Calculation of necessary expenses for the business of purchasing, processing, and selling paintings;

In determining the amount of income of a business operator who purchases chemical posts or sells salted or waterproofly processed and sold, the total amount of income shall be determined by recognizing the final tax base return amount, but if the quantity of chemical posts purchased on the tax invoice is excluded from the quantity of chemical posts purchased, the business operator shall be deemed to have purchased at least the amount of total sales in the previous year, barring special circumstances, such as that the quantity of the remaining raw materials purchased on the tax invoice would result in the processing and sales of the remaining raw materials.

Article 31 of the Income Tax Act

[Plaintiff-Appellant] Plaintiff 1 and 1 other (Law Firm Domin, Attorneys Park Domin-young and 1 other, Counsel for plaintiff-appellant-appellant-appellant-appellant-appellant-Appellee)

[Judgment of the court below]

The director of the tax office.

Seoul High Court Decision 92Gu7681 delivered on May 21, 1993

The judgment below is reversed;

The case is remanded to Seoul High Court.

We examine the grounds of appeal.

According to the reasoning of the judgment below, the court below held that the Plaintiff’s taxation disposition that did not recognize the purchase price of the above raw materials as necessary expenses was unlawful on the ground that the Defendant did not recognize the purchase price of the above raw materials as a processing transaction (refluence) and did not recognize it as a necessary expense on the ground that there was no evidence supporting the fact that the above tax invoice was issued by Nonparty 3, a document evidencing the purchase price of raw materials, which was the evidence of the raw materials that was appropriated as necessary expenses in the final tax base return for global income tax base, was not a dispute between the parties, on the premise that the above tax invoice was not a dispute between the parties, since the above tax invoice was received from the non-party without the business registration certificate on January 1, 1987 from the non-party without the real transaction, since it was not a invoice under the actual supplier’s name, since it was not a processing transaction.

Since the tax base of income and necessary expenses is deducted from income and the tax authority bears the burden of proving income and necessary expenses, most of the facts that generated necessary expenses are hard to prove in the taxpayer's territory, so the court below's determination that the taxpayer should be recognized the necessity of proving the absence of necessary expenses not proved by the taxpayer is in accordance with the precedents of the party members, and there is no illegality prior to the burden of proof pointing out the theory of lawsuit.

However, considering that the Plaintiff’s business is the purchase, dyeing, or waterproof processing and sale of paintings, the quantity of paintings sold by the Plaintiff should be considered as the principle that the quantity of paintings sold by the Plaintiff cannot exceed the quantity of paintings purchased as a result of a tentatively inferior defect, etc.

According to the records, the title of the Plaintiff’s purchase under the above tax invoice is equivalent to KRW 126,50 d. 45,645,00 d. d. 45,645,00, and the Defendant’s total amount of the Plaintiff’s business income from January 1, 1987 to March 3 of the same year is recognized as the amount of the Plaintiff’s final tax base return, in calculating necessary expenses to be deducted, if the Plaintiff’s sales of the non-purchased raw materials are excluded, the Plaintiff would have processed and sold the non-purchased raw materials. Thus, the Plaintiff may be presumed to have purchased at least the quantity of the total sales, unless there are special circumstances, such as the Plaintiff’s stock volume carried over in the previous year exceeds the Plaintiff’s total stock quantity, or the Plaintiff’s processed and sold quantity was adjusted, or the unit sales price was adjusted (see, e.g., Supreme Court Decision 84Nu8889, Jul. 11, 1989; 298Nu3685.

Therefore, the court below should examine whether the amount stated in the plaintiff's account book, business documents, or the preliminary return of value-added tax is the amount of purchase corresponding to the plaintiff's sales volume, and the amount of stock carried over in the previous year, and clarify the facts and determine the legitimacy of the taxation disposition of this case after examining whether the transaction under the above tax invoice is a disguised transaction or a fictitious transaction without real trade. However, the court below should determine the legitimacy of the taxation disposition of this case, but the court below rejected each entry of the documents such as the preliminary return and imposition of value-added tax, the plaintiff's account books and business documents, the plaintiff's local letter of credit issued by the exporter and the delivery date of the goods delivered by the plaintiff to the plaintiff under the name of the supplier under the above tax invoice, the local letter of credit with which the delivery date of the goods issued by the plaintiff was 19.2.4. or 1989.

Therefore, the judgment below shall be reversed and the case shall be remanded to the court below. It is so decided as per Disposition by the assent of all participating Justices.

Justices Yoon Young-young (Presiding Justice)