Plaintiff (Law Firm Sejong, Attorneys Kim Ba-young et al., Counsel for plaintiff-appellant)

Head of Busan District Tax Office (Attorney Cho Young-gu, Counsel for the defendant-appellant)

November 22, 2002

Busan District Court Decision 98Gu4825 delivered on July 7, 1999

Supreme Court Decision 2000Du6237 Delivered on July 23, 2002

1. The plaintiff's appeal is dismissed.

2. The total costs of the lawsuit after the appeal shall be five minutes, which shall be borne by the defendant, and the remainder by the plaintiff.

The decision of the first instance court shall be revoked. The defendant revoked the disposition of imposition of KRW 41,192,942 as global income tax for the year 198 against the plaintiff on February 19, 1998 and KRW 8,291,480 as global income tax for the year 198, KRW 37,676,322 as global income tax for the year 198, KRW 6,321,856 as global income tax for the year 198, and KRW 38,508,496 as global income tax for the year 1990 as well as KRW 6,467,528 as well as defense tax for the year 198 (Reduction of claim as stated in the judgment below of the court below).

1. Details of the disposition;

The following facts are not disputed between the parties, or acknowledged in full view of the whole purport of the pleadings in each of the statements in Gap evidence 1 to 5, Eul evidence 2-1 to 4, Eul evidence 3, Eul evidence 4-1, 2, Eul evidence 6-1, 2, 3, and 6-1, 3.

A. At the time of filing a final return on global income tax for the amount corresponding to the year 198 through 192, the Plaintiff earned earned income from the Mean Hospital, and the Plaintiff subsequently filed a final return on global income tax base based thereon, on the ground that: (a) the Plaintiff leased the real estate located in the Mean-dong, Busan Jung-gu, and the real estate located in the dong-dong, with the lease income (the 1/2 of the lease income from the real estate located in the same Dong-dong is the Plaintiff’s wife Nonparty 1; (b)

B. On February 1, 1994, the Defendant: (a) owned 1/2 equity shares of the Plaintiff and Nonparty 2, the Plaintiff and Nonparty 2 owned 1/2 equity shares of the counter-do hot spring bath site and the building located in Busan (Slue hot spring omitted); and (b) leased it to Nonparty 3 from 1988 to 1993 and obtained its lease income; (c) imposed global income tax and defense tax on the leased income of real estate (a half-do hot spring and the lue hot spring and the lue-dong Real Estate) and wage income in 198 to 192 (hereinafter “previous disposition”).

C. In the Plaintiff’s claim for revocation of the previous disposition No. 94Gu4707 of this court, this court rendered a judgment in favor of the Plaintiff on May 10, 1996 on the ground that the money that the Plaintiff received from Nonparty 3 was not real estate rental income, but interest income, and thereafter, the Defendant appealed, but the Supreme Court dismissed the Defendant’s appeal on November 14, 1997 (hereinafter “previous lawsuit”).

D. Accordingly, the Defendant revoked the previous disposition in accordance with the purport of the judgment on February 19, 198 and the above sub-paragraph (c) above, and imposed upon the Plaintiff the global income tax of KRW 42,221,410 in 198 and KRW 8,515,220 in global income tax of KRW 38,595,360 in global income tax of KRW 38,489,240 in global income tax of KRW 39,614,470 in 190 and KRW 6,68,48,480 in global income tax of KRW 39,614,470 in 190 and KRW 45,939,270 in global income tax of KRW 191 in 191 (hereinafter “revision disposition”).

E. The Plaintiff again filed a lawsuit seeking revocation of the rectification disposition as Busan District Court 98Gu4825, but the same court rendered a judgment against the Plaintiff on July 7, 1999, and the appellate court dismissed the Plaintiff’s appeal on June 23, 200, and the Plaintiff filed an appeal to the Supreme Court 200Du62377.

F. After that, the Supreme Court stated that Article 183(4) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 18320, Jul. 23, 2002) stipulated the procedures for imposing comprehensive taxation on property income. However, the Supreme Court reversed the judgment of the competent court prior to remand in the judgment on the ground that a tax assessment was made by a tax payment notice omitted on the income subject to aggregate taxation at the time of the correction disposition. On the other hand, on August 29, 2002, the Constitutional Court declared that Article 61(1) of the former Income Tax Act (amended by Presidential Decree No. 2001Hun-Ba82, Aug. 29, 2002) which provides that property

G. Accordingly, on October 7, 2002, the defendant issued a revised disposition with respect to the plaintiff on 198, 1989, and 190 global income tax in accordance with the purport of the decision of the Supreme Court and the decision of the Constitutional Court on 1988, 1989, and 190, with respect to the global income tax disposition on 1990s, by determining the amount of tax according to the tax base based on the property determined and reducing the amount of tax as stated in the purport of the claim (hereinafter the date of the disposition is referred to as "the date of disposition"), the amount of tax shall be the amount stated in the purport of the claim, "re-revision disposition" or "the disposition of this case").

H. After that, in the trial of the court below, the part of the global income tax assessment for the year 191 as stated in the above D. D. was completely withdrawn, and the part of the global income tax and the defense tax assessment for the year 198 through 1990 were amended to the effect that the scope of the revocation of the tax assessment is to reduce the amount of tax reduced according to the re-revision disposition as stated in the above D. G.

2. Whether the disposition is lawful;

A. The plaintiff's assertion

The instant disposition is unlawful for the following reasons.

(1) Violation of res judicata or binding force

The Defendant, in the previous lawsuit against the initial disposition that the Plaintiff reported most of the money received from Nonparty 3 as real estate rental income, could assert and prove a reasonable tax amount in cases where the Plaintiff’s income is recognized as interest income through the addition and modification of the grounds for the disposition until the closing of argument in the trial court, but only after the judgment of revocation of the initial disposition becomes final and conclusive, the instant disposition, which was based on the grounds before the conclusion of argument in the previous lawsuit, conflicts with res judicata or binding force

(2) The exclusion period of imposition expires

The defendant, on the ground of the provision of Article 26-2 (2) of the Framework Act on National Taxes with respect to the total income belonging to the year 198 through 191 for which the exclusion period for taxation has already lapsed, on the ground of the provisions of Article 26-2 (2) of the Framework Act on National Taxes. However, the above provisions are merely limited to the fact that the above provisions can only make a decision of correction or a disposition incidental thereto according to the pertinent judgment or decision, and it does not mean that a new disposition may be made as to changing the real estate rental income into the interest income. Thus, the disposition of this case made after the exclusion period for taxation has expired, and it is null and void, even though the validity of the substantive requirements in the previous lawsuit has already been examined, to make a new tax disposition on the same item as the same kind of income after the exclusion period for taxation has

(3) Violation of the good faith principle

In relation to the interpretation of Article 26-2(2) of the Framework Act on National Taxes, the tax authority changed its view that the above provision can be applied to a taxpayer when it was around September 1, 1997, and that the disposition of this case violates the principle of trust protection or the principle of the statement of opinion, even though the tax authority has expressed a public opinion that it will not exercise the right to impose after the expiration of the exclusion period for the benefit of the tax authority.

(4) Subsidization of necessary expenses for the price business

(A) Since the Plaintiff engaged in the money lending business repeatedly to a large number of non-party 3 and others with the money borrowed from the financial institution, the amount received by the Plaintiff from the non-party 3 shall be deemed the business revenue amount, so only the remainder after deducting necessary expenses shall be deemed the business income. In the event there is no evidence of necessary expenses disbursement, the amount of income shall be calculated by applying the standard income rate. However, the Defendant did not deduct necessary expenses by recognizing the money received by the Plaintiff from the non-party

(B) Even if the money received by the Plaintiff from Nonparty 3 falls under interest income, in the case of interest income, unlike other income, Article 17(2) and Article 31(1) of the former Income Tax Act, which stipulates that the expenses corresponding to the total amount of income shall not be included in the necessary expenses, is invalid in violation of the property right guaranteed by the Constitution, the right to equality, and the principle of no taxation without law, and thus, the instant disposition that did not recognize the necessary expenses of the Plaintiffs is unlawful.

(5) Defect in the procedure of the duty payment notice

The instant global income tax amount imposed on the Plaintiff also includes the tax amount on the real estate rental income of Nonparty 1’s wife. The Plaintiff’s cumulative taxation to the Plaintiff should be stated in the tax payment notice pursuant to Article 183(4) of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 14467 of Dec. 31, 1994), but it was not stated in the tax payment notice, and thus, it cannot be deemed that the defect was cured by the instant disposition as stated in its reasoning.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

(1) The part concerning the claim in paragraph (1) above

(A) Since res judicata of a final and conclusive judgment to revoke a taxation disposition is limited to the grounds for illegality established in the final and conclusive judgment, a new taxation disposition that supplements the grounds for illegality established in the final and conclusive judgment shall not conflict with the res judicata of the final and conclusive judgment (see, e.g., Supreme Court Decision 92Nu794, Sept. 25, 1992).

(B) Examining the legal principles of the above Paragraph (a) in comparison with the facts stated in the above Paragraph (1) above, the judgment revoking the previous disposition was finalized in the previous lawsuit filed by the Plaintiff on the ground that the money received from Nonparty 3 is not real estate rental income, but interest income. Accordingly, since the Defendant considered the money as interest income and imposed the global income tax, etc. on the Plaintiff again within the scope of the amount imposed on the previous disposition, the corrective disposition or the instant disposition was a new tax assessment conducted by supplementing the illegal grounds arising from the final and conclusive judgment on the previous disposition, it does not conflict with the binding force of the above final and conclusive judgment or the res judicata effect.

Therefore, the plaintiff's above A. (1) argument is without merit.

(2) The part concerning the claim of the above A. (2)

(A) In a case where the tax authority rendered a tax disposition again by making a mistake within one year after the judgment revoking the previous tax disposition on the grounds that the previous tax disposition was unlawful, the exclusion period under Article 26-2(1) of the Framework Act on National Taxes (amended by Act No. 4672 of Dec. 31, 1993) is not applicable (see Supreme Court Decision 93Nu4885 delivered on May 10, 1996, etc.).

(B) Examining the legal principles in relation to the facts stated in the above Paragraph (1) in comparison with the above Paragraph (a), since the instant disposition was made by supplementing the reason for illegality that occurred in the final judgment within one year from the date the judgment on the previous lawsuit became final and conclusive, it cannot be deemed that there was an error of exceeding the exclusion period, and it does not constitute an interpretation contrary to the provisions of Article 18 (1) and (3) of the Framework Act on National Taxes.

(C) Therefore, the Plaintiff’s assertion of the above A. (2) is without merit.

(3) The part concerning the claim in paragraph (3) above

(A) In order to make the instant disposition contrary to the principle of good faith or the principle of speech and good faith, the tax authority must first express the taxpayer’s public opinion that is the subject of trust, and second, the taxpayer should not be responsible for the taxpayer’s reliance on the tax authority’s reliance on the tax authority’s reliance on the tax authority’s reliance on the taxing authority’s reliance on the taxing authority’s reliance on the taxing authority’s reliance on the taxing authority’s reliance on the taxing authority’s reliance on the taxing authority’s reliance on the taxing authority’s reliance on the taxing authority’s reliance on the taxing authority’s reliance on the taxing authority’s reliance on the taxing authority’s reliance on the taxing authority’s reliance on the taxing authority’s reliance

(B) However, in this case, even if the tax authority had previously expressed the public interest as alleged by the Plaintiff, it is apparent that the Plaintiff did not act in trust and trust the same opinion statement of the tax authority. Thus, the Plaintiff’s allegation in this part is without merit without further examining the remaining point of view.

(4) The part concerning the above A. (4) argument

(A) Considering the whole purport of the oral argument as to whether the money received by the Plaintiff from Nonparty 3 was in revenue stamps pursuant to the payment business as alleged by the Plaintiff, the Plaintiff asserted that the money received from Nonparty 3 was interest on the loan at the time of the previous lawsuit, and that it was recognized as a final and conclusive judgment, etc., the money received by the Plaintiff from Nonparty 3 shall be deemed as interest income corresponding to the non-business interest under Article 17 (1) 11 of the former Income Tax Act (wholly amended by Act No. 4803 of Dec. 22, 1994), and it is difficult for the Plaintiff to acknowledge that the Plaintiff engaged in the payment business with Nonparty 2, and there is no evidence otherwise stated in the evidence No. 5, No. 19-1 through No. 39, A6-1 through No. 39, A, 11, 14, and 15-1, No. 12, No. 31-4 and No. 1-5 of the witness evidence No.

(B) Therefore, the above claim of A. (4) premised on the fact that the plaintiff engaged in the price business is without merit without any need to further examine.

(C) In addition, Article 17 (2) of the former Income Tax Act, which does not recognize the deduction of necessary expenses in calculating interest income, does not excessively infringe the people's property rights, and does not violate the principle of no taxation without law or the principle of tax equality (see Constitutional Court Order 2000HunBa54, Dec. 20, 2001). Therefore, the plaintiff's assertion on this part is without merit.

(5) The part concerning the above A. (5) argument

(A) Comprehensively taking account of the facts stated in the above 1.1., it is recognized that there was a procedural defect in the process of the taxation, which was conducted by the notice of tax payment omitted the entry of the income subject to aggregate taxation and the income subject to aggregate taxation.

(B) However, as stated in the reasoning of the Supreme Court Decision and the Constitutional Court Decision, the Defendant’s disposition of this case, which excluded the Plaintiff’s wife Nonparty 1’s real estate income amount from the real estate income amount, determined the tax amount according to the re-determination tax base, and reduced the global income tax for the year 198, 1989, and 190 as stated in the purport of the purport of the claim, is no longer likely to cause any defect in the property income taxation procedure, and even if the Defendant did not cancel the corrective disposition and make a new tax assessment, it cannot be deemed that there is an illegal cause.

(C) Therefore, the plaintiff's above A. (5) argument is without merit.

D. Ultimately, the Plaintiff’s argument in the judgment above A is without merit, and the instant disposition is lawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and the judgment of the court of first instance is just, and the plaintiff's appeal is dismissed as it is without merit. It is so decided as per Disposition.

Judges Kang Sung-sung(Presiding Judge)(Presiding Judge)