management plan, or unable to construct buildings or build structures, which are not urban planning facilities, which are not urban planning facilities, and thus, to reduce property tax on such land. Accordingly, the Ministry of Government Administration and Home Affairs may not reduce property tax on the land sold to the private person after the establishment of an off-road parking lot by implementing the land readjustment project.” The Ministry of Land, Infrastructure and Transport also excluded the land whose execution of the instant urban management plan was completed in accordance with the first decision to reduce and implement the relevant urban management plan as prescribed by the provision of this case.

⑤ Meanwhile, the Plaintiff asserts to the effect that, at the time of the instant disposition, there was a final and conclusive judgment (Seoul High Court Decision 2009Na100342 Decided March 23, 2010, Seoul High Court), the defect in the instant disposition of taxation is objectively clear and obvious, on the ground that, inasmuch as the said final and conclusive judgment had the obligation to reduce property tax, etc. as to the land which was already determined as urban planning facilities and publicly announced as topographic drawings, and that “the defect in the taxation disposition that did not apply falls under the invalidity of a year.” However, the said final and conclusive judgment is an issue as to whether the pertinent tax disposition is applied with respect to the circumstances where the land subject to the said taxation continues to be used for the original purpose as it was, and it is inappropriate to use the said provisions differently, and thus, it cannot be said that there was no room for dispute over the interpretation of the instant provision at the time of the instant disposition as the existence of the final and conclusive judgment.

In addition, on January 11, 2017, the Tax Tribunal rendered a decision to the effect that the property tax should be reduced pursuant to the mitigation provision of this case on the land for public facilities (airport and Park) owned by the Incheon Metropolitan City Federation (hereinafter “Tax Tribunal”), but the said decision was made after the instant disposition was taken, so it is difficult to deem that there was no room for dispute over the interpretation of the mitigation provision of this case at the time of the instant disposition on the grounds thereof.

4. Conclusion

Therefore, the Plaintiff’s claim against the Defendants on the premise that the instant disposition is null and void as a matter of course shall be dismissed as it is without merit.

Since the judgment of the court of first instance is unfair in its conclusion, the part against the Defendants in the judgment of the court of first instance which accepted the Defendants’ appeal and revoked, and the Plaintiff’s claim corresponding to the revoked part is dismissed. It is so decided as per Disposition.

[Attachment Omission]

Judges Lee Jae-won (Presiding Judge) Constitution of the Republic of Korea