Daegu District Court 2005Guhap3754 ( December 26, 2007)

National High Court Decision 2004Gu3994 (Law No. 7.06, 2005)

Whether the disbursement of research service costs can be deemed as a provisional payment unrelated to the business

The amount to be included in the deductible expenses as long as the research expenses are expenses related to the provision of technical services, and even if there is an accounting error that is processed differently from the actual one by pretending the form of payment as the research service expenses, such circumstance alone cannot be deemed as having been paid irrelevant to the business.

The contents of the decision shall be the same as attached.

Article 52 (Dispudiation of Wrongful Calculation)

Article 28 (Non-Inclusion of Paid Interest in Loss)

1. Revocation of a judgment of the first instance;

2. On July 15, 2004, the disposition of imposition of corporate tax of KRW 77,950,960 for the business year of 1999 against the Plaintiff, corporate tax of KRW 347,779,130 for the business year of 200, corporate tax of KRW 527,301,050 for the business year of 2001, and corporate tax of KRW 774,365,890 for the business year of 202 shall be revoked.

3. On July 12, 2004, the director of the regional tax office of Daegu Regional Tax Office revokes each disposition of change notification of the income amount of 5,004,638 won, income amount of 171,640,449 won, income amount of 200 business year belonging to 380,867,251 won, income amount of 2001 business year belonging to 380,867,251 won, income amount of 2002 business year belonging to 486,313,961 won, and income amount of 294,790,194 won belonging to income amount of 203 business year.

4. The total costs of the lawsuit shall be borne by the Defendants.

The same shall apply to the order.

1. Details of the disposition;

The following facts do not conflict between the parties, or if Gap evidence 1-6, evidence 1-1 through 5-5, evidence 3-1-2, evidence 4-2, evidence 4-2, 3, 39, 63, Gap evidence 7, evidence 8-1, 2, 3, Eul evidence 2-2, Eul evidence 3-2, Eul evidence 3-1 through 5, evidence 4-5, evidence 5-1 through 20, evidence 6, Eul evidence 7, 9-1 through 5, evidence 14-1 through 15, and evidence 15, this can be acknowledged.

A. As ○○ University Agricultural Bioscience University animal engineering and professor, the ZA, which are materials the main role of which is the growth and function of human two brain, has developed technology that manufactures enzymes (names of goods: light additives; hereinafter referred to as "large-scale additives") and technology that produces milk containing the level of DHA milk by eating DHA to milines (hereinafter referred to as "cypypym technology"), and can produce milk containing large amounts of milines by mixing large-scale large-scale large-scale large-scale large-scale large-scale large-scale large-scale additives into miline feed and mixing it with miline feed.

B. On October 24, 1999, the fish industry established the Plaintiff, a stock company with the purpose of manufacturing and selling milch feed for the production of milk contained in DHA using the key technology, and owned 60% of the Plaintiff’s shares, and the remainder 40% of the Plaintiff’s shares were owned by ○○. The total amount of the Plaintiff’s capital for the establishment and capital increase was 50 million won by mixed payment. On October 24, 1999, the Plaintiff was appointed as the representative director and retired on October 6, 2003.

C. The Plaintiff entered into four research services contracts (hereinafter referred to as “each of the above research services contracts individually”) with the ○ University Industrial Technology Research Institute (hereinafter referred to as the “○○ University Industrial Research Institute”) and the ○○ University Digital Research Institute (hereinafter referred to as the “○○ Digital Research Institute”), as indicated in the following table, according to the sequence below, if each of the research services contracts is created individually, the 1 research services contract, the 2 research services contract, etc., and the 13.27 billion won in total. At the time of each of the research services contracts, the 13.27 billion won in total was the Plaintiff’s major shareholder and the 200 industry research institute’s responsible researcher.

D. The Plaintiff paid KRW 6.21 billion to ○ Industry Research Institute and KRW 3.55 billion in total at 00 million to ○○ Digital Research Institute and KRW 6.569 billion in total at 00 million, as stated in the research service agreement content table of each research service agreement under each of the instant research service agreements. The payment and accounting content for each of the pertinent business years are as indicated below.

E. In making a final return on the tax base and its tax amount of each corporate tax for the business year of 1999 through 2002 and its revised return, the Plaintiff’s ordinary development expenses for each business year of 6.5 billion won for the issues of 6.5 billion won for each business year shall be included in the total amount in the deductible expenses for each business year, and the research and development expenses for each business year shall be included in the deductible expenses for each business year as described in the following list of depreciation of intangible assets. The Plaintiff’s tax base and its amount of each corporate tax for each business year of 1999 through 202 business year and the details of each final return and revised return on the tax amount for each business year of 199 through 202 business year shall be the same as described in the column for each tax statement and the column for each revised return.

F. However, on June 18, 2003 and the 30th day of that month, the Plaintiff terminated each of the instant research services contract with ○○ Industrial Research Institute and ○○ Digital Research Institute. Around that time, ○○ Industrial Research Institute and ○○ Digital Research Institute returned KRW 6,672,278,058 in total to the Plaintiff.

G. In reporting the tax base of each corporate tax for 2003 business year and its tax amount, the Plaintiff included the total of 6,672,278,058 won of the research service costs returned by ○○ Industrial Research Institute and ○○ Digital Research Institute in the gross income. The Plaintiff’s tax base of corporate tax for 2003 business year and the details of the report on the tax amount are the same as the report on the tax amount for 203 business year.

H. On December 10, 2003, when the plaintiff filed a final return on the tax base and its tax amount of each corporate tax for the business year from 1999 to 2002 and filed a revised return thereon, the director of the tax office of the Busan District Tax Office (hereinafter referred to as the "the director of the tax office") denied the inclusion of ordinary development costs in deductible expenses for each business year as listed below on the grounds that the plaintiff did not include the depreciation amount and depreciation amount of the research and development costs in deductible expenses, and excluded the inclusion of depreciation amount and the depreciation amount of the start-up costs in deductible expenses for each business year, including the depreciation amount and depreciation amount of the research and development costs in deductible expenses for each business year from the calculation of the tax base and each tax amount of each corporate tax for the business year from 1999 to 202 in the attached Form 198,130,240, corporate tax for the business year from 200, corporate tax for the business year from 401 to 203,3708,396.

I. However, the director of the regional tax office of Daegu Regional Tax Office (hereinafter the head of the regional tax office of defendant Daegu Regional Tax Office), upon filing a tax evasion report from October 2003 to July 2004, conducted a tax investigation on the issues of research funds against the plaintiff and women in the region from around October 2003 to around July 2004. As a result, the plaintiff was a major shareholder of the plaintiff and the representative director of the plaintiff, who is a bypassing through the ○ Industrial Research Institute and the ○ Digital Research Institute, by concluding each research service contract of this case formally with ○○ Industrial Research Institute and the ○○ Digital Research Institute, and notified the plaintiff of the tax data at around that time.

(j) Meanwhile, on the basis of the results of the tax investigation under the preceding paragraph on July 12, 2004, the head of the Defendant denied the Plaintiff’s act of paying KRW 6.569 billion for the key research expenses on the part of the Plaintiff for the reason that it constitutes an unfair act that the Plaintiff’s act of paying KRW 6.569 billion for the key research expenses on the part of the Plaintiff constitutes an unfair act that unfairly reduces the tax burden. In addition, the Defendant issued a disposition of disposal with respect to the Plaintiff, as well as the disposition of notification of change in the amount of income (hereinafter “disposition of change in the amount of income”) equivalent to each of the following amounts, on the ground that the Plaintiff’s act of paying KRW 6.59 billion for the key research expenses on the part of the Plaintiff was an unfair act that unfairly reduces the tax burden.

(k) On July 15, 2004, when calculating the tax base and the amount of each corporate tax for the business year from 1999 to 2002 of the Plaintiff’s 199 to 2002 business year, the Defendant Director denied the total amount of the research expenses related to the issue research and development expenses and the depreciation of research and development expenses and the inclusion of interest paid in deductible expenses for the business year from the Plaintiff’s 199 to 2002 business year on the ground that the 6.59 billion won is a provisional payment without charge, according to the taxation data of the Defendant Administrator, the Plaintiff’s disposal of the tax amount after deducting the tax amount of each of the instant tax disposition from the Plaintiff’s 77,950,960, 200, 347, 97, 2057, 2057, 207, 20057, 207, 20057, 20057, 307, 2057, 2007, 1.

T. Meanwhile, in calculating the Plaintiff’s tax base of corporate tax for the business year of 2003 and its tax amount, the Defendant Western issued a disposition to reduce the Plaintiff’s corporate tax for the business year of 2003 to KRW 3,960,65,196 from KRW 6,672,278,058 to KRW 3,960,90,317 of the key research funds returned by the ○○ Industrial Research Institute and the ○ Digital Research Institute, and to reduce the amount of KRW 3,524,723,879 and KRW 714,65,196 of the corporate tax base and its tax amount for the business year of 203 as stated in the second correction column of the tax calculation statement for the business year of 203.

2. Whether each of the dispositions of this case is legitimate

A. The parties' assertion

(1) The Defendants asserted that each disposition of the instant private case is lawful as a disposition under the relevant laws and regulations.

(2) On this basis, the Plaintiff needs to continue to provide technology in the middle of the Plaintiff’s continuing business, and paid the consideration for technical mutual aid to women in the middle of the Plaintiff. The Plaintiff decided to contribute the technical service cost to women in the middle of the ○○○○ University under the agreement between the Plaintiff and women’s prior agreement, and then paid the key research cost by taking the form of research service cost into account to the ○○ Industrial Research Institute and the ○○ Digital Research Institute. Therefore, the key research cost is the Plaintiff’s expense related to the Plaintiff’s business, which should be included in deductible expenses, and the Defendants considered the provisional payment that was paid regardless of the Plaintiff’s business to women in the middle of the ○○○○○ University. Accordingly, each of the instant dispositions is unlawful.

(b) Related statutes;

Article 14 (Real Taxation under Framework Act on National Taxes)

Article 4 (Real Taxation of Corporate Tax Act)

(c) Fact of recognition;

The following facts are as follows: evidence No. 4-2, 39, 43, 60, 61, 63, evidence No. 8-1, 2, evidence No. 9, evidence No. 15, and 16, evidence No. 17-1 through 3, evidence No. 20-1 through 6, evidence No. 21-2, evidence No. 22, evidence No. 23-1, evidence No. 25-2, evidence No. 26, 28, 30, evidence No. 31-1 through 6, evidence No. 32, evidence No. 46, evidence No. 47-1, No. 5-2, evidence No. 5-1 through No. 7, No. 13, and evidence No. 1 through No. 17, No. 61-2, and evidence No. 1 through No. 7, No. 13, and evidence No. 1 through No. 60-1.

(1) In around 1989, a professor and professor of ○○ University Agricultural Bioscience University and a ○ Industrial Research Institute were responsible researchers for the research and development of key technology. In addition, during the period from 1993 to 1998, women transferred 21 domestic and overseas patents related to key technology to ○land, and this title established ○○ Science Co., Ltd. (hereinafter “○○ Science”) industrialization of key technology.

(2) In order to continue to produce milk containing DHA by eating dHA to milch cows using the key technology, it is necessary to adjust the mixing ratio of feed and continuously observe the status of milch cattle according to the growth status of milch cattle, and continue to manage it accordingly. Such technology cannot be executed only by a patent, it is possible to continue to provide milch cattle with continuous technology, and this was the key element of the industrialization of the key technology. In other words, 00 have been provided with technical services for ○○ Science after agreement was reached between ○ and ○○○ to establish the ○○ Science Research Institute with the profits of the ○ Science by providing its own technology.

(3) In accordance with an agreement with the National Assembly on November 25, 1994, this title, the representative director of the ○○ Science, entered into a technical research service agreement with the ○ Industrial Research Institute, which is the ○○ Institute responsible for the Sonsan on November 25, 1994, and has paid the consideration for the improvement of technical services in Sonsan, uf784, uf84, uf84.

(4) In around 199, when ○○○ Group becomes bankrupt, ○○ Science was jointly and severally suretyd with 10 billion won in ○○○○○○○ Group, and ○○○○○○○○○○ and sons of this item, decided to establish the Plaintiff instead of ○○ Science. On May 28, 199, the Plaintiff established the Plaintiff as KRW 50 million in the established capital, and thereafter, the Plaintiff’s capital was increased to KRW 10 million on August 199, 200, respectively.

(5) The Plaintiff purchased from ○ Science 40 million won a patent 21 unit related to the key technology on June 20, 1999, and 200 million won a single feed business right and raw materials, machinery, etc. on July 1, 1999 (the price of machinery, excluding the price of raw materials and products among them, is KRW 41,183,288), on July 31, 1997, 44,53,084, one vehicle on September 16, 1999, from 1,186,93 won, and the Plaintiff acquired the patent right, facilities and business right from ○○ Science 126,903,365 won.

(6) On December 31, 1999, the Plaintiff entered into a feed supply contract with ○○, Inc. (hereinafter referred to as “○○○”) where ○○ had entered into a contract with ○○ Science, and entered into a feed supply contract with ○○○, and all of the feed supply for ○○, which was a business. In performing the above contract, the Plaintiff continued to provide ○○○, as it was essential for ○○ to continuously provide the above technology. Thus, the Plaintiff, separately from the Plaintiff where ○○ is the representative director, was a separate party to the above contract, provided the Plaintiff with the relevant core technology and guarantee quality during the contract period. On December 31, 1999, the Plaintiff was responsible for all authority and management related to manufacturing technology and quality assurance related to the Plaintiff’s DHA feed, and concluded an agreement with ○○, which continuously provides technical assistance to the Plaintiff by providing the Plaintiff with technical assistance.

(7) On Sep. 1, 1999, the Plaintiff, the representative director of ○○ Science, followed a technical research service agreement with ○○ Industrial Research Institute on Nov. 25, 1994, and entered into the first research service agreement with ○○ Industrial Research Institute on Sep. 1, 1999, which requires the Plaintiff to pay KRW 4,270,00,000, which is not accrued from the above agreement with ○○ Industrial Research Institute, and thereafter, paid the said amount to the research institute affiliated with ○○ University for the aforementioned purport. As seen above, the Plaintiff’s payment of the technical service fee to ○○○ University for the first research service was without being made between ○○ Industrial Research Institute and ○○ Digital Research Institute during the pertinent business year from September 1, 1999 to October 10, 202. The Plaintiff’s payment of the research service fee of KRW 13.27,000,000,000 to ○○ Industrial Research Institute’s average service period of 100,00.

(8) Meanwhile, the ○○ University accepted the proposal on the part of the ○○ University to establish a life-high technology research institute within the ○ University by providing key technology, and around 199, the president of the ○ University was the promotion chairperson at around 199, and the promotion committee was organized by the president of the ○○ University. The president of the ○○ Industrial Research Institute paid technical advisory fees, etc. paid to the Plaintiff to the ○○ Industrial Research Institute on October 15, 1999, and paid the remainder of the use by the Plaintiff to the ○○○○○ Industrial Research Institute and the ○ Digital Research Institute.

(9) In other words, inasmuch as the ○○ Industry Research Institute and the ○○ Digital Research Institute manage 6.5 billion won in a personal way as it used for private purposes, such as auction real estate acquisition funds, stock investment funds, etc., it paid the amount by the time limit of global income for the financial income.

(10) The Plaintiff’s net income based on the Plaintiff’s statement of accounts is KRW 932,782,846, KRW 1,950,483,516, KRW 1,413,220, KRW 979, KRW 1,868,437,625, KRW 716, KRW 716, KRW 2003, KRW 2004, KRW 2104,068, KRW 177, KRW 2005, KRW 3,525,56, and KRW 493, KRW 1,788,566, and KRW 200, KRW 1,787,516, KRW 200 for each of the above business years, KRW 1,700,000 for the Plaintiff’s annual average net income based on the Plaintiff’s statement of accounts under the instant research service agreement, while the Plaintiff’s annual average net income based on the instant research service agreement is KRW 1.37 billion.

(11) The Plaintiff’s business expenses, excluding the technical service expenses, are limited to the amount of KRW 6.5 million per year for the Plaintiff’s business expenses, the amount of wages for the representative director, and for the machinery facilities of mixing two or three common figures with feed, and the amount of the Plaintiff’s physical facilities and assets, excluding the technology inn, are minor in light of the Plaintiff’s import. Three of the 21 patents purchased from the Plaintiff’s ○ Science transferred KRW 4,950,00 to the Plaintiff’s ○ Science, and the two patents were abandoned by the Plaintiff, and the remainder was invalidated due to the lack of extension of the period.

(12) Around May 2002, 2002, the Plaintiff transferred 40% of its equity interest to the Plaintiff around 2 billion won as a conflict arises between the Plaintiff’s operation and the Plaintiff’s operation, and without any technological provision, the Plaintiff’s share was transferred to the Plaintiff by 00 billion won. Since then, the exchange continued to bring a prosecution or accusation against the relevant agency in relation to the pertinent research fund.

(13) 이○환의 계속적인 고소, 고발과 원고가 기술용역비를 경상개발비나 연구개발비라는 실제와 다른 형식으로 회계처리한 사정, 원고의 대표이사가 여○근이어서 지급된 금원의 실제 성격이 밝혀지기 전까지는 특수관계에 따른 의심을 받을 수 있는 사정, 국립대학교인 ○○대학교가 연구용역계약의 형식을 빌어 기금출연을 받은 사정, 국립대학교인 ○○대학교가 연구용역계약의 형식을 빌어 기금출연을 받은 사정 등이 비난의 대상이 되는 등 말썽이 나자 여○근과 ○○대학교는 쟁점연구비를 원고에게 돌려주면 모든 시비가 종결될 것으로 생각하고 이를 원고에게 반환하기로 합의하고, 2003.6.경 ○○산업연구소와 ○○디지털연구소가 여○근으로부터 쟁점연구비를 돌려받아 이를 원고에게 반환하였다.

(14) On July 14, 2003, 2003, after the above return, this exchange filed a complaint against the Plaintiff on tax evasion including the key research expenses with the National Tax Service. On October 2003, 2003, the Plaintiff suffered difficulties in relation to the key research expenses, such as the Plaintiff’s payment of KRW 2 billion to the ○○○○ Exchange. Around March 2004, this exchange filed a complaint against the Plaintiff with the press and the Board of Audit and Inspection, and filed a complaint with the Cheongdae and Daegu regional tax office on May 2004, the Plaintiff did not include the key technology usage fees or advisory fees as deductible expenses for the business year 2004 and 2005.

(15) The Daegu regional tax office which investigated the instant case of accusation against tax evasion by ○○○ constitutes a reinvestigation on October 21, 2003, and notified the investigation of the contents of the investigation to deny the relevant losses by withdrawing an excessive appropriation of research and development expenses of KRW 172,00,000 on October 21, 2003, but at around around 2004, a reinvestigation was made. At the time, each of the instant research services contract of this case can be deemed as an abnormal transaction based on a special relationship between the Plaintiff and the Plaintiff in light of the content and form of the contract, and determined as a provisional payment on the premise of this, and thus, it became subject to each of the instant dispositions on this premise.

(16) Meanwhile, on May 2002, the head of the relevant tax office assessed the value of the above shares to 6 persons, such as Sungsung, etc., on the basis of the net profit and loss value of the Plaintiff accrued during the past three years, and assessed the value of the above shares as KRW 362,063, and imposed a gift tax equivalent to KRW 6.5 billion per share on the ground that six persons, such as Sungsung, etc., protested against this, the National Tax Tribunal on July 6, 2004 on the basis of most of the Plaintiff’s net profit, and on the basis of the key technology owned by women, the above specific contents are not known to the outside, and thus, the Plaintiff’s net profit based on such technology constitutes an objective exchange value of the Plaintiff’s shares, and thus, it became reasonable to reduce the Plaintiff’s gift tax amount to KRW 1,540,000 per share by assessing it as KRW 150,000 per share.

D. Determination

(1) Whether the disbursement of key research funds is related to the work

① Considering the fact that the Plaintiff’s ○○○ University’s ○○ ○○ ○○ ○ ○ ○ ○○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○.

(2) Whether each of the dispositions of this case is legitimate

As long as the research cost in question is an expenditure related to the provision of technology services by women, it should be included in deductible expenses in accordance with the substance over form principle, and even if the Plaintiff committed an accounting error that is processed differently from the actual amount by pretending the payment form as the research service cost, such circumstance alone cannot be deemed as having been paid regardless of the business. As such, the Defendants deemed the provisional payment that is made to women who are in a special relationship, regardless of the key research cost, the Defendants considered the aforementioned each disposition in question as unlawful.

3. Conclusion

Therefore, the plaintiff's claim of this case seeking the revocation of each disposition of this case is justified, and the judgment of the court of first instance is unfair, so the judgment of the court of first instance is revoked, and each disposition of this case is revoked, and it is so decided as per Disposition.