Daegu LSS Co., Ltd. (Law Firm Han & Han, Attorney Kim Jung-han, Counsel for the plaintiff-appellant)

Head of Yeongdeungpo Tax Office

September 3, 2009

Seoul Administrative Court Decision 2008Guhap6059 Decided September 26, 2008

1. Revocation of a judgment of the first instance;

2. The instant lawsuit shall be dismissed.

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

The judgment of the first instance shall be revoked. The defendant's rejection disposition against the plaintiff on June 14, 2007 against the tax base and amount of the tax withheld for the year 2003 shall be revoked.

1. Details of the disposition;

A. The plaintiff is a juristic person operating cargo transportation services, etc. in Yeongdeungpo-gu Seoul Metropolitan Government 14-31. The defendant, upon filing a corporate tax return, added the processing expenses, etc. to the processing expenses, and conducted a tax investigation with the plaintiff from August 18, 2005 to November 30, 2005, and conducted the tax investigation with the plaintiff from August 18, 2005 to November 30, 2005. The plaintiff constitutes a bonus amounting to 304,529,500 won on credit purchase expenses in the counter account among the processing expenses in the business year 2003 as well as 120,00,000,000 bills paid to the counter account (the sum of the above credit purchase amount and the payment bill amount plus the above processing expenses; hereinafter referred to as the "processing expenses"), on the ground that it falsely appropriated the processing expenses of this case to the plaintiff for each business year and notified the corporate tax correction for each business year, while the plaintiff's income amount reverted to the plaintiff's income amount is unclear.

B. Accordingly, on April 207, 2007, the Plaintiff requested the Defendant to rectify the tax base and tax amount of the wage and salary income tax on the Plaintiff’s representative for the business year 2003 as KRW 554,254,402 and KRW 187,3871,580, respectively, on the grounds that the instant processing expenses cannot be deemed as bonus to the Plaintiff’s representative, since they were not leaked out of the company. However, on June 14, 2007, the Defendant rejected the Plaintiff’s request for correction.

C. The plaintiff requested on July 2, 2007 to the National Tax Tribunal, but the National Tax Tribunal dismissed the plaintiff's above request on December 31, 2007.

【Non-contentious facts, Gap’s evidence Nos. 1, 4, 5, Eul’s evidence Nos. 3 and 11, Eul’s evidence No. 5-3, and the purport of the whole pleadings

2. Determination on the legitimacy of the instant lawsuit

A. The parties' assertion

The instant disposition that the Plaintiff rejected the Plaintiff’s request for correction on the ground that the instant processing expenses were not leaked out of the company or that it was decided by the National Tax Tribunal to that purport is unlawful. The Defendant asserted that the instant disposition was unlawful. The Defendant asserted that the Plaintiff’s request for correction on April 20, 2007 for correction of the tax base and tax amount of the said wage and salary income tax was filed by the Plaintiff without the right to request correction, since the Plaintiff paid the annual wage and salary income tax amount for the business year 2003 until February 10, 2004, which was three years after the date when the period of request for correction was three years after the said date, which was the lawful period of request for correction from the above date. Accordingly, the Defendant’s

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

(1) Article 45-2(4) and Article 45-2(1) of the former Framework Act on National Taxes (amended by Act No. 8830 of Dec. 31, 2007) provides that “If a person subject to withholding tax or withholding tax who has paid a year-end tax or income tax withheld at source, and submits a payment record within the deadline for submission pursuant to Articles 164 and 164-2 of the Income Tax Act and Article 120 of the Corporate Tax Act falls under any of the following subparagraphs, he/she may request the head of the competent tax office to determine or correct the tax base and amount of the national tax for which the initial return or revised return was made within three years after the deadline for payment of the year-end tax or withheld tax amount.” Considering that the said provision restricts the period for filing a request for correction by sufficiently reviewing the tax base and amount of the taxpayer after the lapse of the deadline for filing a request for correction, which does not constitute an exercise of the pertinent tax authority’s subjective disposition of rectification within the said period for the purpose of 2001.

(2) In addition, Article 137 of the former Income Tax Act (amended by Act No. 8825 of Dec. 31, 2007) provides that "where a withholding agent at the principal place of work pays his earned income for January of the year following the year concerned, he may make a global income deduction from the earned income of the person who receives such income for the year concerned according to the details returned under Article 140, and then shall calculate his calculated global income tax base based on the tax base of global income, deduct the amount withheld and paid in the year concerned after deducting the income tax under each subparagraph of Article 134 (4), and withhold the difference between it." Article 128 of the same Act provides that "The withholding agent shall, in principle, pay the withheld income tax from the head of the competent tax office, the Bank of Korea or the postal service agency by the 10th day of the month following the month in which the tax base is collected, and as prescribed by Presidential Decree, the withholding agent may make a request for withholding from the person under Article 134-1 and 4 of the Income Tax Act within the last year following year.

(3) The facts that the Plaintiff reported and paid the withholding labor income tax on the earned income paid by the Plaintiff to its representative in 2003 until February 10, 2004 and submitted the payment record by February 28, 2004 do not conflict between the parties, and that the Plaintiff requested the Defendant to rectify the tax base and tax amount of the above withholding labor income tax on the Plaintiff’s representative on April 20, 2007, but the Defendant refused it on June 14, 2007. As seen above, the payment period of the withholding labor income tax on the Plaintiff’s representative on the earned income tax withheld from his representative is February 10, 2004 as stipulated in Article 128 of the former Income Tax Act. Thus, the Plaintiff’s request for correction clearly filed after three years from the date of the request for correction is merely a fact that the Defendant rejected the request for correction against the tax authority, which is not subject to appeal even if it was rejected by the Defendant.

In this regard, the Plaintiff asserts that in the case of withholding tax on the income disposed of as bonus under the Corporate Tax Act, unlike the case of general earned income, the statutory due date of return, which is the starting date of application for correction, shall be deemed to be the end of the month following the month in which the notice of change in the amount of income under Article 134(

Therefore, Article 70 (1) of the former Income Tax Act provides that "a resident who has global income in the corresponding year shall report the tax base of global income to the head of the district tax office having jurisdiction over the place of tax payment from May 1 to 31 of the year following the corresponding year under the conditions as prescribed by the Presidential Decree." Article 134 (1) of the Enforcement Decree of the same Act provides that "Where a corporation files a report on the tax base of global income pursuant to the Corporate Tax Act after the deadline for filing the tax base of global income or the head of the district tax office disposes of dividends, leisure or other income and thus has no obligation to file the final return on global income because the amount included in the calculation of global income has changed in the income amount due to the disposal of the dividends, leisure or other income, and where a person who has filed the final return on the tax base of global income is obliged to additionally pay the income tax, the pertinent corporation (the resident concerned) shall not be deemed to have filed a request for correction of the tax base of global income under the proviso of Article 192 (1) for the above period of tax payment."

3. Conclusion

If so, the plaintiff's lawsuit of this case is illegal as it is against which it cannot be a subject of appeal, and thus, it is dismissed. The judgment of the court of first instance is unfair as it differs from this conclusion, and it is so decided as per Disposition by the decision of the court of first instance.

[Attachment]

Judges Lee In-bok (Presiding Judge) Lee In-bok Kim