A. Character of Article 34-4 of the former Inheritance Tax Act (amended by Act No. 4283 of Dec. 31, 1990)

(b) Where the stocks that have waived the preemptive right to new stocks in the course of the previous capital increase exceed the stocks acquired in excess of the equity ratio, whether the new stocks are deemed donated in excess of the equity ratio thereafter;

A. Article 34-4 of the former Inheritance Tax Act (amended by Act No. 4283, Dec. 31, 1990) provides that where a stockholder who renounced his/her preemptive right and a person in a special relationship receive profits by obtaining new shares in excess of his/her share ratio, such shares shall be deemed as a donation regardless of whether the stockholder who renounced his/her preemptive right had a intent to donate his/her preemptive right, such shares shall not be deemed a presumption provision, but rather

B. Even if the shares that have waived the preemptive right to new shares in the course of the previous capital increase exceed the shares acquired after being allocated in excess of the shares ratio, so long as the new shares are allocated in excess of the shares ratio, it shall not be deemed to violate the principle of substantial taxation by deeming them as the donation.

Article 34-4 of the former Inheritance Tax Act (amended by Act No. 4283 of Dec. 31, 1990)

[Judgment of the court below]

Head of the Do Tax Office

Seoul High Court Decision 92Gu16791 delivered on November 25, 1992

The appeal is dismissed.

The costs of appeal are assessed against the plaintiff.

We examine the grounds of appeal.

According to the reasoning of the judgment below, the court below confirmed that the plaintiff acquired new shares in excess of his share ratio as the person who renounced the preemptive right due to the waiver of the preemptive right by other shareholders at the time of issuing new shares on February 10, 1989, and that the defendant did not receive the delegation of the above provision of Article 4 of the former Inheritance Tax Act (amended by Act No. 4283 of Dec. 31, 1990), Article 34-4 of the same Act (amended by Presidential Decree No. 13196 of Dec. 31, 1990), and Article 41-3 of the same Enforcement Decree of the same Act (amended by Presidential Decree No. 13196 of Dec. 31, 1990), deeming that the plaintiff received the gift tax of this case and the detailed defense against the value assessed under Article 5 (1) of the above Enforcement Decree, and determined that the person who renounced the preemptive right and the person who received the delegation of the above provision of Article 41-4 of the same Act is legitimate.

Article 34-4 of the former Inheritance Tax Act provides that a person who receives a benefit as consideration from a person with a special relationship prescribed by the Presidential Decree is deemed to have received the benefit in question at the time of receiving the benefit in question. Article 41(1) of the Enforcement Decree provides that "the scope of a significantly low price" shall be "the scope of a person in a special relationship"; Article 41-3 provides that "the benefit received at the remarkably low price" shall be "the benefit of a person in a special relationship". The legislative intent of the above provision is to capture and impose a gift tax on a person with a special relationship as prescribed by the Presidential Decree that a gift equivalent to the difference between the amount of payment and the market price of the share is subject to gift tax through the procedure of waiver and acceptance of preemptive rights (see Supreme Court Decision 91Nu9565 delivered on July 28, 192). In light of the purport and language of the provision, the above determination by the court below is justifiable, and it does not err in the misapprehension of legal principles as to a person who gives benefit under Article 34-4 of the former Inheritance Act.

Article 41 (2) 4 of the Enforcement Decree of the above Act provides that a corporation shall be a person in a special relationship. Thus, it is not appropriate to add a decision to the purport that the plaintiff's assertion that the above treatment metal corporation is not a person in a special relationship. However, as long as the court below judged that the plaintiff is a person in a special relationship with the stockholder who has waived preemptive rights, the above additional opinion cannot be deemed to be an unnecessary statement and there is no error of law in the misapprehension of legal principles that affected the decision

In addition, Article 34-4 of the former Inheritance Tax Act should be interpreted as a presumption provision, and in light of the principle of substantial taxation, the court below did not make any judgment on the plaintiff's assertion that the economic substance cannot be deemed as a donation in this case, which is not a donation. However, Article 34-4 of the former Inheritance Tax Act provides that where a person who has waived a preemptive right and a person in a special relationship with a stockholder receives profits by obtaining new shares in excess of his/her share ratio, such shares shall be deemed a donation regardless of whether the person who has renounced the preemptive right, is a gift. Therefore, it is not a presumption provision, but a legal fiction provision in its original meaning. Although the plaintiff's shares renounced in the previous capital increase exceed the shares acquired in excess of his/her share ratio, even if the plaintiff received new shares in excess of his/her share ratio, it cannot be deemed as a donation so long as the plaintiff actually received the new shares in excess of his/her share ratio, it cannot be deemed as a violation of the principle of substantial taxation. Therefore, even if the court below did not make a judgment on this part above.

Therefore, the plaintiff's appeal is dismissed and all costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Choi Jae-ho (Presiding Justice)