doping Co., Ltd. (Law Firm Seoil, Attorneys Ahn Byung-hee et al., Counsel for the defendant-appellant)

Samsung Head of Samsung Tax Office

August 22, 2008

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

The Defendant’s disposition of collecting KRW 35,688,290 from the original earned income of the Plaintiff as of March 1, 2007 shall be revoked.

1. Details of the disposition;

A. The plaintiff (the trade name was changed to doping Co., Ltd. on January 15, 2005) is an entrepreneur who runs the malicious business, etc. from November 2001, and around June 2003, the plaintiff received three copies of the purchase tax invoice of KRW 118,32,760 (the total tax amount included in 130,15,036) (hereinafter referred to as the "tax invoice of this case") in total from the gold Korea Co., Ltd. (hereinafter referred to as "non-party company"), and deducted the relevant input tax amount and reported the amount to be added to deductible expenses on July 25, 2003, and then filed a corporate tax return on March 31, 2004.

B. Around May 2004, the head of the Goyang Tax Office investigated Nonparty Company as a material suspicion, and confirmed that Nonparty Company issued a false tax invoice without a real transaction and notified the Defendant, etc. of the relevant taxation data.

C. Accordingly, based on the above taxation data, the Defendant: (a) considered the instant tax invoice as a processing tax invoice and deducted the relevant input tax amount; (b) notified the Plaintiff of the correction and notification of the value-added tax and corporate tax; and (c) notified the Plaintiff of the change in the amount of income as a bonus to the representative; and (d) as of March 1, 2007, the Defendant notified the Plaintiff of the change in the amount of income as a result of the bonus for the representative, the amount of KRW 35,688,290, the source earned income tax for the year 2003 as of March 1, 2007 (hereinafter “instant disposition”).

D. Meanwhile, Nonparty 1, who was a de facto operator of the non-party company, was convicted of the facts constituting the crime, such as receiving false purchase tax invoices and issuing false sales tax invoices in the criminal case proceeded with Seoul High Court No. 2005No469, which became final and conclusive by dismissing the appeal.

[Reasons for Recognition: Evidence Nos. 3-1, 2, 3, 4, 5, Evidence No. 1, Evidence No. 3-1, 2, Evidence No. 4-1, 2, 3, 5, 6, and Evidence No. 10, as a whole, the purport of the whole pleadings and arguments No. 10]

2. Whether the disposition is lawful;

A. The plaintiff's assertion

The plaintiff purchased the tax invoice of this case from the actual non-party company and received the tax invoice of this case. Thus, the disposition of this case on the premise that the transaction of this case is false is unlawful.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

1) According to the instant tax invoice, the Plaintiff’s purchase of 3,00g at the present 3,00g on June 26, 2003, June 27, 2003, and 3,000g at the present 3,00g on June 30, 203 from Nonparty Company for three consecutive business days.

2) At the time of the Defendant’s on-site investigation, if Nonparty 2 and Nonparty 3, who had been an employee of the Plaintiff, deposited the purchase price without passbook in the capacity of his agent, the Plaintiff presented as evidence a certificate of remittance that he was employed as the Plaintiff’s employee from June 26, 2003 to June 43, 200, KRW 279,50 on June 27, 2003, and KRW 43,678,90 on June 30, 200, and KRW 43,678,90 on June 30, 203. Nonparty 4, who was identified as the Plaintiff’s managing director, prepared a confirmation document that Nonparty 2 and Nonparty 3 were employed as the Plaintiff’s employee from June 26, 2003 to July 2003, and submitted it to the Defendant.

3) However, according to the current status of earned income data related to withholding reported by the Plaintiff, Nonparty 2 and Nonparty 3 are not confirmed to have earned income from the Plaintiff, and Nonparty 3 was found to have worked as an employee from the company, the representative of Nonparty 5, who was in a transaction with the non-party company at the time, from January 1, 2002 to December 31, 2003.

4) The Plaintiff, from the time of the above on-site investigation to the instant case, did not submit not only the membership-related documents, work records, withholding data, and the source of the purchase price, but also the receipts and disbursements, work sites, and sales records related to the current purchase.

[Reasons for Recognition: Evidence Nos. 1-2, 1-3, 6-2, 1, 2, 3, 10, 11, 12-1, 2, 13-2, 13-2, 13-2, and the purport of the whole pleadings]

D. Determination

1) According to the provisions of the relevant Acts and subordinate statutes, where the head of the tax office having jurisdiction over the place of tax payment deems that the amount included in the calculation of earnings has been included in the calculation of earnings when it is clear or it is unclear that the amount has been leaked out or its attribution has been unclear, it shall be deemed that it has been reverted to the bonus for the representative. Meanwhile, in an administrative litigation seeking revocation on the grounds of illegality of taxation, the tax authority bears the burden of proving the legality of the taxation disposition and the existence of taxation requirements. Therefore, the tax authority should bear the burden of proving the expenses to be included in the calculation of the expenses, which are the basis of the determination of corporate income. However, if the tax authority proves that the tax invoice on some of the expenses reported by the taxpayer has been prepared without real transactions, and there are special circumstances such as the use of the expenses claimed by the taxpayer and the special cases where it is proved that the other party to the payment is false, it is necessary to prove that it is easy for the taxpayer to present books and evidence, etc. (see, e.g., Supreme Court Decision 2005Du166).

2) Further to these relevant provisions and legal principles, the above facts and the facts stated in the above 1.1., the non-party company was found to have been under suspicion that it issued false sales tax invoices before and after the date of issuance of the tax invoice, and was convicted in its criminal case. ② There is no evidence to deem that the plaintiff directly paid the purchase price to the non-party company. However, the non-party 2 and the non-party 3 merely submitted as evidence the remittance certificate which deposited the purchase price amount without a passbook in the Plaintiff’s agent. ③ Although the plaintiff asserted that he was the plaintiff’s employee at the time, the non-party 2 and the non-party 3 did not submit all the revised tax invoice and legitimate work records, and the non-party 3 did not have the plaintiff’s employee at the time, and instead, it was found that the non-party 3 had worked in the same kind of business as the plaintiff’s employee at the time, and the plaintiff's assertion that the non-party 3 was false, proved to have not been able to be able to presently submit the tax invoice related to the tax invoice.

3. Conclusion

Thus, the plaintiff's claim of this case is dismissed as it is without merit.

[Attachment]

Judges Kim Jong-soo (Presiding Justice) and Kim Jong-hee