Korea Land and Housing Corporation (Attorney Kim Young-sub et al., Counsel for the plaintiff-appellant)

Goyang-si Market

April 19, 2011

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition of development charges of KRW 14,585,225,580 on December 4, 2009 and development charges of KRW 13,091,840 on March 11, 201 shall be revoked.

1. Details of the disposition;

A. The Korea National Housing Corporation (the merger with the Korea Land Corporation on October 1, 2009 and the Plaintiff newly established and comprehensively succeeded to the rights and obligations of the Korea National Housing Corporation; hereinafter the same shall apply) shall obtain approval of the housing site development plan under the Housing Site Development Promotion Act on October 25, 200, on the land of 834,725 square meters for the Hanyang-gu Pung-gu Pung-gu and the meal Dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-dong-gu-gu-si

B. Of the instant project sites, the Plaintiff newly constructed apartment units (hereinafter “new construction of the instant site”) on the land (hereinafter “instant site”) located in B2 and B3 B3 B B block (hereinafter “instant district”) and received the completion inspection on March 31, 2008.

C. On May 9, 2008, the Plaintiff reported development charges of KRW 23,174,964,143 (i.e., KRW 529,311,894,287 at the time of termination - the land price of KRW 93,404,429,424 at the time of commencement - the normal land price of KRW 59,70,983,757 - the total development costs of KRW 353,031,516,963) calculated accordingly to the Defendant.

D. Accordingly, the Defendant considered the development gains from the new construction of this case as KRW 97,896,732,365 (i.e., KRW 538,710,887,643 at the time of termination - KRW 90,30,256,225 won at the time of commencement - KRW 57,70,101,056 - total development costs - KRW 292,813,797,997, Nov. 18, 2008, and imposed development charges of KRW 12,237,091,540 calculated accordingly on the Plaintiff (hereinafter “original disposition”).

E. Meanwhile, on February 11, 2009, the Plaintiff filed an administrative appeal with the Central Land Expropriation Committee on the disposition imposing the development charges. On August 20, 2009, the Central Land Expropriation Committee accepted part of the Plaintiff’s assertion and rendered an administrative appeal ruling revoking the initial disposition.

F. In accordance with the purport of the above ruling on December 4, 2009, the Defendant: (a) recognized the land value as of the starting point to be KRW 90,30,256,225; (b) KRW 538,710,87,643; (c) KRW 57,700,101,056; and (d) development costs as of KRW 274,028,725,654; and (b) calculated the development gains as of KRW 116,681,80,804,7087,643 (i) KRW 538,710,787,643; (b) KRW 90,300,256,250; (c) KRW 57,70,701,056, KRW 2740,7285,2584; and (d) KRW 1065,2585,15685,5654,2565

G. On March 11, 2011, the Defendant imposed and notified the amount of KRW 13,091,840 (hereinafter “instant increase disposition”) on the ground that the Defendant erroneously imposed the development charges on the Plaintiff based on the amount including the general management expenses and profit of the subcontractor and the research and design expenses, while imposing the administrative expenses on the Plaintiff based on the net construction cost.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 8, Eul evidence Nos. 1, 2 and 23, the purport of the whole pleadings

2. Whether the instant disposition and increase disposition are legitimate

A. The plaintiff's assertion

The Plaintiff asserts that the instant disposition and increase disposition should be revoked for the following reasons.

(1) Violation of prohibition of disadvantageous alteration

The Defendant imposed development charges of KRW 12,237,091,540 in relation to the new construction of the instant case, but the disposition of KRW 14,585,225,580 in the instant case and the disposition of increased development charges of KRW 13,091,840 in the light of the fact that the development charges correspond to quasi-tax even though the original disposition was revoked due to the administrative trial decision by the Central Land Expropriation Committee.

(2) Calculation of development costs

(a) interest on construction funds, construction indirect costs;

According to Article 12 (4) 1 of the Enforcement Decree of the Restitution of Development Gains Act (hereinafter referred to as the "Act"), development costs incurred pursuant to the former Framework Act on the Management of Government-Invested Institutions (amended by Act No. 8258, Jan. 19, 2007) as "a tax reduction or exemption institution" referred to in Article 12 (3) of the Enforcement Decree of the same Act, such as the Plaintiff, should be recognized as development costs even if the development costs exceed the amount referred to in paragraph (3) of the same Article, and construction costs should be spent naturally. Since construction costs should be paid, they should be included in development costs, and the detailed rules on the implementation of the Financial Accounting Standards for Government-Invested Institutions (amended by the Enforcement Rule of the Korea National Housing Corporation Act, Dec. 26, 2006; hereinafter the same shall apply) for government-invested institutions and quasi-government institutions (amended by the Enforcement Rule of the Financial Accounting Standards for Government-Invested Institutions; hereinafter the same shall apply) include construction costs in "construction costs" among construction costs, and the two items are excluded from the above construction costs.

(b) General management expenses;

The general management expenses of this case were calculated as 5% of the net construction cost, and the above net construction cost included the construction fund of the plaintiff's assertion, and the construction indirect cost, and the general management expenses should be calculated based on the sum of value-added tax, general management expenses, profits, research expenses, and design expenses within the contract construction cost of the supplier in addition to the net construction cost, but the defendant was calculated based on the calculation basis based on the

(c) Expenses incurred in opening a surrounding road;

Although the expenses incurred in relation to the roads (hereinafter “road around the instant district”) installed by the Plaintiff and donated to the Defendant in the vicinity of the instant district fall under Article 12(1)5 or 6 of the Enforcement Decree of the Act, and should be included in the total development costs, the Defendant recognized only the amount equivalent to the instant district by dividing the development costs in proportion to the size of the rental housing district constructed by the Plaintiff in the vicinity of the instant district, while the development costs were to be included in the total development costs. However, as the public interest of the relevant project increases due to the construction of rental housing, the development charges to be borne by the

B. Relevant statutes

The entries in the attached Table-related statutes shall be as follows.

C. Determination

(1) As to the violation of the prohibition of disadvantageous change

Article 79(2) of the Framework Act on National Taxes provides that in making a decision on a request for a trial that is dissatisfied with a tax disposition, the claimant may not be affected by a decision that is more unfavorable than that made by the request for a trial. Such prohibition of disadvantageous change is applied to cases where the contents of the decision of the trial are disadvantageous than that of the tax disposition subject to a request for a trial. This prohibition does not apply to cases where the tax authority finds new omissions or errors in the process of making a new tax disposition based on the details revealed in the grounds of the decision of the judgment and immediately changes the tax base or tax amount (see Supreme Court Decision 2005Du10675, Nov. 16, 2007). Thus, the above assertion

(2) As to the interest on construction funds, construction indirect costs

(A) Criteria to determine development costs

In calculating development gains, the net construction cost from among the development costs subject to deduction is the element of the so-called construction cost, including the cost of material (direct and indirect material cost, etc.), labor cost (direct labor cost, indirect labor cost, and indirect labor cost), but the development profit itself refers to the profit derived from the enhancement of the value of land that is obtained through the development project. Therefore, even if the construction cost of the above three items is included in the land subject to the relevant development project for the implementation of the relevant development project, it falls under the development cost as the net construction cost (see Supreme Court Decision 9Du8923, Jan. 22, 2002, etc.).

(B) However, according to the following circumstances, Gap evidence Nos. 4, Gap evidence Nos. 6, 7, and Eul evidence Nos. 2, the whole purport of the pleadings, and the relevant statutes, the construction funds of the plaintiff's assertion, construction costs, and construction costs cannot be acknowledged as net construction costs. Thus, the plaintiff's assertion is without merit.

1) Article 39(3) of the Act on the Management of Public Institutions and Quasi-Governmental Institutions provides that matters necessary for the accounting principles, etc. of public corporations and quasi-governmental institutions shall be prescribed by Ordinance of the Ministry of Strategy and Finance. Article 19 of the Rules on Accounting of Public Corporations and Quasi-Governmental Institutions provides that matters necessary for the enforcement of said Rules shall be determined and publicly announced by the Minister of Finance and Economy, and the head of the institution may determine the detailed matters necessary for the enforcement of said Rules within the scope determined and publicly announced by the Minister of Finance and Economy. Accordingly, the rules on the accounting standards of public corporations and quasi-governmental institutions

2) The calculation of the construction cost as stipulated in Articles 158, 179, and 181 of the Enforcement Rule of the Government-Invested Institutions Accounting Standards, which the Plaintiff is based on the inclusion of net construction cost, is determined as necessary for the accounting principles of public corporations and quasi-governmental institutions. As such, it does not necessarily coincide with the items of development cost and the calculation purpose.

3) Article 12(3)1 of the Enforcement Decree of the Act provides that material cost, labor cost, and expenses shall be calculated by applying the method of calculating material cost, labor cost, and expenses for calculating construction cost among the criteria for determination of estimated price under Article 9 of the Enforcement Decree of the Act on Contracts to Which the State Is a Party. According to Article 9(1)2 of the Enforcement Decree of the Act on Contracts to which the State is a Party; Article 6(1), 2, and 3 of the Enforcement Rule thereof, “the amount calculated by multiplying the quantity of materials required for the manufacture, construction, or services, etc., of the subject matter of a contract by the per unit price”; “the amount obtained by multiplying the quantity of labor cost by the quantity of materials required for each type of work required for the manufacture, construction, or services, etc., of the subject matter of a contract by the unit price”; and “the total amount of expenses for each item of work required for the manufacture, construction, or services, etc.

4) Even if construction cost items are identical or similar to the net construction cost items in accordance with the regulations on the implementation of the government-invested institution accounting standards, whether such costs may be included in the development cost, which serves as the basis for the calculation of development charges, shall bring about an increase in benefits or values by putting them into the land subject to the relevant development project for the implementation of the relevant development project. However, it is insufficient to view that the construction costs of the Plaintiff’s assertion (land compensation bond, interest on the National Housing Fund, interest on general loans), construction indirect costs (Plaintiff head office, local head office, and personnel expenses at each site) can be deemed as expenses or general management expenses incurred in housing construction in light of the details thereof, and thus fall under the net construction cost invested in

5) If construction capital interest is recognized as development costs, the scope of recognition of development costs is larger than that of the general project operator implementing the project with his own capital, and the Plaintiff’s construction capital interest, and construction indirect costs are sought for the total sum of all the costs invested in all construction works, and such costs are exempt from balance with the general project operator.

6) When calculating development costs, public services and non-public services cannot be treated differently, and public services can be treated differently from non-public services by means of exclusion and reduction, burden burden, etc.

(3) Regarding general management expenses

(A) Net construction cost portion

As seen earlier, the Plaintiff’s assertion that the net construction cost is the construction fund of the Plaintiff’s assertion, and the construction indirect cost cannot be included. As such, the Plaintiff’s assertion is without merit.

(B) Value-added tax, general management cost, profit and research cost, design cost portion within the contract construction cost of the subcontractor

According to the facts and relevant laws and regulations, the following circumstances are revealed.

1) According to Article 11(1)1 of the Act, Article 12(1)4, proviso to Article 12(2) of the Enforcement Decree of the Act, Article 9 of the Enforcement Decree of the Act to which the State is a Party, and Article 6 Subparag. 4 of the Enforcement Rule of the same Act, general management expenses, which are a kind of net construction costs, shall be an amount calculated by multiplying the total sum of “materials cost, labor cost, and expenses” by a certain ratio.

As such, the purpose of legislation that sets the items and contents of development costs in detail is to prevent a project operator from evading the burden of development charges by unfairly deducting the excess from development costs if the project operator has disbursed items and expenses exceeding the amount recognized by the relevant statutes, and reducing development gains. Therefore, in calculating development costs, the interpretation that arbitrarily exceeds or expands the limits of the items and amounts prescribed by the relevant statutes shall not be allowed.

2) If a different interpretation is made, if a development project is subcontracted over several stages and executed, the purpose of legislation clearly setting development costs as above is considerably damaged, such as that the general management expenses of a contractor in several stages of work are included in the construction cost accumulated and net construction cost becomes more and more complicated.

Therefore, the plaintiff's assertion that the value-added tax, general management cost, profit and survey cost, and design cost should also be included in the general management cost among the construction cost paid to the supplier under different premise is not reasonable.

(4) As to the charge due to the establishment of a neighboring road

If the purport of the entire pleadings is added to the statements in the evidence Nos. 2 and 3, and No. 4, the defendant approved the project of this case, and the traffic impact assessment was conducted on the entire housing site including the district of this case where the plaintiff constructed apartment units and the rental housing district, etc. In order to solve traffic problems in the entire housing site, the plaintiff agreed to contribute to the defendant after building some roads including the surrounding areas of this case, and the fact that the residents as well as the present apartment units are also using the surrounding areas of this case is recognized.

According to the above facts, it is clear that the above charges fall under Article 12 (1) 5 through 6 of the Enforcement Decree of the Act and are included in development costs. However, in light of the facts and the purport of the whole arguments revealed earlier, the following circumstances revealed: (a) where land subject to development charges (sale apartment district) and land excluded from development charges exist in the whole project district, there are special circumstances where the apartment zone and rental housing district are excluded from the imposition of development charges for national rental housing complex development projects (rental housing district) although the land subject to the imposition of development charges and the land excluded from the imposition of development charges are gaining benefits in the whole project district; and (b) Article 12 (1) 5 through 6 of the Enforcement Decree of the Act does not stipulate that the total amount of development charges should be recognized as development costs, and it is necessary and reasonable to determine the scope of development costs in consideration of the legislative purpose of the redemption of development gains arising from the enhancement of the value of the land acquired through the development project; (c) the Plaintiff bears more public interest in the relevant project (excluding the imposition of development charges on rental housing district) and so that the development charges should be imposed.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.

[Attachment]

Judges Kim Su-cheon (Presiding Judge) Na Jong-hun