Dongbu Tech Co., Ltd. (Law Firm Squa, Attorneys Park Young-chul et al., Counsel for the defendant-appellant)

Samsung Head of Samsung Tax Office (Law Firm ELBS Partners, Attorneys Lee Jin-jin et al., Counsel for the defendant-appellant)

May 14, 2014

1. The Defendant’s disposition of imposing corporate tax of KRW 67,107,749,780 (including additional tax of KRW 27,573,762,764) and special rural development tax of KRW 10,051,044,240 (including additional tax of KRW 4,281,545,221) imposed on the Plaintiff on March 12, 2013 shall be revoked.

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

The same shall apply to the order.

1. Details of the disposition;

A. The Plaintiff (the Plaintiff) was a listed corporation that produces and sells pesticides, fertilizers, etc., and entered into a merger contract after the resolution of the board of directors for the merger on February 16, 2007 for the purpose of absorbing and combining the listed corporation that is engaged in the business of manufacturing and selling semiconductors and related machinery (hereinafter “Dongbuex”) and entered into the merger contract after the resolution of the board of directors for the merger on March 29, 2007. After the merger on May 1, 2007, the merger was completed on May 3, 2007, and completed the merger registration on May 3, 2007.

B. In accordance with Article 84-7(1) of the former Enforcement Decree of the Securities and Exchange Act (amended by Presidential Decree No. 20055 of May 16, 2007) and Article 36-12(1) of the former Enforcement Rule of the Securities and Exchange Act (amended by Ordinance of the Ministry of Finance and Economy No. 875 of March 3, 2008), the Plaintiff calculated the merger ratio based on the stock price of the Plaintiff and the Dong Il Bo Bosch Rexroth as of the base date of appraisal (amended by Ordinance of the Ministry of Finance and Economy No. 875 of March 3, 2008) and the former Enforcement Rule of the Securities and Exchange Act (amended by Ordinance of the Ministry of Finance and Economy of March 15, 2007). The Plaintiff delivered common and preferential

1) The Plaintiff’s ordinary share (amounting to KRW 1,00,000) per common share (amounting to KRW 5,000) of the same non-exclusive share 0.102758 shares (amounting to KRW 5,00)

2) The first priority week (e.g., par value 1,000 won) per share of the Plaintiff’s first priority week (e.g., par value 5,000 won) of the Eastern Bosch Rexroth; 0.0813931 note

3) 0.1527563 note 0.1527563 per share of the Plaintiff’s preferential interest (amounting to KRW 1,000) of the same non-exclusive interest (amounting to KRW 5,000) of the same non-exclusive interest week

C. The value of the new shares of the merger granted to the shareholders of the same Ministry Bosch Rexroth (based on KRW 21,950 per share as of May 1, 2007) was the common share of KRW 589,756,825,260 (based on the face value of KRW 136,098,110,000), 2,611,952,350 per share (based on the face value of KRW 71,705,00), total of KRW 592,368,777,610 (based on the face value of KRW 136,809,815,00).

D. Meanwhile, on the other hand, the Plaintiff and East Fexroth entered into the merger contract on February 16, 2007, and its main contents are as follows:

A. The shareholders of the Plaintiff in the main sentence (hereinafter referred to as “A”) and A.I.D. (hereinafter referred to as “B”) shall make a merger with the shareholders of less than 3 per 1,00,000, with the aim of positively responding to changes in the domestic business environment and maximizeing the management efficiency and market effects, and shall conclude a contract as follows. The merger with Party A shall continue to exist and be dissolved. The total number of shares to be issued shall be 27,376,390 per 1,00, and the shares shall be 37,05,390 per 2,000,0000,0000,0000 per 1,000,000,000 per 1,000,000,000 won per 2,000,000 won per 1,000,000 won per 1,000,000 won per 3,00

E. The Plaintiff and Dongsch RexrothS drafted the merger report on February 16, 2007, and its main contents are as follows:

2. The merger and 2. The merger and 3. The merger and 1. The 2.0-day merger and 2. The 2.0-day merger and 2. The 2.0-day merger and 3. The 2.0-day merger and 4. The 2.0-day merger and 1. The 2.0-day merger and 2. The 2.0-day merger and 4. The 2.0-day merger and 5-day merger and 2. The 2.0-day merger and 30-day merger and 4. The 2.0-day merger and 5-day merger and 2. The 2.0-day merger and 5-day merger and 2. The 2.0-day merger and 5-day merger and 40-day merger and 70-day merger and 1400-day merger and 7. The 2.0-day merger and 5-day merger and 70-day merger and 20-day merger and 5-day merger and the 20-day merger and 7.

F. The book value of the net assets (the total assets on the balance sheet, excluding the debt) succeeded by the Plaintiff from the same Bosch Rexroth (the equity capital) was 204,660,480,068 won, and the fair value (the amount calculated by subtracting the net asset decrease from the net asset decrease due to the removal of internal transactions between the corporations involved in the merger from 328,584,913,147) was 29,18,474,000 won, while the Plaintiff succeeded to the net assets of the same Bosch Rexroth, and the issuance of new shares for the merger was 592,368,677,610 won, and 293,130,000 won, and 299,18,474,677,610 won, and 293,630,301,630,000 won as the business account book.

G. However, the Plaintiff’s goodwill 293,180,303,610 won, which was recorded in the course of the merger, does not constitute a business right under Article 24(4) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 20619, Feb. 22, 2008; hereinafter “former Enforcement Decree of the Corporate Tax Act”), and thus, imposed tax adjustment and disposition as follows.

151,477,00,000 reservation reservation 200, 2000, 2003, 293, 180, 303, 160, 207, and 19,545,000,000, 2000, 2000, 2000, 2000, 122,158,000, 2009, 2009, 122,158,000, 200, 2007, 293,180, 300, 307, 303, 303,160, △△

H. However, the tax authority, however, determined that the amount should be included in the calculation of depreciation costs each year after the business year 2007 is included in the calculation of the profit from the merger under Article 12(1)1 of the former Enforcement Decree of the Corporate Tax Act as the business right that the Plaintiff’s business right 293,180,303,160 won was included in the calculation of the operating income for the business year 2007. Accordingly, the Defendant denied the operating right 293,180,303,610 won which the Plaintiff included in the calculation of the operating income for the business year 2007, and estimated the amount of KRW 19,545,00,000 to the Plaintiff on March 12, 2013, including the corporate tax amount of KRW 67,107,749,762,764 won for the business year 207, the amount of the above amount should be included in the calculation of depreciation costs.

I. On June 27, 2013, the Defendant corrected KRW 10,051,04,240 (including additional tax of KRW 4,281,545,221; hereinafter referred to as “instant disposition”) by reducing KRW 10,713,30,670 as the above special rural development tax, and correcting it as KRW 10,051,04,240 (including additional tax of KRW 4,281,5,221; hereinafter referred to as “the instant disposition”).

(j) The Plaintiff filed a request for examination of the instant disposition on April 18, 2013, but the Commissioner of the National Tax Service rendered a decision to dismiss the request for examination on July 16, 2013.

[Reasons for Recognition] Facts without dispute, Gap evidence Nos. 1, 2, 3, 4, 12, 15, Eul evidence Nos. 1 and 2 (including all of the serial numbers; hereinafter the same shall apply), and the purport of the whole pleadings

2. The parties' assertion

A. The plaintiff's assertion

1) The goodwill that is counted in an account book is limited to cases where it satisfies the requirements prescribed in Article 24(4) of the former Enforcement Decree of the Corporate Tax Act. In other words, the goodwill is recognized as a goodwill only where it has a business value (such as trade name, transaction relation, and other business secrets of an extinguished corporation) and (2) only where it succeeds to the evaluation and succession of the pertinent goodwill.

2) The instant goodwill does not reflect intangible property value, but rather arises only from accounting and technical aspects in the process of calculating the merger ratio by the method prescribed by the law. The Plaintiff did not have any fact of evaluating and succeeding the business value due to the trade name, transaction relationship, and other trade secrets of the same Bosch Rexroth.

3) The instant merger cost is not determined by the assessment of the existence of excess earnings higher than the ordinary profits of other companies running the same kind of business. It is not determined by the stock market owner rather than by the assessment of the existence of excess earnings. The tax authority should impose the tax on the portion that can be recognized as excess earnings by considering the circumstances where the stock price was formed in excess of the net asset value, the period, whether artificial influence was involved in the formation of the stock price, the securities market situation, and all other factors that may affect the stock price as a whole and comprehensively. The burden of proof is on the tax authority. In this case, the defendant failed to prove the existence of excess earnings of the same type of business and the amount appraised thereof. Accordingly, the defendant shall be deemed as the business right 293,180,303, and 610 won appropriated in the account book of the plaintiff, and the disposition of this case as depreciable assets should be revoked because it is unlawful and void.

4) The instant disposition violates the principle of non-taxation practice and prohibition of retroactive taxation pursuant to Article 18(3) of the Framework Act on National Taxes.

B. Defendant’s assertion

1) In the event of a merger, the merged corporation entered into a merger contract by paying a price in excess of the net asset value of the merged corporation, and the sales right calculated as the difference falls under the assets subject to merger evaluation and depreciation. Since the book value of the merged corporation of business right is zero won, the Plaintiff’s total market value of the merger shares issued by the said stockholders, i.e., the total market value of the merger shares issued by the said stockholders, i.e., the merger price of KRW 592,368,77,610 and the book value of the net asset value of the said subcontractor and the said subcontractor’s net asset value of KRW 299,18,474,00,00 shall be included in the gross income.

2) The merger ratio of the merged party corporation is determined by the market price of the stock market, and the merger price is ultimately paid in proportion to the market price of the merged corporation. As such, the merger price is the corporate value appraised by the stock price of the merged corporation, and the Plaintiff was merged with the same company according to the share price, which constitutes “the case where the merged corporation succeeds to the appraisal of the assets of the merged corporation.”

3) Under the former Corporate Tax Act before 1998, business rights are listed as depreciable assets, and the contents thereof are not specified. The amended Corporate Tax Act and the Enforcement Decree of the same Act stipulate business rights as “where assets of the merged corporation are evaluated and succeeded to as a result of business value due to trade name, transaction relations, trade secrets, etc. of the merged corporation, etc.” Before the amendment of the Corporate Tax Act in 1998, the acquisition of the assets and liabilities of the merged corporation with losses carried forward at the book value was used as a means of tax avoidance treated as depreciation in the future. The above provision was newly established in the purport that, prior to the amendment of the Corporate Tax Act in 1998, the losses carried forward with losses carried forward at the expiration of the period of extinctive prescription due to the merger of the merged corporation’s assets and liabilities are assessed as depreciation costs, and only the goodwill arising from the market price other than the book value is recognized as depreciable assets. Therefore, “in case of succession of assets” under Article 24(4) of the former Enforcement Decree of the Corporate Tax Act, which provides business rights, not the book value.

4) Business rights consisting of the license rights, business relations, and other trade secrets of an extinguished corporation. There is no individual evaluation method that can objectively evaluate business rights. Therefore, assessing business rights in an amount obtained by deducting the net asset value of the extinguished corporation from the cost of merger based on the market price of stocks is the most objective evaluation of business rights under the market economy.

5) Since the surviving corporation’s intent to pay the price for merger in excess of the net asset value of the extinguished corporation is determined to have a value equivalent to that of the extinguished corporation’s goodwill, it should be recognized as a business right with the entire asset value.

3. Relevant statutes;

Attached Form is as shown in the attached Form.

4. Determination

A. The situation of profit and loss before and after the merger of the plaintiff

1) The Eastern Group continued to be in the capital erosion of the East Bosch Rexroth, which led to a merger with a sound Plaintiff. The amount of losses from 2001 to 2006 of the Eastern Group’s financial structure is the same as the Telecommunication 1>, and the profits and losses of Samsung Electronic (limited to the semiconductor general sector) and the business profits and losses of the secondary database for the same period are as the attached Table 2

Table (units: 2002 2003 2004 2004 2005 -1,635-1,675-52 -1,019-2,136-1,909-8,926 -2,285-1,285-1,219-2,950-2,280-2,280-3,197-3,30-13,261

The name of Samsung Electronic Co., Ltd. (unit: KRW 2002 2003 2004 2004 2005 36,139 74,748,748 54,57750,320,942 -12,9219,403-2,59,403-2,594 18,459 14,300,72526,564

2) The audit report on the financial statements of the business year 2006 business year by the same director general shall contain the following contents:

The financial statements of the voting company included in the main text were prepared on the assumption that the company will continue to be a company, so the book value of the company's assets and liabilities can be recovered or repaid through the normal business activity process. However, the company has incurred 332,972,00,000 won in the current year, and the cumulative loss as of the end of the current year is 343,862,000 won in the current year, and the cumulative loss exceeds 169,78,000 won in the current assets, so the financial structure needs to be improved.

3) However, following the merger, the Plaintiff’s profits and losses due to the continuous loss of the semiconductor sector after the merger are as follows:

Operating profit and loss -153-885-1, 579-2, 813-354-14-5, 928-1 net profit and loss -169-2 of the table (units: KRW 2007 2008 - 2010 2011 -201 -153-885 -2, 813-354-14-5, 928 -169-2, 816-1, 764-61 -61 -931 -62

[Reasons for Recognition] The evidence adopted earlier, Gap evidence Nos. 6 through 10, and Gap evidence No. 13

(b) Merger marginal profits and merger marginal losses;

1) Article 17(1)3 of the former Corporate Tax Act (amended by Act No. 9267 of Dec. 26, 2008; hereinafter “former Corporate Tax Act”) defines the value of the property succeeded from the extinguished company as the amount of debts succeeded from the extinguished company, the amount paid to its shareholders, and the excess amount in cases where the amount of capital increase or merger of the company surviving the merger exceeds the amount of capital of the company incorporated by the merger, and stipulates that such excess amount shall not be included in the gross income as profits from capital transactions. In other words, the merger gains refer to the balance not included in the capital among the net asset value of the merged corporation, and the intrinsic method is the excess amount of issued stocks.

The actual value of the shares included in the text = The net asset value of the extinguished corporation (total value of succeeded assets - total value of succeeded liabilities) - (total par value of the shares issued to the stockholders + total amount of merger subsidies)

2) The merger losses are not stipulated not only in the Commercial Act but also in the Corporate Tax Act and the corporate accounting standards, but also in general, in terms of the concept contrary to the merger marginal profits, if the net asset value succeeded from the merged corporation to the stockholders of the extinguished corporation is less than the sum of the merger grants paid to the merged corporation and the face value of the new stocks issued by the merger (i.e., the cost of the merger). In other words, the formula in this context is as follows, and the essence thereof is also the amount that is exempted from

The actual loss from merger = The price of merger (the merger subsidy + the total par value of new stocks after merger) - the net asset value succeeded from the merged corporation.

(c) Merger losses and goodwill.

The fiscal rules on corporate acquisition, merger, etc. (hereinafter “the fiscal rules on combined accounting”) stipulate that the purchaser’s goodwill is the portion exceeding the share of the purchasing company in the net asset value among the purchase cost. It was revised on August 28, 2009 to the closing price on the date of purchase (Article 6.6 (6-3) of the rules on combined accounting, which is revised on August 28, 2009). In addition, there is a difference between the concept and the merger losses in which the goodwill in the above fiscal rules on combined accounting is regarded as the total face value of the new shares after merger. In addition, there is a discussion on how to evaluate the operating rules on combined accounting by evaluating the assets of the merged corporation (hereinafter “the operating rules on combined accounting rules”) and how to evaluate the net assets of the merged corporation succeeded to the merged corporation (the net assets of the extinguished company should be succeeded to as they are, and the net assets value of the extinguished company should be evaluated as the net assets value of the extinguished company from the perspective of recognizing the net assets of the extinguished company as transactions in the merged company.

(d) Taxation on merger evaluation marginal profit on a merged corporation under the former Corporate Tax Act;

Article 12(1) of the former Enforcement Decree of the Corporate Tax Act provides that where assets are evaluated and succeeded to from a merged corporation until the amount under Article 459(1)3 of the former Commercial Act (amended by Act No. 10600, Apr. 14, 201) is reached, the amount in excess of the book value of the extinguished corporation shall be deemed a merger evaluation marginal profit. The concept of the merger marginal profit is distinguishable from the merger marginal profit, which means the amount after deducting the capital increase from the value of net assets succeeded from the merged corporation, as seen earlier.

Merger evaluation marginal profit included in the main sentence = Evaluation value of assets succeeded to - Book value of assets succeeded to.

Article 17 (1) 5 of the former Corporate Tax Act does not include the merger marginal profit as profit from capital transactions, while it does not include the merger marginal profit in the gross income pursuant to the provisions of the proviso. This means that the merger marginal profit is included in the gross income at the time of the merger because the amount of income decreases in the case where the merged corporation conducts the disposal of depreciation costs or assets disposal losses after the merged corporation succeeds to its assets evaluation of the merged corporation. However, according to Article 12 (1) 1 of the former Enforcement Decree of Corporate Tax Act, the merger marginal profit shall not exceed the merger marginal profit pursuant to Article 459 (1) 3 of the former Commercial Act, and the merger marginal profit shall not exceed the liquidation marginal profit pursuant to Article 80 (1) of the former Corporate Tax Act after the merger. In other words, the merger marginal profit shall be deducted from the liquidation income within

E. Provisions on goodwill

1) According to the combined accounting rules, a goodwill is recognized only for a combination of enterprises under the Act on the Purchase of Bonds. Of the purchaser price (referred to the fair value of cash or cash, etc. paid to control the net assets and business activities of another company) the purchaser exceeds the share of the purchasing company in the fair value of the net assets recognizable by the purchasing company as of the date of purchase. Such a goodwill is recognized by setting the period during which the economic benefits can be expected to be flown in the future, and the period of service expected to be paid in the future shall not exceed 20 years ( § 9 of the combined accounting rules). In other words, the goodwill under the combined accounting rules is recognized by stipulating the difference between the issue date of new stocks issued for merger or the market value (including the case of a merger subsidy) of the merger date, which is the amount deducted from the net assets value of the merged corporation succeeded from the merged corporation as the price for the merger to the shareholders of the merged corporation at the time of the merger.

According to the statement contained in the main sentence = The purchase cost - the share of the purchasing company on the fair value of assets and liabilities (net assets) acquired from the purchasing company as of the date of purchase.

On the other hand, if the share of the purchasing company exceeds the purchase cost out of the fair value of the identifiable assets and liabilities acquired from the purchasing company on the date of purchase, the excess amount shall be appropriated as the business right of the division (§ 10 of combined accounting rules).

2) Meanwhile, Article 24(1) of the former Enforcement Decree of the Corporate Tax Act provides for depreciable assets and lists business rights under subparagraph 2(a). Article 24(4) provides that “In the case of a merger or division among business rights under paragraph (1)2(a), the business rights appropriated by the merged corporation shall be deemed depreciable assets only where the merged corporation evaluated and succeeds to the assets of the merged corporation and paid compensation for business value due to the trade name, transaction relations, and other trade secrets of the merged corporation or divided corporation.” Article 12 of the former Enforcement Rule of the Corporate Tax Act provides that “The above business rights shall be deemed depreciable assets, separately from the transferred or acquired assets during the process of transfer or acquisition of the business, by taking into account the following factors: (i) the amount acquired at a cost in accordance with the appropriate method of assessment, including the amount of permission or authorization for the transferred business, business convenience, geographical conditions, business secret, credit, trade lines, etc.; (ii) the authorization for establishment, license for a specific business, and the amount of contribution, etc.

3) Comprehensively taking account of the foregoing relevant provisions, the recognition of a business right under the former Corporate Tax Act as a business right in a corporate merger is limited to the case where the merged corporation evaluates the assets of the merged corporation and succeeds to the business value due to the trade name, transaction relations, business secrets, etc. of the merged corporation, and is considered as depreciable assets only for such asset-value business rights. In this context, in order to be evaluated as a business right having business value, a certain company must have intangible property value that can make it possible to bring more profits than the ordinary profits of the other company operating the same kind of business due to its special skills, social credit and transaction relations, and other business functions or characteristics. If a company acquires more profits than the ordinary profits prior to the merger by absorbing another company through absorbing its business functions or characteristics, the intangible value of the absorption company that may bring more profits after the merger shall be deemed as a business right (see Supreme Court Decision 85Nu592, Feb. 11, 1986, etc.).

4) On the other hand, the merger evaluation marginal profit resulting from the evaluation and succession of assets is included in the gross income for the concerned business year. The assets here can fall under not only tangible assets but also intangible assets. In case where there are intangible business values (excess profits) in the merged corporation, if the merged corporation succeeds to the evaluation and evaluation, the assets called business rights are evaluated (the book value of business rights of the merged corporation is zero won) and the merger marginal profit is succeeded to the merged corporation. Thus, the business rights are

F. Determination

In light of the facts acknowledged earlier and the overall circumstances revealed in the argument in this case, it is difficult to deem that the Plaintiff’s operating right 293,180,303,610 won on the account book appropriated in the course of the merger as the business right under the tax law succeeded to by evaluating assets. Therefore, the instant disposition that inferred the amount as depreciable assets after inclusion the said amount in the gross income as the merger evaluation marginal profit under the premise that the asset value of KRW 293,180,303,610 on the account book appropriated by the Plaintiff is recognized.

1) In the case of a merger between listed corporations, the parties concerned cannot arbitrarily determine the merged value of the listed corporation, and under Article 190-2 of the former Securities and Exchange Act, Article 84-7(1) of the Enforcement Decree of the same Act, and Article 36-12(1) of the Enforcement Rule of the same Act, the merger ratio is enforced to determine the merged value after calculating the merged value based on the exchange price of the merged corporation. The merged corporation involved in the merger shall enter into a merger agreement with the merger ratio calculated in accordance with the above Act

As such, the purport of the former Securities and Exchange-related Acts and subordinate statutes requires that the merger ratio be set based on the stock price at the Exchange in the case of a merger between stock-listed corporations is to prevent unfair merger by ensuring the objectivity and appropriateness of the merger ratio, and by fairly assessing the value of assets of the merged corporation, it does not aim at determining the merger value by reflecting the merger ratio, in a case where the merger ratio is set disadvantageous to either of the companies that will be merged, the shareholders of the relevant company could not maintain their share ratio after the merger. Therefore, it would result in unfair results in the loss of part of stocks.

On the other hand, where the merged corporation issues new shares to the shareholders of the merged corporation according to the merger ratio after determining the merger ratio based on the exchange share price, the merged corporation as a result of the payment of the merged price equivalent to the market value of the merged corporation is virtually no room for profits and losses through the merger to the merged corporation.

However, according to the corporate accounting rules, where the price of merger is paid to the merged corporation as the stocks of the merged corporation, the merger consideration should be calculated on the basis of the closing price of the date of issuance of the stocks or the date of the merger. If the price calculated as above exceeds the fair net asset value recognizable, losses arising from the merger shall be recognized as business rights on the account of the merger. On the other hand, in calculating the merger marginal profit, Article 17(1)3 of the former Corporate Tax Act, Article 12(1) of the former Enforcement Decree of the Corporate Tax Act, and Article 459(1)3 of the former Commercial Act, the merger marginal profit should be calculated on the basis of the increase in capital, i.e., the value of the stocks issued by the merged corporation as the net asset value of the merged corporation, not the market value of the stocks issued by the merged corporation after the merger marginal profit is calculated at the market value of the new stocks issued by the merged corporation. In addition, if the market value of the stocks is higher than the par value of the stocks issued by the merged corporation, it should be determined within the scope of the merger marginal profit.

In this case, as of February 15, 2007, as of February 15, 2007, the average closing price for the last one week, the average closing price for the last one week, the value obtained by calculating the average closing price for the last one day, and the amount calculated by calculating the lower price of the last day, which is the closing price. Therefore, the business right 293, 180, 303,610 won under the accounts, which is calculated as the difference between the price determined based on the market price in the stock market, is merely the amount arising in the technical process of accounting.

2) In addition, as alleged by the Defendant, “the case of succession from the merged corporation’s acquisition of assets” refers to a merger under the former Securities and Exchange Act, if it is deemed unnecessary to separately evaluate the goodwill, it shall be always taxed if the cost of merger assessed as the price of the merged corporation under the relevant provisions of the former Securities and Exchange Act is larger than the net asset value of the merged corporation. This is against the purport of Article 24(4) of the former Enforcement Decree of the Corporate Tax Act stipulating the concept of goodwill by stipulating it as depreciable assets only for the case of payment of the price for business value due to the trade name, transaction relations, and other trade secrets, etc. of the merged corporation. The Defendant’s cited Supreme Court Decisions 2007Du12316 Decided October 16, 207 and Supreme Court Decisions 2012Du1044 Decided May 9, 2012, which found the acquisition value of the merged corporation’s net asset value after deducting the fair value of the merged corporation’s net asset value of the merged corporation from the merger value of the former.

3) In particular, even if there were intangible assets, such as semiconductor manufacturing technology, designing ability, and transaction line, it is difficult to view that the accounting business right, which is ex officio calculated on the basis of the market price of stocks, was computed based on objective and fair assessment of the intangible asset value, which is the excess profit-making power of the same vice-contractor, was computed through an objective and fair assessment. In addition, the same vice-contractor, from 2001 to 2006 at the time of the instant merger, cannot be deemed to have any excess profit-making power that can be recognized as business right, in light of the fact that the cumulative business loss from 200 to 2006, total cumulative net loss amounted to 13,26.1 billion won, while other companies engaged in the same kind of business, who have been operating the same type of business, have raised profits for the same period.

4) According to the literal interpretation of Article 24(4) of the former Enforcement Decree of the Corporate Tax Act, the part of the merger exceeding the fair value of net assets of the extinguished corporation is recognized as business rights, and only the part of the asset value is recognized as business rights. Thus, only if the part of the asset value is confirmed, the amount can be recognized as business rights under the tax law and imposed as a merger evaluation marginal profit. In this case, there was no direct perception or evaluation of business rights.

5) The merger ratio is calculated as the market price on the date of merger as prescribed by the former Securities and Exchange Act while the merger price of business rights in the accounts is calculated on the basis of the market price on the date of merger. On the other hand, Article 12(1) of the former Enforcement Decree of the Corporate Tax Act provides that where assets are evaluated and succeeded, the amount exceeding the book value of the extinguished corporation shall be deemed as the merger evaluation marginal profit. This is premised on the calculation of the merger marginal profit based on the evaluation base date. According to the aforementioned adopted evidence, the merger price of the merged corporation, between February 15, 2007 and May 1, 2007, which is the date of merger, can be recognized as the fact that the merger price of the Plaintiff, the merged corporation, due to the increase in the Plaintiff’s stock price during the above period, has increased KRW 80.8 billion, and it is difficult to view that the stock price increase during

6) Also, the price of listed stocks is determined by various reasons, such as the market and economic situation, supply and demand of the pertinent stocks, and the temporary preference of the stock market, other than the profit of the issuing corporation. Therefore, it is difficult to readily conclude that the total amount of the cost of mergers paid in excess of the net asset value is a goodwill that reflects the excess profit.

7) The National Tax Service in September 2003 announced for the first time the authoritative interpretation that the business rights appropriated as depreciable assets by evaluating the trade name, trade relations, and other business secrets of the extinguished corporation under Article 24(4) of the former Enforcement Decree of the Corporate Tax Act shall be included in the merger evaluation marginal profit under Article 12(1)1 of the Enforcement Decree of the same Act (including the difference between the business value of the extinguished corporation and the net asset value of the extinguished corporation under Article 24(4)1 of the former Enforcement Decree of the Corporate Tax Act; 200-10 of the former Enforcement Decree of the Corporate Tax Act shall not be included in the merger evaluation marginal profit if the merged corporation received the difference between the business value of the extinguished corporation and the net asset value of the extinguished corporation under Article 24(1)4 of the former Enforcement Decree of the Corporate Tax Act.

8) In addition, when an affiliated company of the same subsidiary group entered capital loss of KRW 333 billion in the business year 2006, such as recording the net loss, it was merged with the Plaintiff, which is an affiliated company of the same subsidiary for the improvement of the financial structure of the same subsidiary. In light of the aforementioned merger circumstances, it is difficult to readily conclude that the merged corporation, which decided to pay the price for the merger in excess of the net asset value of the extinguished corporation, has the value equivalent to the Plaintiff’s business right of the same affiliate, and paid the price.

5. Conclusion

All of the plaintiff's claims shall be accepted due to the reasons, and it is so decided as per Disposition.

[Attachment]

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

Note 1) Thai-ro and Han Man-do, Tax Law Doctrine, Tax Law Doctrine, 2013 (No. 19), 1679