Cho High Court Decision 2010Du0429 ( October 21, 2010)

In the name of the Ministry of Health and Welfare, it is omitted to report sales while engaging in retail business, such as health food.

Health and food retail business under the name of the Ministry of Health and Welfare, the amount deposited in the bank account falls under the sales amount of the place of business and cannot be recognized as the factoring transaction amount, and the act of hiding revenues while operating the place of business after completing business registration under the name of the Ministry of Health and Welfare falls under the act of fraud or other improper act.

2010Guhap48193 Revocation of Disposition of Imposition of Value-Added Tax, etc.

XX

O Head of the tax office and one other

April 28, 2011

June 2, 2011

1. All of the plaintiff's claims are dismissed.

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

Defendant XX head of the tax office’s imposition of value-added tax for the second period of 201 against the Plaintiff on January 11, 2010, of KRW 17,206,00, value-added tax for the first period of 202, value-added tax 21,846,420, value-added tax for the second period of 202, value-added tax for the second year of 2003, value-added tax 26,97,650, value-added tax for the first period of 203, and 27,896,390, value-added tax for the second period of 203 (value-added tax seems to have been clearly written in writing), and revocation of the imposition of global income for the second period of 201 to the Plaintiff on September 20, 201, of KRW 81,217,540,930, 2038,396,390,305.

1. Details of the disposition;

A. From December 26, 1994, the Plaintiff operated the XX-Gu 000-0 of the XX-Gu 000-0, and KimA, the Plaintiff’s wife, completed a business registration application with respect to the operation of retail business, such as health, food, etc. on October 24, 2000, such as OO-dong 00-0 of Seoul OO-dong 000 to 'OO' (hereinafter “instant business establishment”). After filing a business registration application, the Plaintiff reported and paid the value-added tax and the general income tax related to the instant business establishment.

B. Upon receipt of the notice of tax evasion regarding the instant place of business, the head of the relevant tax office concluded that the instant place of business was not KimAA after conducting a tax investigation around October 2009. In addition, according to the above findings, the tax office: (a) 1,562,981,750 won deposited in the Plaintiff’s office and six deposit accounts (hereinafter “instant account”); (b) 1,421,391,750 won deposited in the Plaintiff’s office in 201 to 2003; (c) 2, 360, 360, 370, 360, 207, 360, 206, 37, 200, 360, 36, 207, 206, 306, 207, 200, 360, 206, 206, 207, 296, 2010.

C. On January 22, 2010, the Plaintiff filed an appeal with the Tax Tribunal on January 22, 2010. On July 21, 2010, the Tax Tribunal rendered a decision to review whether the amount of sales claims collected from a final consumer after acquiring at a discount on the claims for sales of goods by other business entities out of the omitted sales amount of the instant sales revenue. Accordingly, the Defendants issued a disposition to partially reduce the value-added tax and to partially correct the amount of global income tax, as stated in [Attachment 1], as of September 20, 2010, the Defendants issued a disposition to partially reduce the amount of value-added tax and to partially correct the amount of global income tax (hereinafter “each disposition of imposition of global income tax”).

[Ground of recognition] Facts without dispute, Gap 1 to 3 evidence (including each of the sub-paragraphs (a) and Eul 1 to 5 evidence (including each of the sub-paragraphs (a)), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) Since the actual operator of the instant workplace is KimA, each of the instant dispositions based on the premise that the Plaintiff is a substantial business operator of the instant workplace does not exist.

(2) Even if the Plaintiff deemed as the actual business operator of the instant business place, 568,756,563 won out of the omitted sales amount of the instant business place is not subject to value-added tax, as the Plaintiff purchased and recovered the claims of another health food business entity, apart from the sales amount of the instant business place (hereinafter referred to as “instant factoring amount”).

(3) In addition, the difference between the claim recovery amount of KRW 603,493,60 and KRW 443,368,376, and the claim purchase amount of KRW 160,125,224 should be taxed as interest income of the Plaintiff. If the Plaintiff filed a global income tax return within the statutory reporting deadline, the exclusion period of imposition of global income tax is five years, and the exclusion period has already lapsed.

(b) Related statutes;

Attached Form 2 shall be as listed in attached Table 2.

C. Determination

(1) As to the first argument

Comprehensively taking account of all the following circumstances acknowledged by the purport of the statements and arguments in the evidence Nos. 2, 6 through 9, 11, and 16 through 18 as a whole, the Plaintiff is reasonable to deem that the Plaintiff was operating the instant business after lending the name of the wife KimA, despite the actual business of the instant business establishment. Contrary thereto, the Plaintiff’s testimony as stated in the evidence No. 5-1 and No. 6-1 and the witness KimA’s testimony is difficult to believe it as it is, and the statement of evidence No. 4 is insufficient to reverse it by itself. The Plaintiff’s above assertion is without merit.

(A) On the back side of the paper for a sale hall (No. B. 8) used at the instant place of business, the instant account (seven) indicated the Plaintiff as the deposit holder is printed in the deposit account.

(B) The Plaintiff paid part of the money deposited into the instant account as an allowance to the sales members of the instant business establishment, and directly signed the monthly allowance statement (Evidence B No. 18) in the letter of approval of the president.

(C) A business employee of the instant business establishment, BB, thisCC made a statement consistent with the Plaintiff as the actual business operator of the instant business establishment (the instant business establishment, XX distribution, and △△△ Trade) including the instant business establishment. The said three business establishments, including the instant business establishment, were integrated and managed by the Plaintiff.

(D) Important decision-making related to the business, such as the purchase of goods necessary for the instant workplace and the payment of the price, was made with the approval of the Plaintiff.

(2) As to the second argument

Of the omitted amount of sales, 568,756,563 won in the instant place of business is a separate personal factoring transaction amount from the sales amount of the instant place of business. Rather, in full view of the aforementioned facts and the following circumstances acknowledged by the overall purport of the statement and arguments as stated in the statement and evidence Nos. 4, 19, and 25, the above 568,756,563 won shall be deemed the sales amount of the instant place of business. The Plaintiff’s above assertion has no merit.

(A) If the instant business place purchased sales bonds, it should have appropriated the sales bonds loss from the customer’s discount sale of the sales bonds. However, there is no record of calculating the sales bonds loss on the corporate tax return in 2003 in the 2003. Moreover, in relation to the return of the 1 and 2-year value-added tax, it reported only the tax invoice and the credit card amount in relation to the 1 and 2-year value-added tax (which seems to have no other retail sales during the above period).

(B) According to the decision of the Tax Tribunal, the Defendants reviewed whether the omission amount of sales contained the amount related to the factoring business claimed by the Plaintiff, and confirmed that some of such amount is included, and then, took each of the instant dispositions based on its contents.

(C) The Plaintiff is not fully able to present objective data to recognize the purchase of sales claims, such as the customer management card, in which the transaction party’s personal information is recorded in relation to the factoring amount.

(3) As to the third argument

According to Article 26-2 (1) 1 of the Framework Act on National Taxes, if a taxpayer evades national tax, or obtains a refund or deduction by fraudulent or other unlawful means, the exclusion period of national tax is ten years from the date on which national tax can be imposed. "Fraud or other unlawful acts" as referred to in this context mean the fraudulent or other active acts that make it impossible or considerably difficult to impose and collect tax. It is reasonable to view that the Plaintiff’s act of hiding the Plaintiff’s number of business while operating the instant establishment after completing registration of business in the name of KimA, the wife, as its wife, constitutes such act (see, e.g., Supreme Court Decisions 2006Do1933, Jun. 15, 2006; 2004Do5818, Nov. 12, 2004). Thus, even if the Plaintiff’s payment was omitted, the exclusion period of each of the instant dispositions was not reasonable.

(4) The theory of lawsuit

Therefore, each disposition of this case is lawful.

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.