Seoul High Court Decision 200Na14488 delivered on May 2, 2000

The Head of Gangnam Tax Office (Attorney Kim Young-soo, Counsel for defendant-appellant)

o October 29, 2004

Seoul Administrative Court Decision 2003Guhap14369 delivered on September 24, 2003

1. All appeals by the defendant against the plaintiffs are dismissed.

2. The costs of appeal shall be borne by the Defendant.

1. Purport of claim

The Defendant’s imposition of corporate tax of KRW 372,019,670 on May 16, 2002 (the merger with Plaintiff two Industrial Development Co., Ltd. on May 6, 2004) for the business year of 1999, and the imposition of corporate tax of KRW 63,026,40 on May 17, 200 on the Plaintiff East Engineering Co., Ltd. for the business year of 199.

2. Purport of appeal

The judgment of the first instance is revoked, and all plaintiffs' claims are dismissed.

1. Quotation of the reasons for the judgment of the first instance;

The reasons to be indicated in this judgment are as follows: “The reasons to be indicated” of the first instance court’s 5th 14th 14th 1st 5th 5th 5th 199; “the six 9th 9th 9th 3 billion”; “Article 49(2)” of the 10th 7th 7th 10th 7th 199, “Article 49(1)”; “the date of transfer” of the attached FMK’s stock sales table as “the date of December 31, 199,” respectively, and “the date of December 31, 199” as “the grounds of the first instance court’s judgment, except for the addition of the following judgments, it is consistent with Article 8(2) of the Administrative Litigation Act; and Article 420 of the Civil Procedure Act.

2. Additional determination

[A] Summary of the defendant's assertion

The defendant asserts as follows.

(1) The transactional cases, etc. with Marenman, Bluis, KON, KONEX, etc., indicated in the attached table of FMK Stock Sales Practice (FMK Stock Sales Practice Table) with the judgment of the first instance court, are false transactions or prices calculated as a means of establishing and implementing the so-called “FMK Stock Transfer Project,” which sells stocks at a higher price, by raising the corporate value of the non-party company’s personal interest in a way of excessively appropriating the profits of the non-party company in order for the financial experts to personally raise funds.

(2) The share transaction between Shee and KON and Hyundai Industrial Development (State) on December 27, 1999 is accompanied by the management right of the non-party company and thus, the transaction price cannot be deemed as a normal price.

(3) In light of the fact that the price per share of the new development (ju) around December 1998, which is a KOSDAQ-registered company with a similar type of business, capital, financial ratio, etc., the price per share of the non-party company was not 5,650 won, there is no reasonable ground to determine the stock price per share of the non-party company as 18,000 won.

(4) The stock evaluation report of the accounting firm against the non-party company is merely a simple presumption based on the false financial statements provided by the non-party company, and it cannot be deemed a legitimate evaluation of the non-party company's shares.

(5) The plaintiffs' purchase of the shares of the non-party company of this case was forced under the expression that it would be forced by the plenary session to purchase the shares again.

B. The judgment of this Court

In full view of all evidence submitted by the Defendant, there is no sufficient evidence to conclude that the trading cases listed in the “FMK Stock Sales Schedule” as the part of the “FMK high-priced stock transfer project” in the judgment of the court of first instance were conducted as part of the “FMK high-priced stock transfer project,” or that the price was adjusted at a higher price. The mere fact that the shares of the new development (State) at the time of December 1998 were KRW 5,650 per share cannot be readily concluded that the price of the instant stock transaction was false or fabricated, and it cannot be concluded that the purchase price of the shares of the non-party company in Hyundai Industrial Development (State) is not normal market price, and even if the third accounting corporation’s stock assessment of the non-party company is not deemed a legitimate assessment of the shares price of the non-party company, in light of other trading cases indicated in the list of the above trading cases, it is reasonable to view that the plaintiffs’ stock acquisition price of the instant case at a reasonable market price, and all of the above arguments by the Defendant are without merit).

3. Conclusion

Therefore, the judgment of the court of first instance is justifiable, and all appeals against the plaintiffs are dismissed. It is so decided as per Disposition by the assent of all.

Judges Kim Nung-hwan (Presiding Justice)