Plaintiff 1 and one other (Attorney Cho Jong-soo, Counsel for the plaintiff-appellant)

Head of Suwon Tax Office

May 4, 2007

Busan District Court Decision 2006Guhap980 Delivered on August 17, 2006

1. Revocation of a judgment of the first instance;

2. Each imposition of capital gains tax of KRW 70,930,530 against Plaintiff 1 on January 3, 2005 and capital gains tax of KRW 82,643,880 against Plaintiff 2 shall be revoked.

3. All costs of the lawsuit shall be borne by the defendant.

The same shall apply to the order.

1. Details of the disposition;

The following facts are either disputed between the parties, or acknowledged by comprehensively considering the overall purport of the pleadings in the descriptions of Gap evidence 1, Gap evidence 2, Gap evidence 3, Gap evidence 4, Eul evidence 1, Eul evidence 2, and Eul evidence 3.

A. On June 28, 2004, the Plaintiffs transferred each ownership share to the non-party 1 corporation among four lots of land in Taedong-dong (each lot number omitted) Nam-gu, Busan, and filed a transfer income tax on the basis of the transfer value calculated by applying the officially assessed individual land price as of January 1, 2003 of the above land.

B. The Defendant initially used the above land as a gas station site, and the use of the above land was changed due to the construction of a building for neighborhood living facilities on that ground. Accordingly, since the land category under the Cadastral Act was changed from the miscellaneous land to the site, it was thus subject to the proviso of Article 99 (1) 1 (a) of the former Income Tax Act (amended by Act No. 7335 of Jan. 14, 2005; hereinafter “Act”) and Article 164 (1) 3 of the Enforcement Decree of the Act (amended by Presidential Decree No. 18705 of Feb. 19, 2005; hereinafter “Enforcement Decree”), on the ground that it constitutes “land without any individual land price” under Article 164 (1) 1 of the Enforcement Decree of the former Income Tax Act (amended by Presidential Decree No. 18705 of Feb. 19, 205), the transfer value was calculated by requesting two appraisal agencies to assess the transfer value, and then the Plaintiff was imposed on the Plaintiff 70300,38384.

2. Whether the disposition is lawful;

A. The plaintiffs' assertion

The instant disposition shall be revoked on the grounds that it is unlawful for the following reasons.

(1) The proviso of Article 99(1)1 (a) of the Act delegates the assessment of only the land for which the publicly announced individual land price is not publicly announced in such a way as prescribed by the Presidential Decree. Thus, Article 164(1) of the Enforcement Decree of the Act applies to a case where there is no publicly announced individual land price among the land falling under each subparagraph of the same paragraph. Since the pertinent land is not a land for which the publicly announced individual land price is no publicly announced, the instant disposition based on the premise that the said land falls under the land without the publicly announced individual

(2) Even if not, Article 164(1)3 of the Enforcement Decree provides that “the land category of the Cadastral Act changes due to the change of the form and quality of the land or the change of the purpose of use of the land.” Thus, in order to fall under “land without any individual published land” under the above provision, the land category change due to “the change of the form and quality of the land” or “the change of the purpose of use of the land.” The above land constitutes a case where the land category change due to “the change of the purpose of use of the building,” and thus, the disposition

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

The following facts shall be acknowledged, either in dispute between the parties or in full view of the overall purport of the arguments in each of the evidence, evidence, evidence No. 5-1 to No. 4, evidence No. 8, and evidence No. 9.

(1) The above land was originally land category as it was used as one of four lots. Nonparty 2, the father of the plaintiffs, commenced gas station business on August 23, 1994 with the trade name, “○○○ Gas station” from the above land, and its land category was changed to miscellaneous land on March 14, 1997.

(2) On March 2, 2002, Nonparty 2 discontinued the gas station business, and thereafter, Nonparty 2’s children, including the Plaintiffs, who became co-owners of the above land, were newly built upon obtaining a building permit for Class 1 neighborhood living facilities of the second and fourth floors above the above land on March 30, 202, and obtained a building permit for Class 1 neighborhood living facilities from the competent Gu office on June 10, 204.

(3) As above, the co-owners of the above land, including BB and the plaintiffs, filed an application for land category change of the above land. Accordingly, the remaining head of Busan Metropolitan City changed the land category of the above land to the site on the ground that the use of the building was changed on June 16, 2004.

D. Determination

(1) As to the assertion that Article 164(1) of the Enforcement Decree applies to a case where no officially assessed individual land price exists among the lands falling under each subparagraph of the same paragraph

(A) Articles 94(1)1, 96(1), and 99(1)1(a) of the Act, and Articles 10(2) and 10-2 of the former Act on the Public Notice of Values and Appraisal of Land, Etc. (amended by Act No. 7335, Jan. 14, 2005; hereinafter “Public Notice of Values and Appraisal of Real Estate Act”), and 10-2 of the former Act on the Public Notice of Values and Appraisal of Land, Etc. (amended by Act No. 7335, Jan. 14, 2005); in the case of transfer of land, the transfer value of the land shall be based on the standard market price at the time of transfer, and the standard market price shall be based on the publicly announced individual land price under the Public Notice of Land Price Act: Provided, That the value of the land without such publicly announced individual land price shall be determined by the method as determined by the Presidential Decree, taking into account the publicly announced individual land price of neighboring similar land; in the case of Article 164(1) of the Enforcement Decree, the same shall be compared to the land price.

(B) In light of the above provisions of the relevant laws and regulations, Article 164(1) of the Enforcement Decree of the Act provides that the transfer value of the land stipulated in each of the following subparagraphs shall be interpreted as the land without a publicly assessed individual land price, and it shall not be interpreted to the effect that the above provision shall apply only to the land without a publicly assessed individual land price among the land stipulated in each of the above subparagraphs (the same shall apply in that the land is separately listed in subparagraph 4 where the determination and public notice of the publicly assessed individual land price is omitted). In a case where the use of the land is changed, the comparison standard for calculating the publicly assessed individual land price shall also be changed because the price, etc. of the land existing before and after the change of the publicly assessed individual land price is considerably different. In such a case, it is unreasonable to apply the previous officially assessed individual land price even after the change of the publicly assessed individual land price as one of the land without a similar factors, and it is reasonable to apply the price assessed by the head of the tax office having jurisdiction over the place of tax payment pursuant to the comparative table under Article 10(2) of the Publication Act.

(2) As to the assertion that the land category under the Cadastral Act is changed due to the change of the purpose of use of a building, it does not constitute “land without individual land price” under Article 164(1) of the Enforcement Decree.

(A) Article 164(1)3 of the Enforcement Decree of the Building Act provides that “The land category of the cadastral law changes due to the change of the form and quality of the land or the alteration of the purpose of use of the land.” Article 164(1)3 provides that the land category of the cadastral law changes due to the change of the use of the land shall be applied to the competent authority within 60 days from the date of change of land category. Article 21 of the Cadastral Act provides that the land owner shall apply to the change of land category as prescribed by the Presidential Decree, and Article 16 of the Enforcement Decree of the Cadastral Act provides that “the change of the purpose of use of the land is to change the category and use of the existing facilities, such as buildings and facilities to which the change of the category and use of the land is difficult,” and Article 164(1)4 of the Enforcement Decree of the same Act provides that “the change of the land category and facilities to which the change of the use of the land can be applied to the existing facilities, including the alteration of the use of the land category and facilities.”

(B) Based on this point, it is clear that the instant land does not fall under the “land whose land category has been changed due to the change of the form and quality of the land or the change of the purpose of use of the land” under Article 164(1)3 of the Enforcement Decree, and thus, the Defendant’s disposition of this case premised on the premise that the said land falls under the category of “land whose land category has been changed due to the change of the form and quality of the land or the change of the purpose of use,” is unlawful.

3. Conclusion

Therefore, the disposition of this case shall be revoked in an unlawful manner. Accordingly, the plaintiffs' claim shall be accepted due to its reasons, and since the judgment of the court of first instance is unfair with different conclusions, the judgment of the court of first instance shall be revoked, and the disposition of this case shall be revoked, and it shall be so decided as per Disposition.

Judges Park Jong-jin (Presiding Judge)