Blisher Industry Development Co., Ltd. (Attorneys Ba-sik et al., Counsel for the plaintiff-appellant)

The director of the tax office of Leecheon-jin (Court of Law, Attorney Kim Young-jin, Counsel for defendant)

May 30, 2012

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

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

The Defendant’s imposition of KRW 3,063,952,020 of corporate tax for the business year 2004 as of March 3, 2010 and the imposition of KRW 2,521,432,470 of corporate tax for the business year 2005, corporate tax for the business year 2006, KRW 2,345,82,150 of corporate tax for the business year 2006, KRW 93,279,010 of corporate tax for the business year 2007, and KRW 304,493,630 of corporate tax for the business year 208.

1. Details of the disposition;

A. (1) In the early 2000s, Hyundai Electronic Industry Co., Ltd. (hereinafter “Haaks”) established a financing plan containing large-scale sale of assets, inducement of foreign capital, etc. around November 2000, which entered the workout program following the restructuring of semiconductor industry, around March 2001.

(2) Under such financing plan, Ashedas changed the name of Volia WA (Veolia WA around 2003, which is a specialized enterprise for the treatment of diverse nationality in France; hereinafter referred to as “Bolia”), requested Ashedas to enter into an agreement in a way that he/she re-transfers the water treatment facilities, such as water-purification facilities and wastewater facilities, to Bolia, to Bolia, and to Bolia, to Bolia, to provide Esium with water supply and water treatment services necessary for the semiconductor activities of Aars, and to provide Esium with water treatment facilities, such as water purification facilities and wastewater treatment facilities, etc., upon expiration of the contract period, at the request of Bolia to enter into an agreement in a way that he/she re-transfers the water treatment facilities, such as water treatment facilities, etc.

(3) Benria decided to invest approximately KRW 200 billion equivalent to the value of water-purification facilities and waste water treatment facilities, etc. by admitting the proposal of an clinic. Accordingly, the Plaintiff (previous trade name: non-benching Industrial Development Co., Ltd.) established by fully investing the entire amount of Benuriia invested in the Plaintiff (previous trade name: non-benching Industrial Development Co., Ltd.) was registered as its business place with the water treatment facilities of the clinic on December 18, 200, with the water treatment facilities of the clinic as its place of business.

B. (1) On March 23, 2001, the Plaintiff provided the Plaintiff with services such as supply of industrial water necessary for semiconductor production and treatment of waste water and sewage, etc., and on March 29, 2001, the said agent transferred the Plaintiff’s first assets, structures, machinery, etc. (hereinafter “the first assets”) related to the treatment facilities of the clinic license to KRW 197,415,117,485, “ASS PSS PREAS AEENT (hereinafter “APA”)” to the Plaintiff, and on March 29, 2001, the Plaintiff transferred the Plaintiff’s first assets acquired during the contract period (hereinafter “the first assets”) to the Plaintiff, and on March 31, 2013, the date the contract period expires, the Plaintiff did not conclude the contract period for the Plaintiff’s business related to the Plaintiff’s first assets to the Plaintiff, and the first assets acquired during the contract period of the Plaintiff’s business to the Plaintiff to the Plaintiff as “new assets” in the instant case of the Plaintiff.

(2) On June 1, 2006, as the credit rating has increased from BB- to 'BB+’, she requested the Plaintiff to reduce the basic service fee of 33 billion won. The Plaintiff and Hadssssss have made a request for reduction of the basic service fee of 10% from 10% from 2007 January 28, 2006 to 30 March 2013, 207 and 4% from 4.5% from 2013 to 4.5% from 2014 to 31.31, 2018.

C. (1) On March 2002, the Plaintiff reported the Defendant’s durable years and depreciation method to the Defendant. With respect to the durable years reported by the Plaintiff, the Plaintiff reported the ownership transfer registration under the name of the Plaintiff, the building and structure with respect to the building and machinery, the durable years with respect to the machinery and equipment, and the durable years with respect to the equipment, etc., five years with respect to the durable years, and

(2) In filing a return on the tax base and tax amount of corporate tax on each income for the business year 2004 through 2008 from March 2005 to March 2009, the Plaintiff depreciated the residual value for 12 years in accordance with the corporate accounting standards. As the contract period was extended on November 2006, the former assets were depreciated for 12 years in accordance with the former Income Tax Accounting Standards by applying the former Income Act recognized in the corporate accounting standards as the contract period was extended for 5 years. The new assets of this case were depreciated for depreciation costs calculated by calculating the remaining period as the remaining period until March 31, 2013, the former contract period, and were depreciated for the remaining period until the contract period extended after the extension of the contract period.

D. (1) In a comprehensive audit conducted against the Defendant, the director of a regional regional tax office of mid-term regional tax office: (a) applied the service life by structure under Article 15(3) [Attachment Table 5] of the former Enforcement Rule of the Corporate Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 187, Jan. 28, 201; hereinafter the same shall apply); and (b) applied the service life by type of business under Article 15(3) [Attachment Table 6] of the former Enforcement Rule of the Corporate Tax Act to machinery; (c) reported excessive depreciation costs by arbitrarily applying the service life of 12 years, which is the contract term of the instant transaction, to the Defendant; and (d) notified the Defendant of the fact that the Defendant recognized

(2) Accordingly, the Defendant calculated the depreciation cost included in deductible expenses of the assets of this case and added each limit amount to deductible expenses, etc., deducted the corporate tax on income for the pertinent business year after deducting each already paid tax amount, and imposed corporate tax of 3,063,952,020 on the Plaintiff on March 3, 2010, and imposed corporate tax of 2,521,432,470, 2006, corporate tax of 2,345,82,80, 2006, corporate tax of 2,345,82,150, and corporate tax of 2,345,82,80, 2007, corporate tax of 93,279,010, corporate tax of 208, and corporate tax of 304,493,630 (hereinafter “each of the instant dispositions”).

E. On August 11, 2010, the Plaintiff filed an objection against the disposition of imposing corporate tax for the business year 2004, and filed an appeal with the Tax Tribunal on August 11, 201 without filing an objection against the disposition of imposing corporate tax for the remaining business year. However, the Tax Tribunal dismissed the Plaintiff’s appeal on May 27, 201.

[Ground of Recognition] Facts without dispute, Gap evidence 1 through Gap evidence 4, Gap evidence 8 through 11, Gap evidence 12-1 through 5, Gap evidence 13, Gap evidence 16, Eul evidence 1-1 through 5, Eul evidence 1-2, and the purport of whole pleadings

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

Each disposition of this case is unlawful for the following reasons.

(1) The Plaintiff and Hadice, through the instant transaction, agreed to acquire the legal ownership of the instant assets only during the 12-year contract period and transfer them to Hadice without compensation upon the termination of the contract period. The investment risk of an increase or decrease in the value of the instant assets belongs to Hadices. The legal substance of the instant transaction belongs to Hadices by acquiring the Plaintiff’s exclusive right to use and profit from the instant assets during the contract period, providing Hadices with industrial water supply and water treatment services. Upon the termination of the contract period, Hadices re-acquisitions the exclusive right to use and profit from the instant assets, which constitute a 3-year installment transaction with the appearance of the transfer transaction. The acquisition value of the instant assets constitutes the pre-sale cost for the use of and profit from the instant assets, not the transaction price itself, and thus, constitutes a 2-year installment transaction with the Plaintiff’s depreciable assets (the same shall apply to 20-year interim provisions or the National Tax Service’s interpretation of the former Corporate Tax Act.

(2) Even if the assets of this case constitute the Plaintiff’s depreciable assets, the Corporate Tax Act and the Restriction of Special Taxation Act do not stipulate the lifespan and depreciation method with respect to the assets whose period of use should be used only for a certain period and transferred without compensation as to the assets, such as the assets of this case, and thus, the contract period of this case should be deemed depreciation in accordance with corporate accounting standards and practices pursuant to Article 43 of the former Corporate Tax Act (amended by Act No. 9267 of Dec. 26, 2008; hereinafter the same shall apply). When applying the standard of service of the former Enforcement Rule of the Corporate Tax Act to the assets of this case, the remaining value which was not yet depreciated after the termination of the contract period of this case is de facto excluded from deductible expenses and double taxation. Since the Plaintiff reported the lifespan of the assets of this case for 12 years, the Plaintiff’s report on lifespan is not within the scope of statutory lifespan, and it does not constitute “cases where a report is not filed within the reporting period” under the proviso of Article 28(1)2 of the former Corporate Tax Act.

(3) Even if the standard service life of the instant assets is applied to the lifespan of the former Enforcement Rule of the Corporate Tax Act, it is unfair for the Defendant to take each of the instant dispositions at the expiration of 9 years from the time when 9 years have elapsed since the Plaintiff received a report of the Plaintiff’s corporate tax base and tax amount without any objection. In light of the purport that the Plaintiff reported the service life for 12 years, it is reasonable for the Plaintiff to set the service life of the instant assets for 15 years, which is the lowest limit within the scope of the service life under the former Enforcement Rule of the Corporate Tax Act, to the extent that it conforms

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

(1) Contents of the WSA’s contract

(A) APA provides for the scope of the Hashes’ disposal facilities that the Hashes transferred to the Plaintiff and the amount that the Hashes paid to the Hashes. With respect to the transfer of the Hashes disposal facilities, the WT provides detailed provisions regarding the Plaintiff’s rights and obligations, the concept and payment method of service charges, the ownership and disposal method of the assets of this case, the risk-bearing due to force majeure, the contract period, the effect of termination of the contract, etc. The terms and conditions of the WT’s contract are as follows (in English, HEI means the Hashes, the Hashes the Plaintiff, and the necessary parts are stated as English).

(B) Professionality;

1) An clinic’s sales of water-purification facilities, water-purification facilities, water-purification facilities, waste water treatment facilities, etc. to the Plaintiff, and the Plaintiff’s sales of water to the clinic (h) and (B).

2) The Plaintiff and the Hashes entered into or entered into the APA at the same time or before the date of commencement of WSA. Accordingly, the Plaintiff purchased water-purification facilities and wastewater facilities from the Hashess, and owned wastewater facilities located within such water-purification facilities and Hashes’ complexes (specialized (F)).

(c) Definition. “1.1 Definion”

1) 자산매수계약은 원고와 하이닉스가 2001. 3. 23. 체결한 자산매수계약을 말하고, 이에 따라 하이닉스는 정수시설 및 폐수시설을 매도하며, 원고는 이를 매수한다(Asset Purchase Agreement means the asset purchase agreement dated March 23rd, 2001 between HEI and the Operator under which the Water Facilities and the Wastewater Facilities will be sold by HEI and purchased by the Operator).

2) The basic service charges are the service charges specified in 1.1 of attached 3 (Basic Service Charges and Additional Services Charges) (Apendix 3 (Basevice Charge and Adivarge 3) of a 3 (Basic Services Charges and Additional Services Charges).

3) The starting date refers to the date on which the sale of water-purification facilities and waste water facilities is completed in accordance with the asset purchase contract (the date on which the sale of water-purification facilities and waste water facilities is completed). The date of commencement refers to the date on which the sale of water-purification facilities and waste water facilities is completed, which is the date of termination of the contract.

4) Force majeure cases shall be governed by Article 18(1) of the Act on the Law of God (Mureure 18.1). (Clause 18.1).

5) HEI Industrial Complex refers to Echeon Industrial Complex, Cheongju Industrial Complex, South Korea Industrial Complex, and Gu Industrial Complex (Definition in each asset purchase agreement) (HEI Industrial Complex, eachon Dom Machip, Gam Machix, Gam Gai Compendx and Gaum x ( defined referred to as the “each”) and the term “Pendax1” of the attached Apendix 1.

6) The term “insurance” refers to an insurance policy that the Plaintiff is obliged to maintain in the form and amount set forth in the attached 12 (Insurance) with respect to which the Plaintiff is obligated to carry out the business for the prevention of bankruptcy to be incurred by the 12 (Insurance).

7) 프로젝트 문서는 WWSA 계약, 토지사용권계약, 자산임대차계약, 시설접근계약(체결한 경우), APA 계약, 양도된 계약, 갱신 및 제3자의 동의(체결된 경우), 경과기간 서비스계약, 공동운영계약, 건물임대차계약, 기타 원고와 하이닉스가 서면으로 지정하는 계약을 말한다{Project Documents means (a) this Agreement, (b) the Land Use Rights Agreement, (c) the Asset Lease Agreement, (d) when it is entered into, the Facility Access Agreement, (d) the Asset Purchase Agreement, (f) when they are entered into, the Assigned Agreements, the Novations and Third Party Consents, (g) the Transition Period Services Agreement, (h) the Joint Operation Agreements, (i) the Building Lease Agreement and (j) such other Agreements as the Operator and HEI may designate in writing}.

8) 기간은 개시일부터 12년이 되는 날 및 이 계약의 조건에 따라 계약이 해지되는 날 이전까지의 기간을 말한다{Term means the period starting from the Commencement Date and ending on the earlier of (ⅰ) the dating falling twelve years thereafter and (ⅱ) the termination of this Agreement in accordance with the terms hereof}.

(d) Exclusive rights [2. Exclus’s (a)]

Subject to this contract and transitional period service contract, a license clinic grants the Plaintiff an exclusive right on the management, operation, repair, and maintenance, etc. of water-purification facilities and wastewater facilities (hereinafter omitted) (hereinafter “Subing”) to the end of the contract (hereinafter “Subing”). The term of the contract is extended to the end of the contract to the end of the contract and to the end of the contract in order for the buyer to have the right to and for the end of the end of the contract.

(E) The obligations and rights of the Plaintiff (“4.00 U.S.C. 4.1)

1) 이 계약의 조건에 따라 원고는 운영기간 중 자신의 비용 및 경비로 다음과 같이 행하여야 한다. (A) (ⅰ) 신중한 공익설비 관행, (ⅱ) 첨부 6(운영 수행 기준 및 운영절차), (ⅲ) 기타 프로젝트 문서의 조건, (ⅳ) 하이닉스가 따라야 하는 제3자에 대한 계약상 의무를 정하는 첨부 15(하이닉스의 계약조건)에서 정하는 조건, (ⅴ) 국제표준위원회가 정하는 표준(보건, 안전 및 환경에 관한 표준 포함)에 부합하고, (B) 이 계약에 의한 의무를 이행할 수 있는 하이닉스의 능력에 중대하게 불리한 영향을 미치지 않는 방식으로 자신의 비용과 위험부담으로 정수시설, 폐수시설 및 용지의 운영, 관리 및 유지(이하 생략){(a)항 : Subject to and in accordance with the terms and conditions of this Agreement, the Operator shall at all times during the Operating Period and at its sole cost and expense : operate, manage and maintain the Water Facilities, the Wastewater Facilities and the Sites at its own cost and risk and in a matter (A) consistent with (ⅰ) Prudent Utility Practices; (ⅱ) Appendix 6(Operating Performance Criteria and Operating Procedures); (ⅲ) the terms and conditions of the other Project Documents; (ⅳ) the terms and conditions set out in Appendix 15(Contract Terms of HEI) which set out contractual obligations with third parties to which HEI is subject; and (ⅴ) the standards set forth by the International Organization for Standards(including standards regarding health, safety and environment) and (B) that does not materially adversely affect the ability of HEI to perform its obligations under this Agreement}.

2) Subject to the items of the above (a) and the relevant laws, the Plaintiff may, at its absolute discretion during the operation period, enter into a contract for the provision of services or the use or purchase of assets necessary for the performance of the obligations under this contract (hereinafter referred to as "paragraph (b) : case in the each-j to the lapt (a) and for the e-case, the reasonable public laws and regulations to be set up, and the Oator may be put into place. The contractor, referring to the e-mail Doz in the Doz. Doz. Doz. Doz. Doz. Doz. Doz. Doz. Doz. Doz. Doz. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. 2

(f) Fact-finding and warranty (“11. Red Cross and Worant”)

1) As of the first day of commencement, Hadice verified and guaranteed that the Plaintiff is a stock company duly organized and effective under the laws of the Republic of Korea and that has full authority to own, operate, manage, and maintain the Hadice's complex and to carry out its business in the Republic of Korea (hereinafter the omission) (hereinafter the “HEI res and warranty”) (hereinafter the “Korea”). Hadice’s joint management rate, which is called the “Hadice” to Hador’s Hador’s Hador’s Hador’s Hador’s and Hador’s Hador’s Hador’s Hador’s Hador’s Had, Had, Had e,man’s tab and Mador’s Dodor’s Hador’s Hador’s Hador’s Hador’s and Mador’s Dodor’s Ro

2) As of the starting date, the Plaintiff, a corporation duly organized and effective under the laws of the Republic of Korea, shall verify and guarantee that the Plaintiff has full authority to own, operate, manage and maintain water-purification facilities and wastewater facilities, and to conduct the business within the Republic of Korea (hereinafter referred to as “the omission”), which is a corporation (hereinafter referred to as the “Korea”) and provides a certification of the fact that the Plaintiff has a full authority to conduct the business within the Republic of Korea (hereinafter referred to as “the “the Competation rate”): Do Do Do Do du Do dued and valided. Do Do Do Do du Do du Do Do Do du d and Do dy dy dy dy dy Do dy dy dy dy Do dy dy dy dy dy e, e, Do e, Asset Management and l' Do dy dy dy dy s.

(g) Insurance Obligations (as referred to in subsection (a) from among the Associations of Inc. (17).

During the contract period, the Plaintiff shall obtain, maintain, or maintain the amount and conditions specified in attached 12 (Insurance) as well as the insurance terms and conditions. The Plaintiff shall ensure that the buyer acquires, maintain, or maintain the amount and conditions attached to the attached 12 (Insurance).

(h) Exemption from performance and past obligations [Article 18.2(c) of the “18. Formure”];

불가항력 사건이 발생한 경우에도 당사자 일방은 제12조(서비스요금 및 비용 인상요인)에 의한 금액을 지급할 하이닉스의 의무{제12조 제3항(기본서비스 요금에 대한 불가항력의 영향)을 조건으로 함} 등 이 계약에 의하여 지불하여야 하는 금원의 지급의무를 면할 수 없다{The occurrence of a Force Majeure Event will not excuse a Party's obligation to pay any sum due under this Agreement, including HEI's obligation to pay any sum due under Clause 12(Service Charge and Cost Escalators), subject always to Clause 12.3(Consequences of Force Majeure on Base Service Charge)}.

(i) Payment upon termination [19 Tmination..3(c)]

Article 26(2), 13(h) or 18(5) of the Act on the Prevention of Customs Duties of Korea, in the event that such termination is notified, the proprietor shall purchase water-purification facilities and wastewater in accordance with attached 16(3) of the Act. In the event that the clinic fails to purchase water-purification facilities and wastewater facilities within 90 days from the date of the issuance or receipt of the notice of termination, the Plaintiff may be entitled to sell them to any person other than the clinic (If A). It is used to do so for the purpose of 3rd or 26.2 of the Act on the Management of Customs Duties of Korea Post to Roundant. 13rd or 18(3) of the Act on the Management of Customs Duties of Korea.

(j) Transfer (the “19. Temination”) No. 19.4(b)

Article 20 and direct contract terms that the plaintiff shall notify the termination and shall transfer all rights and interests in respect of water-purification facilities and wastewater facilities to the clinic in accordance with attached 16 (Termination) if the termination is notified and the period expires after receipt of 1 won, the plaintiff shall transfer the rights and interests in the water-purification facilities and wastewater facilities to the gate 20 (Lendor 20 (HEI) and the Ordinance of the Ministry of Health and Welfare (HEI). He shall report to the Hamor 30 (HEI) and the Ordinance of the Ministry of Health and Welfare, to the Hamor Fail and Interest Interest in the Hamter Failty and Interest Interest Interest Affairs in the Hamster Fail 16 (Tremination: Amended by Act No. 1554, Mar. 13, 201).

(k) Ownership (the "23. Assign. 23.3)

1) 제19조 제3항(해지로 인한 대금)을 조건으로 원고는 하이닉스로부터 사전 서면동의를 얻지 아니하고는 정수시설 또는 폐수시설을(각각의 부가물 및 개선)의 일부를 제3자에게 매각, 양도, 인도 기타 이전할 수 없다. 다만 원고는 통상적 영업과정에서 발생하는 잉여, 폐용품, 마모 또는 교체장비를 처분할 수 있고, 제23조 제2항 (a)에 따라 HEI의 동의를 얻지 아니하고도 출자 또는 자금조달을 목적으로 정수시설, 폐수시설, 용지 또는 원고의 기타 재산, 원고의 이윤, 권리 또는 자산을 양도·이전하거나 담보를 설정할 수 있다{제4조 제1항 (d)(운영자의 권리와 의무)를 조건으로 함}[Subject to Clause19.3(Termination Payments), the Operator shall not sell, assign, convey or otherwise transfer any portion of the Water Facilities or the Wastewater Facilities(and their respective additions and improvements) to a third party without the prior written consent of HEI provided that the Operator may dispose of any surplus, obsolete, worn out or replaced equipment in the ordinary course of business and may in accordance with Clause 23.2(a) without HEI's consent assign, transfer or create in or to the Lenders a security interest over its rights and interests in the Water Facilities, the Wastewater Facilities, the Sites or any other property of the Operator, or the revenues or any of the rights or assets of the Operator for financing or refinancing purposes{subject always to Clause 4.1(d)(Rights and Obligations of the Operator}]

2) Except as provided for in Article 23(1) of the Trust Business Act, in the event that any sale, transfer or relocation of all or part of the undisclosed complex causes serious adverse impacts on the ability of the parties to perform the obligations on the part of the parties to the contract, the said Association shall not sell, transfer or transfer all or part of the undisclosed complex without the Plaintiff’s prior consent. Without regard to this, the said Association shall notify the Plaintiff that all or part of the undisclosed complex will be transferred to a third party (Ecept 23.1, HE 1, 23.1, 3.00, 3.00, 100, 2000, 2000, 2000, 2000, 2000, 200. 3. 3. 3. 3. 3. 3. 2. 3. 3. 3. 3. 3. 3. 4. 2. 3. 3. 4. 7. Ro General Ro General Ro. Ro. 3. . . 3. . . 3. . . . . . . . . . . . . . . . . . . . . . . . Ro. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) The service charge system by WSA

WSA provides the Plaintiff with basic service charges, value-added service charges, Pass-Thugh charges during the contract period of the instant transaction. Among them, the basic service charges refer to the price for the provision of the Plaintiff with a predetermined amount so that the Plaintiff can recover the acquisition costs, financial costs, and other ordinary costs in the instant assets in proportion to the contract period. The basic service charges that the Hashes shall pay from May 24, 2001 to May 23, 2002 are 183,561,64 won per day, from May 24, 2001 to May 23, 2002; from May 24, 2002 to May 24, 2002 to May 23, 2008; from May 23, 2002 to May 24, 2008 to May 23, 2008; from May 23, 2002 to 30,818 won per day;

[Ground of recognition] Facts without dispute, Gap's evidence 3, Gap's evidence 4, Gap's evidence 6, Gap's evidence 7, the purport of whole pleadings

D. Determination

(1) Whether the instant assets are Plaintiff’s depreciable assets

Article 23(1) and (2) of the former Corporate Tax Act does not separately provide for the concept and type of fixed assets, but Article 23(1) and (2) of the former Corporate Tax Act provides that the depreciation costs of fixed assets shall be included in the calculation of losses in the calculation of the income amount for the concerned business year within the scope of the amount calculated as prescribed by the Presidential Decree only when the domestic corporation appropriates them as losses (referring to the inclusion of losses in the settlement of accounts in the settlement of accounts) for each business year. Of the appropriated amounts, the portion in excess of the scope of depreciation shall not be included in the calculation of losses, and fixed assets shall be the assets prescribed by the Presidential Decree such as buildings, machinery, apparatus, patent rights, etc. excluding land. Article 24(1) of the former Enforcement Decree of the Corporate Tax Act provides that the fixed assets, which are similar to buildings and structures, vehicles, transportation tools, tools, instruments and fixtures, ships, aircraft,

The value of fixed assets, such as buildings, vehicles, ships, and machinery, such as buildings, vehicles, machinery, etc., has been deteriorated as the time has elapsed, and the emergence of new products has been reduced, and there are cases where it becomes improper due to the appearance of new products. Depreciation is a system depreciation that copes with profits and expenses by allocating physical and economic depreciations for the period during which the services are provided as losses according to a cost allocation method. For the accurate calculation of the period of profit and loss, depreciation is a cost allocation procedure that copes with the cost of acquisition of fixed assets used within a specific period in accordance with the principle of profit and expense response to the profits generated from the use of the assets. The cost of acquisition of fixed assets must be assumed that the economic benefits of the cost of acquisition of fixed assets would be reduced in full in the distribution of the cost of acquisition of fixed assets, but it does not mean the cost of depreciation in response to the profits generated from the use of fixed assets. On the other hand, assets generally refer to the resources under the control of the corporation as economic benefits or service potential, so a specific resources is perceived as assets of a corporation, and actually acquired the ownership of the corporation.

1. The Plaintiff’s assets are substantially offered to the Plaintiff’s business, and the terms and conditions of the WSA are as follows. ① Hashes are selling YA water-purification facilities, water-purification facilities, waste water facilities, etc. with respect to the purpose of the WSA, and the Plaintiff purchases them. Based on these, Hashes are given exclusive rights to the Plaintiff regarding the management, operation, repair, and maintenance of water-purification facilities and waste water facilities during the contract period of the instant transaction. ② The Plaintiff bears the duty of operating, maintaining, and managing water-purification facilities and waste water facilities with its own cost and risk burden during the operation period, and the Plaintiff is not entitled to freely conclude contracts for the instant use or purchase of the said facilities during the operation period by taking into account the fact that the Plaintiff’s assets were actually supplied to the Plaintiff, and the Plaintiff cannot be exempt from the Plaintiff’s duty to pay the service fees for the instant case due to force majeure during the contract period.

Therefore, as long as the plaintiff actually provides the plaintiff's business while exercising practical control over the assets of this case, the assets of this case are the plaintiff's depreciable assets, so the first argument of the plaintiff on a different premise is without merit.

(2) Whether the standard service life under the former Enforcement Rule of the Corporate Tax Act should be applied

Article 23(4) of the former Corporate Tax Act provides that the matters necessary for the method of allocating depreciation costs as deductible expenses and handling the amount in excess of the scope of depreciation amount shall be prescribed by Presidential Decree in cases where depreciation costs are included in or excluded from deductible expenses. Article 28(1)2 and (4) of the former Enforcement Decree of the Corporate Tax Act provides that the lifespan of depreciable assets and the depreciation rate based on such lifespan shall be calculated by adding or reducing 25 percent of the standard lifespan to the standard lifespan prescribed by Ordinance of the Ministry of Strategy and Finance (hereinafter referred to as "standard lifespan") within the scope of lifespan prescribed by Ordinance of the Ministry of Strategy and Finance (hereinafter referred to as "scope of lifespan") within the scope of lifespan prescribed by Ordinance of the Ministry of Strategy and Finance and applying the reported lifespan (hereinafter referred to as "reported lifespan") to the head of the district tax office having jurisdiction over the place of tax payment, and the reported lifespan or standard lifespan applied by type of assets or type of business shall continue to apply the lifespan in the subsequent business year: Provided, That where a report is not filed within the deadline for filing the report under each subparagraph of paragraph (3).

Depreciation costs are calculated by determining the basic value of assets, lifespan, depreciation rate, and residual value of the depreciable assets. The lifespan serving as the factor of depreciation is estimated in consideration of physical and economic reasons that can be used for the business activities of the depreciable assets. In order to exclude the possibility of calculating taxable income and achieve the equity in taxation, the relevant tax law provides that the corporation may arbitrarily determine the lifespan and appropriate the depreciation costs by prescribing the lifespan in the form of structure, asset or business type: Provided, That the reported lifespan shall be applied within the scope of 25% of the standard lifespan in order to reflect special circumstances of the corporation by adopting the standard lifespan system, while adopting the standard lifespan system, and the reported lifespan shall be applied continuously in the subsequent business years, and the reported lifespan and the depreciation rate shall be uniformly applied within the scope of “where the report on lifespan is not filed by the deadline for filing the report by the deadline for filing the report by the deadline for filing the report by the deadline for filing the report by the deadline for filing the report by the deadline for filing the report within the reasonable scope of application of the standard lifespan under the former Corporate Tax Act.”

Even in cases where the Plaintiff filed a report that falls short of the scope of the lifespan permitted by the former Corporate Tax Act and applied the standard lifespan under the Enforcement Rule of the former Corporate Tax Act, the remaining value of the instant transaction would be included in deductible expenses for the business year to which the date when the Plaintiff transferred the instant assets to the Hadice pursuant to Article 32(5) of the former Enforcement Decree of the Corporate Tax Act, which would result in unreasonable double taxation against the Plaintiff. If the contract term of the instant transaction is recognized as the useful life as it is in accordance with the corporate accounting standards as alleged by the Plaintiff without such interpretation, the Plaintiff would be able to apply more or less useful life than the statutory useful life, depending on the unexpected circumstances, which is the short term of the contract term determined by the parties when concluding the contract. In particular, as seen in the instant case, even if the contract term concluded by the parties falls short of the scope of the useful life of the assets by category of business, if the corporation permits to apply the depreciation period as the useful life of the taxable income by excessively appropriating the depreciation cost

Therefore, the Defendant’s disposal of this case by applying 20 years to the Plaintiff who calculated depreciation costs by applying 12 years of the contract term of the instant transaction to the depreciation service life is in accordance with the proviso of Article 28(1)2 of the former Enforcement Decree of the Corporate Tax Act and Article 15(3) [Attachment 6] of the former Enforcement Rule of the Corporate Tax Act. Therefore, the Plaintiff’s second and third claims on different premise are without merit.

3. Conclusion

Then, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.

[Attachment Omission of Related Acts]

Judges Kim Jong-hee (Presiding Judge)