(a) Criteria for determining “where the use is restricted under the provisions of laws and regulations” excluded from non-business real estate under the Corporate Tax Act;

(b) The case holding that restrictions on building permission by the Mayor of Seoul Special Metropolitan City on measures taken by the Minister of Construction and Transportation under Article 44 (2) of the former Building Act constitute restrictions on the use of lakes and marshes under Article 18 (4) 1

A. Article 18(4)1 of the former Enforcement Rule of the Corporate Tax Act (amended by the Ordinance of the Ministry of Finance and Economy No. 1844 of Feb. 28, 191) provides that “real estate, the use of which is prohibited or restricted by the provisions of the Act and subordinate statutes,” which is not directly prohibited or restricted by the provisions of the Act and subordinate statutes, includes a case where the administrative agency does not make any authorization or permission concerning land use that goes against its purpose, such as building permission, etc. on the ground of the establishment, etc. of urban planning as part of its administrative action, and

B. The case holding that the construction restriction of the Seoul Special Metropolitan City Mayor pursuant to the construction permission restriction measure under Article 44 (2) of the former Building Act (amended by Act No. 4381 of May 31, 191) is included in the restriction on use under the provisions of Article 18 (4) 1 of the former Enforcement Rule of the Corporate Tax Act, so long as the cases where the use of the land is prohibited or restricted under the provisions of Acts and subordinate statutes prescribed by the Enforcement Rule of the same Act are included in the restriction on use under the provisions of Article 18 (4) 1 of the former Enforcement Rule of the Corporate Tax Act, the administrative agency's

A.B. Article 18(4)1(b) of the former Enforcement Rule of the Corporate Tax Act (amended by the Ordinance of the Ministry of Finance and Economy No. 1844 of Feb. 28, 1991)

A. Supreme Court Decision 93Nu2995 delivered on January 25, 1994 (Gong1994Sang, 848) 93Nu17591 delivered on March 25, 1994 (Gong194Sang, 1367)

Sam Chang Industrial Development Co., Ltd., Counsel for the defendant-appellant

Head of Mapo Tax Office

Seoul High Court Decision 92Gu37675 delivered on December 29, 1993

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

(1) As to the second real estate

Article 18 (4) 1 of the Enforcement Rule of the Corporate Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 1835 of Oct. 22, 1990; hereinafter the same shall apply) which provides for one of the cases of non-business real estate of a juristic person subject to non-business interest in corporate tax in corporate tax shall be construed as "real estate, the use of which is prohibited or restricted under the provisions of Acts and subordinate statutes" does not directly be prohibited or restricted by the provisions of the Acts and subordinate statutes, and it shall include cases where the use of land is prohibited or restricted by the construction permit, etc. for reasons of the establishment of urban planning as part of its administrative action, and it shall not be considered that the government's construction plan cannot be established for the purpose of non-business under Article 18 (4) 1 of the Enforcement Rule of the Corporate Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 1844 of Feb. 28, 199; hereinafter the same shall apply).

(2) As to the first real estate

According to the reasoning of the judgment below, the court below acknowledged the following facts: the plaintiff acquired the real estate of this case for the purpose of constructing national housing on May 30, 1985, but applied for a review of construction plan on March 13, 1990 with the change of the purpose of opening the market, and obtained the above approval on June 2 of the same year, and applied for a construction permit on June 4 of the same year; however, the Seoul Special Metropolitan City restricted the construction permit of commercial buildings, such as the market to be newly constructed by the plaintiff from May 15, 190 to May 15, 199 in accordance with the restriction of construction permit under Article 44 (2) of the former Building Act; the plaintiff revoked the above construction permit application and the restriction of construction permit was not included in the restriction of use under the provisions of Acts and subordinate statutes under Article 18 (4) 1 of the above Rule; since the construction restriction measure of the Mayor of Seoul Special Metropolitan City was not included in the land for non-business use.

If the facts are as determined by the court below, the court below held that the construction restriction measures on the real estate No. 1 of this case were included in the restriction on use under the provisions of Article 18 (4) 1 of the above Rule, as long as the case where the use is prohibited or restricted under the provisions of the above rule, is considered to include the case where the administrative agency uniformly controls the construction permission as part of administrative action and actually prohibits or restricts the use of the land, and thus, it is difficult to accept the lawsuit that caused this error. However, even according to the judgment below, the above construction restriction measures were taken from May 15, 190 to May 14, 1990, and thus, the defendant's loan No. 1 of this case did not meet the requirements under Article 18 (4) 1 of the above rule, and thus, the non-Inclusion of the loans against the payer of the real estate No. 1 of this case in the deductible expenses for the non-deductible expenses against the non-business real estate during the pertinent business year is illegal from May 10, 19, 190.

Nevertheless, it is clear that the court below erred in the misapprehension of legal principles as to the scope of non-inclusion of interest paid in borrowings related to non-business real estate in the above business year, and such illegality has influenced the conclusion of the judgment. Therefore, the appeal pointing this out is justified, and the judgment of the court below cannot be reversed in its entirety.

(3) Therefore, we reverse and remand the judgment below. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Don-hee (Presiding Justice)