The loan bonds and outstanding amount claims in this case do not constitute a provisional payment in office.

Since a corporation's failure to recover the purchase price to be paid by a person with a special relationship falls under the provisional payment paid without relation to the business, it is illegal that it refuses to correct because it does not include the amount in deductible expenses as bad debts.

Article 19-2 (Non-Inclusion of Bad Debts in Loss)

Article 19-2 (Non-Inclusion of Bad Debts in Deductible Expenses)

2013Guhap1590 Revocation of Disposition of Refusal of Correction

○ Stock Company

○ Head of tax office

April 30, 2014

June 13, 2014

1. On February 24, 2011, the part of the Defendant’s refusal disposition against the Plaintiff, which exceeds ○○○○○○○○○○○○○○○○○ in the business year 2009, and the part of the refusal disposition against the Plaintiff’s ○○○○○○○○○ in the business year 2009,

2. The costs of the lawsuit are assessed against the defendant.

Cheong-gu Office

same as the order(written statement of claim in the written complaint seems to be written in writing on February 25, 201).

1. Details of the disposition;

A. The Plaintiff, established on May 23, 1974, and established TV slabs, computer monitors (hereinafter referred to as “CRT”) by investing 100% of the “○○○ Electronic ○○○○○ in China” on March 31, 2003 (hereinafter referred to as “HU”), as a company manufacturing and producing a glass valve for the CRT glass in China.

B. On March 29, 2010, the Plaintiff reported the corporate tax base and tax amount for 2009 business year to the Defendant with the total tax base of ○○○○, and the total tax amount to be borne by ○○○○○○○○○○○ (the Plaintiff’s investment loan + the total amount of operating loan + the other outstanding amount of loan + the amount of other outstanding amount of ○○○○○○○○○) on the ground that the Plaintiff’s claim for correction was filed to the effect that, on December 29, 2010, HNH discontinued discontinued its business in 209, as it discontinued its business in 209.

C. On February 24, 2011, the Defendant issued a notice of dismissal of the Plaintiff’s claim for corporate tax rectification on the ground that it cannot be deemed that HNH discontinued its business in 2009, and the Plaintiff’s claim amount cannot be recognized as bad debt for the business year 2009 (hereinafter “instant disposition”).

D. On May 11, 201, the Plaintiff appealed and tried on May 11, 201, and the Tax Tribunal rendered a reinvestigation decision that "the date of actual discontinuance of the HNH's business on August 21, 2013" was 209. Of the amount claimed by the Plaintiff, the ○○○○○○ Won out of the amount claimed by the Plaintiff failed to meet the bad debt requirement, and it is unclear whether ○○○○○○○○○○ Won and other outstanding amounts exist. Therefore, it is unclear whether each claim exists and whether each claim satisfies the bad debt requirement, thereby re-auditing the tax base and tax amount (hereinafter "the re-audit decision of this case").

마. 이에 따라 피고는 2013. 9. 4.〜9. 25. 이 사건 재조사결정 내용에 따른 조사를 한 후 2013. 9. 25. 원고에게 이 사건 처분과 동일한 내용의 '심판청구결정에 따른 처리결과' 통지률 하였고, 원고는 2013. 9. 27. 위 통지를 수령하였다.

F. On October 8, 2013, the Plaintiff appealed to the Tax Tribunal, and filed the instant lawsuit on December 24, 2013.

Facts without any dispute, Gap's 1, 13 through 15, Eul's 2 through 10 (including each number), and the purport of the whole pleadings.

2. Whether the instant disposition is lawful

A. The parties' assertion

1) The plaintiff's assertion

A) On March 2009, HNH ceased to operate a panel tank for the production of the full glass (hereinafter referred to as “Pel Trak”), from October 2009, no sales have occurred, and around that time, the volume of electricity used was extremely low, and the local media in China also made a press report premised on the discontinuance of HNH’s business, and even in the report on the liquidation of direct overseas investment projects and the collection of loan claims, HNH actually discontinued its business in December 15, 2009.

B) The Plaintiff’s total sum of ○○○○○○○○○○○○ (hereinafter “instant loan claims”) and the total sum of other outstanding bonds (hereinafter “instant outstanding bonds”) were in a situation where it is objectively impossible to collect the outstanding bonds at the end of 2009. HNH concluded a contract on the transfer of shares with the Plaintiff on the basis of its discontinuance of business around 2009, and there was no means to repay the outstanding bonds at all. The Plaintiff accounts for approximately approximately approximately KRW 00 of the total sum of the claims against HN at the settlement of accounts in the business year 2009, on the basis of which the Plaintiff was able to recover the outstanding bonds, and the remaining approximately KRW 00,00,000 were classified as irrecoverable bonds. The Plaintiff concluded a contract on the transfer of shares with the Plaintiff on the basis that it did not have actual value of HNN’s loan claims, including loan and loan claims.

C) The Plaintiff treated the outstanding loan claims and outstanding amount as deductible expenses in the business year 2009, and each of the above claims at the time was impossible to be recovered, and thus constitutes bad debt under the Corporate Tax Act. Therefore, the Plaintiff may include the outstanding loan claims and outstanding amount as deductible expenses for the business year 2009, by filing a request for correction.

2) The defendant's assertion

A) In light of the fact that: (a) around December 2009, HNH managed the place of business with 15 guards; (b) operated its own power plant; (c) disposed of raw materials; and (d) HNH’s equity transfer procedure was completed on March 30, 2010, HNH is merely temporary suspension of business with intent to resume its future business activities around 2009; and (c) it cannot be deemed that it discontinued its business.

B) It cannot be deemed that the outstanding loan claims and outstanding amount claims were objectively apparent situations at the time of settlement of accounts in 2009 for the following reasons.

① On February 26, 2010 and March 22, 2010, the Plaintiff recovered the sum of the outstanding loan claims and outstanding receivables from HNH, which is part of the outstanding claim, USD ○○○○○○ (hereinafter “USD”) and then, included the unpaid claim balance retroactively as the unpaid claim in the business year 2009.

② In addition, even if ○○○○○, part of the loans extended to HNH collected in early 2010, the Plaintiff disposed of the amount of the collected credit against HNH with the balance obtained by deducting the collected credit retroactively from the end of 2009.

③ The Plaintiff’s renunciation of the claim against HN is merely a mere fact that it cannot be readily concluded that the pertinent loan claim and the outstanding amount claim were objectively irrecoverable. Under the General Rule of the Corporate Tax Act, the Plaintiff’s waiver of the claim under an agreement does not constitute bad debts.

④ Even if an obligor discontinued his/her business, it cannot be said that the remaining assets of HN are not recoverable claims without confirming the remaining assets. Since the Plaintiff’s decision of exemption from obligation is merely a condition of share transfer, it cannot be said that the Plaintiff’s conclusion of a contract for sale of HN share with ○ Electronic, etc. on December 15, 2009 cannot be said that the remaining assets of HN have been determined.

⑤ Even if the share sale contract constitutes a procedure for confirming the existence of the HN’s remaining property, the Plaintiff’s effect of exemption from liability to HNH under the said share sale contract takes place on March 30, 2010 when the share transfer was completed. Therefore, the remaining property of HN was finalized at that time.

C) The disposition of bad debt of an irrecoverable claim can be included in deductible expenses on the premise of the settlement of accounts at the time of settlement of accounts as a matter of settlement of accounts, which shall be attributed to deductible expenses for the business year in which "the date when the relevant cause occurred and appropriated as deductible expenses" belongs. However, the Plaintiff did not dispose of outstanding loan claims and outstanding amount claims at the time of settlement of accounts in the business year 2009, and even if it was disposed of bad debt, it cannot be included in deductible expenses

(b) Related statutes;

It is as shown in the attached Table related statutes.

(c) Fact of recognition;

1) Technical assistance and financing loans to the Plaintiff’s HNH

가) 원고는 자회사인 HNH에 대한 기술지원 등을 목적으로 2003. 11. 24.〜2005. 3. 31. HNH 사이에 다음과 같은 내용의 계약을 체결하였다.

Table Omission of the Table

나) 원고는 위 2005. 3. 31.자 계약에서 HNH에게 CRT GLASS 생산설비 및 소모 품 일체를 제공하기로 함에 따라 시설투자자금을 조달하기 위하여, 2005. 10.경〜2006. 5.경 이사회결의 및 해외직접투자 신고 등의 절차를 거친 다음, HNH에게 4회에 걸쳐 합계 ○○○달러를，Libor+1.88% 이율로 3년 거치 4년 분할(매 6개월) 상환조건으로 대여하였다.

C) As of the end of 2009, the Plaintiff’s investment loan to HNH is a total of 00 won (a loan claim in dispute). The cost of the unclaimed service is a total of 00 won (a claim receivable in dispute). The specific details are as follows ($ 1 =1,67.6).

Table Omission of the Table

2) Plaintiff’s resolution to sell shares of HNH due to the management deterioration of HNH

A) From 2007, due to the change in demand for PDP TV and L CD TV, the management difficulties of HNH have deepened due to a sudden decrease in the demand of BDP TV and CR for computer monitors. HNH suspended the operation of a personal tank that produces the post-face glass on February 17, 2009 (hereinafter referred to as 'Funel Bank') and suspended the operation of Panelk that produces the full glass on March 2, 2009.

B) On July 8, 2009, the Plaintiff held a board of directors to sell to a third party all the shares of HNH owned by the Plaintiff on the basis of the actual appraised value “0” with respect to the issue of stock transfer due to the decline in the CR glass industry and the non-disputation of the HNH’s business outlook. However, the Plaintiff discussed the method that the Plaintiff bears approximately approximately KRW 00 and approximately KRW 00 by the purchaser.

C) HNH did not have any sales since July 2009 due to the suspension of the operation of production facilities. Meanwhile, from the time HNH established a production retailer in China to the time it ceased its business due to business deterioration, the major content of the local press in the China related to HNH is as follows.

Details omitted.

3) Conclusion, etc. of the instant basic contract

A) On December 15, 2009, 2009, ○○ Electronic and ○○ Limited Company (hereinafter referred to as “○○ International”) signed a basic contract (hereinafter referred to as “instant basic contract”) with the Plaintiff for the purpose of selling by removing and melting HNH’s machinery and equipment after removing and melting the white paper, etc.

Details omitted.

B) On February 10, 2010, pursuant to Article 22 of the instant Framework Agreement, the Plaintiff made a resolution by the board of directors on the exemption of the total amount of the obligation owed by HNH to the Plaintiff ( = “○○○○○○○”) (Evidence A No. 12), and drafted a written waiver of obligation with HNH on February 28, 2010, as follows.

Details omitted.

C) On July 6, 2010, the report on the liquidation of direct overseas investment projects and the collection of loan claims received at the ○○○○○ branch of the ○○ bank, the Plaintiff’s completion date of the liquidation of HNH is indicated as December 15, 2009 with respect to the Plaintiff’s investment in HN.

D) Meanwhile, the Plaintiff’s audit report on the financial statements of the 2009 business year prepared by Samil Accounting Corporation (No. 4 No. 2) stated that “The Company included the losses in excess of HNH’s equity law as loans and the bad debt allowances of outstanding amounts for the investment company, respectively, in the amount of KRW 00 and KRW 00 won (No. 5. b. 2), and “The Company established and dismissed the bad debt allowances in a manner that reflects the bad debt allowances for the total amount of KRW 00,00,000, such as loans to subsidiaries (HNH) during the 2009 period, which are deemed unlikely to recover (No. 20. 20. 2).”

4) Plaintiff’s request for correction, determination of reinvestigation of this case, etc.

A) On March 29, 2010, the Plaintiff reported the corporate tax base and tax amount for the business year 2009 to the Defendant, but on December 29, 2010, the Plaintiff filed a claim for rectification by asserting that, “HNH discontinued discontinued its business in around 2009, approximately KRW ○○○○○, including the loan and the outstanding amount, should be included in the Plaintiff’s corporate tax base for the business year 2009 business year, as bad debt.” However, on February 24, 2011, the Defendant rendered the instant disposition rejecting the said claim for rectification.

B) On May 11, 2011, the Plaintiff filed an appeal on May 11, 201, and the main contents of the instant re-investigation decision by the Tax Tribunal as of August 21, 2013 are as follows.

Details omitted.

Facts without dispute over recognition, entry of evidence 2 through 14, Eul in evidence 12 through 5, 9, 11 through 13 (including each number), and the purport of the whole pleadings.

D. Determination

1) Determination on the first argument

A) Article 19-2(1) of the Corporate Tax Act provides that the amount of bonds which cannot be recovered due to reasons prescribed by Presidential Decree, such as debtor's bankruptcy, among bonds held by a domestic corporation shall be included in deductible expenses for the purpose of calculating the amount of income for the pertinent business year, and Article 19-2(1) of the Enforcement Decree of the same Act provides that "bonds which cannot be recovered due to reasons prescribed by Presidential Decree" referred to in Article 19-2(1) of the same Act means bonds that fall under any of the following subparagraphs and cannot be recovered due to the debtor's business discontinuation, death, disappearance, or missing. Meanwhile, a business operator under the Value-Added Tax Act means a person who continues to supply goods or services in the form of business that can create value added and with repeated intent, regardless of registration or reporting under the Act (see, e.g., Supreme Court Decisions 2006Du8372, Dec. 24, 2008; 95Nu1480, May 28, 1996).

Therefore, in light of the following circumstances, it is reasonable to view that HNH was in a situation where the business was substantially discontinued around 2009, in light of health care room, the above recognition, and the relevant laws and regulations, etc., and in light of the following circumstances, HNH was in a situation where the business was substantially discontinued around 2009. Therefore, the Plaintiff’s above assertion has merit

① HNH is a company that mainly engages in the production and manufacturing of the CTRGS. In early 2009, since early 2009, the operation of Funel Tak and Pank, which are the core facilities for the production of the CTRS, was all discontinued, and there was no sales since July 2009.

② Both the Plaintiff and ○○ Electronic, etc.: (a) deemed that there is no business value of HNH; (b) the part of the obligation of HNH is to be treated by obtaining a loan; (c) the Plaintiff’s obligation to the Plaintiff was assumed that the Plaintiff transferred or acquired the HN stocks on the condition that the Plaintiff renounced; and (d) at the time of the conclusion of the contract, HNH had already discontinued its business.

③ ○○ Electric, etc. concluded the instant basic contract with the Plaintiff for the purpose of extracting and acquiring brus, etc. included in the machinery and equipment, not for the previous business, following HNH’s machinery and equipment, and thus, it seems that there was no room to resume the existing business of HNH in the future.

④ On July 6, 2010, the report on the liquidation of direct overseas investment projects and the collection of loan claims (Evidence No. 11) received at ○○ bank’s ○○○○○ Branch was written on December 15, 2009. In China’s local area, HNH had a press report premised on the suspension of factory operation and discontinuance of business around 2009.

⑤ In light of the fact that the Tax Tribunal reduced the demand for the main products of HNH to suspend the operation of the production plant, and that the Plaintiff negotiated with HN electronic and entered into a MOU with respect to the sale of shares of HNH, HNH, the Tax Tribunal determined that the actual discontinuance of the business was recognized as the fact that the actual discontinuance of the business was the year 2009, since January 1, 2009.

B) As to this, the Defendant, and HNH argued that it was merely temporary suspension of business with intent to resume business activities in 2009 and cannot be deemed to have discontinued business. However, there is no evidence to acknowledge that it was only temporary suspension of business. Rather, as seen earlier, HNH had already discontinued the operation of Funel Tak and Pank, which is the core facility for the production of CRTRS, in early 2009, and there was no sales after July 2009. The instant basic contract was concluded with ○○ Electronic, etc. to proceed with HN’s previous business, and it is recognized that ○○ Electronic, etc. was concluded for the purpose of extracting precious metals, such as white metals included in the machinery and equipment, and thus, it is not a temporary suspension of business in 2009. Therefore, the Defendant’s assertion that it was without merit.

(2) Secondly, Article 19-2(1) of the Corporate Tax Act and Article 19-2(1)8 of the Enforcement Decree of the same Act provide that "a claim which cannot be recovered due to the debtor's bankruptcy, compulsory execution, execution of a punishment, or the discontinuation of business as one of the bad debts included in deductible expenses," and Article 19-2(3) of the Enforcement Decree of the same Act provides that in the case of subparagraph 8, the relevant cause arises and the relevant amount should be included as deductible expenses for the business year which includes the date on which the deductible expenses are appropriated. As such, even if the debtor discontinued his/her business, it is objectively confirmed that the impossibility of collection of claims that cannot be recovered due to the discontinuance of business is included in deductible expenses, the entire amount of such claims cannot be deemed as an irrecoverable bad debts (see, e.g., Supreme Court Decision 2004Du13158, Mar. 10, 2005). The issue of whether it is impossible to recover such claims should be objectively evaluated by the debtor's ability to pay bad debts based on social norms (see, 13.

Therefore, in light of the following circumstances, the Plaintiff’s loan claims and outstanding amount related to HNH were objectively irrecoverable in the business year 2009: (i) HeNH had already been in excess of its obligations since 2007; (ii) the Funel Bank and Pank’s operation, which are the core facilities for the production of TRTGS; (iii) around July 2009; (iv) it was impossible to collect the outstanding amount from HNN as the Plaintiff’s loan claims and outstanding amount were objectively irrecoverable; and (v) it was objectively impossible to collect the outstanding amount from the Plaintiff’s loan and outstanding amount due to the Plaintiff’s settlement of accounts around 209; and (v) it was objectively impossible to collect the outstanding amount from the Plaintiff’s loan and outstanding amount due to the Plaintiff’s settlement of accounts; and (v) it was objectively impossible to collect the outstanding amount from the existing KNN’s loan and outstanding amount due to the Plaintiff’s settlement of accounts under the relevant basic contract.

B) As to this, the Defendant asserts that: (a) the Plaintiff disposed of the amount of ○○○○○, part of the loan to HN, which was collected by the Plaintiff at the beginning of 2010, retroactively deducted the amount of the collected claim from the end of 2009; (b) the amount of the claim to HN was objectively impossible in 2009. However, the Plaintiff asserts that the outstanding loan and the outstanding claim did not have been recovered objectively during the year 2009. However, as seen earlier, the Plaintiff’s assertion that the amount of the claim to HN, including the outstanding loan and outstanding claim at the time of the settlement of accounts in the year 2009, approximately KRW 00 out of approximately KRW 00,000, including the outstanding loan and outstanding claim, was deemed as recoverable credit, and the remaining amount was deemed as deductible credit and disposed of as deductible expenses. As such, the circumstance that the Plaintiff recovered the claim as planned by the Plaintiff classified as the recoverable credit is irrelevant to the issue of loans and the possibility of collecting the outstanding amount.

In addition, the Defendant asserts that since the Plaintiff collected USD 00, which is a part of the outstanding loan and the outstanding claim, from HNH in early 2010 and calculated the outstanding claim amount retroactively with the unpaid claim for the business year 2009, the outstanding loan and the outstanding claim are not objectively irrecoverable in the business year 2009. According to each of the evidence Nos. 17 and 11, the Plaintiff’s total amount of USD 00 from HNH on February 26, 2010 and March 22, 2010, it is recognized that the Plaintiff collected USD 00 from HN on February 26, 2010, and as seen earlier, it is not clear that the Plaintiff collected the outstanding claim from HN on February 20 and March 3, 209 as part of the collected claim of KRW 00 as at the time of settlement of accounts for each business year. Therefore, the Defendant’s assertion is also without merit.

The Defendant asserts that the instant loan and outstanding claim are attributable to the Plaintiff’s voluntary waiver of claims, such as the Plaintiff’s decision of exemption from obligations on February 10, 2010 and the Plaintiff’s decision of exemption from obligations on February 28, 2010. However, according to the above facts, the Plaintiff’s key loan and outstanding claim had already been in an irrecoverable state due to the Plaintiff’s discontinuance of business at HNH around 2009, and the said decision of exemption and the written statement of exemption are merely follow-up measures under the instant basic contract. Thus, the key loan and outstanding claim are merely an impossible state due to the business closure at HNH around 209, and cannot be deemed to have reached the irrecoverable state due to the above decision of exemption and exemption. Accordingly, the Defendant’s aforementioned assertion is without merit.

The Defendant asserts that: (a) the Plaintiff entered into a contract for the sale of HN shares with ○○○○, etc. on December 15, 2009 does not mean that the remaining assets of HNH have been determined; (b) even if the share sale contract constitutes a procedure to determine whether the Plaintiff’s remaining assets of HNH, the effect of the Plaintiff’s exemption from obligations to HNH under the said share sale contract was incurred only on March 30, 2010 when the share transfer was completed. However, at the time of the conclusion of the instant basic contract, HN was in a situation where it was entirely incapable of discharging new funds by its own debt to HNH as a discontinuance of business; (c) even in the instant basic contract, the Plaintiff renounced the Plaintiff’s debt to ○○○, etc. with ○○○, etc. from a financial institution; and (d) the Plaintiff already agreed to resolve the remainder of the obligation to the third party of HNN due to the loan of ○○ from the financial institution, regardless of the aforementioned facts, it is reasonable to deem that the Plaintiff’s claim on the remaining portion of the completion date of this case.

3) Judgment on the third argument

A) Article 45-2(1) of the Framework Act on National Taxes provides that a person who has filed a tax base return within the statutory due date of return may request the chief of the competent tax office to correct the tax base and amount of the national tax which has been filed first and reported for revision in any of the following cases, while subparagraph 2 provides that the deficit amount entered in the tax base return falls short of the deficit

Meanwhile, Article 19-2(1) of the Corporate Tax Act and Articles 19-2(1)8 and 19-2(3)2 of the Enforcement Decree of the same Act stipulate that the amount of income for the pertinent business year shall be included in deductible expenses when determining the non-collectionable claim following the debtor’s business discontinuation as bad debt. However, if the form of bad debt is for the reason of impossibility of recovery as above, the claim itself exists if it is the reason of impossibility of recovery. Thus, only when the corporation conducts accounting process that caused bad debt, it can be included in deductible expenses for the business year in which the bad debt becomes final and conclusive (see, e.g., Supreme Court Decision 2002Du7227, Dec. 11, 2003).

According to the above facts, the plaintiff set up ○○○○, including outstanding loan claims and outstanding amount claims, as the bad debt allowance for the business year 2009, and completed the settlement of accounts after the settlement of accounts for the business year 2009, using the method of recognizing the loss incurred in evaluating the equity law of HN, which is the subsidiary. Since it is objectively apparent that the outstanding loan and outstanding amount claims are not collectible at the end of 2009, it is reasonable to view that the plaintiff can request the defendant to additionally include the outstanding loan and outstanding amount in deductible expenses for the business year 2009 on the premise that it falls under bad debt. Accordingly, the plaintiff's above assertion is well-grounded.

B) As to this, the Defendant asserts that the Plaintiff perceived ○○○○○ in the business year 2007 as loans and bad debt allowances related to HNH ( = = ○○○○○○○○ + ○○○○○○○) in the business year 2008, ○○○○○○○ (+ ○○○○○○○○) in the business year 2009, and ○○○○○○ ( = ○○○○○○ + ○○○○○○) in the business year 2009, respectively, and that this is inconsistent with the total amount of the bonds depreciated by the Plaintiff as bad debt in the business year 2009, and thus, the Plaintiff cannot be deemed to have treated the outstanding loans and outstanding receivables as bad debt in the business year 2009.

살피건대, 갑 제4호증의 2, 제20 내지 22호증의 각 기재에 의하면, 원고가 2007년〜2009년 사업연도에 계상한 쟁점 대여금 및 미수금채권 관련 대손충당금 설정내역은 아래 표 기재와 같은 사실을 인정할 수 있는 바, 위 인정사실에 의하면 원고가 2009 사업연도에 대손금으로 인식한 합계 ○○○원은 2009 사업연도 결산 당시 대손충당금 잔액과 일치하므로, 피고의 위 주장도 이유 없다.

3. Conclusion

Therefore, all of the plaintiff's claims shall be accepted for the reasons of the plaintiff's claim and it is so decided as per Disposition.