Gwangju District Court-2014-Gu Partnership-141 ( August 27, 2015)

Chon High Court 2014 Mine4050 ( November 06, 2014)

Inability to recover real estate sales price claims

It is objectively apparent that some of the transfer values of each real estate of this case cannot be recovered.

Article 96 of the Income Tax Act

The revocation of disposition imposing capital gains tax, etc. shall be revoked for Gwangju High Court 2015Nu643

AA

BB Director of the Tax Office

August 27, 2015

August 11, 2016

October 6, 2016

1. Of the judgment of the first instance court, the part against the plaintiff ordering cancellation shall be revoked.

The Defendant’s disposition of imposition of KRW 113,704,520 on June 10, 2014 against the Plaintiff was revoked.

2. All costs of the lawsuit shall be borne by the defendant.

1. Purport of claim

The Defendant’s imposition of KRW 113,704,520 on June 10, 2014 and KRW 11,370,450 on local income tax shall be revoked.

2. Purport of appeal

The decision is as follows (the plaintiff voluntarily withdrawn an appeal on the part of the claim for revocation of the imposition of local income tax of KRW 11,370,450 on December 1, 2015).

1. Details of the instant disposition

A. Acquisition of real estate by the plaintiff

On November 17, 2004, the Plaintiff: (a) ECE-ri 439 square meters of land for a factory; (b) 3,029 square meters of land for a factory; and (c) the same Ri.

436-5 428 m2, 440 m2, 445 m2, 441 m2, 439-1 m2 and 12 m2 of m2, and each of the above lands (hereinafter referred to as “each of the instant real property”) purchased in FF District Court 2003 m231,110,000 in the auction procedure for rental of real estate in GGGGGGGGGGG rental real estate.

B. The Plaintiff’s transfer of each of the instant real property to JJ

On August 5, 2009, the Plaintiff sold each of the instant real estate to the JJ between the JJ on August 5, 200.

A sales contract (Evidence B No. 1) was prepared to transfer KRW 520,000,000 in total. On October 1, 2009, JJ completed the registration of ownership transfer based on a sales contract on August 5, 2009 with respect to each of the instant real estate, but the transaction value is KRW 520,000,000 in the registry on each of the instant real estate.

C. The defendant's disposition of this case

After investigating the transfer income tax related to each real estate of this case, the defendant JJ

On June 10, 2014, on the ground that each of the instant real estate was transferred to the Plaintiff and the transfer income tax was not reported, the transfer value of each of the instant real estate was KRW 520,00,000, and the transfer value of each of the instant real estate was deemed KRW 113,704,520 (including additional tax KRW 43,904,324) and KRW 11,370,450 of local income tax reverted to year 2009, respectively (hereinafter “instant disposition”).

(d) Procedures of the previous trial; and

On August 6, 2014, the Plaintiff rejected the instant disposition and filed an appeal with the Tax Tribunal on August 6, 2014.

On November 6, 2014, the Tax Tribunal rendered a decision to dismiss the plaintiff's appeal.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 3 (including branch numbers if there are branch numbers; hereinafter the same shall apply), Eul evidence No. 1, the purport of the whole pleadings

2. The plaintiff's assertion and relevant Acts and subordinate statutes;

A. The plaintiff's assertion

1) The transfer value of each of the instant real estate cannot be deemed as KRW 520,000,000.

The Plaintiff, while transferring each of the instant properties to JJ, between JJ and KK

Pursuant to the investment contract (Evidence A) concluded, the JJ received KRW 30,000,00 from the JJ, and the JJ paid KRW 4,884,240 to the Plaintiff for the amount of delinquent local taxes in relation to the PlaintiffCC. While the JJ repaid KRW 324,591,781 to the secured debt of the collateral security obligation established on each of the instant real estate by the JJ, the said obligation is a debtor of the Co., Ltd., Ltd. operated by KK, and thus, the transfer value of each of the instant real estate is not KRW 520,00,000. Therefore, the instant disposition violates the principle of substantial taxation, and thus, is unlawful.

2) The Plaintiff’s claim for payment of KRW 160,523,979 against JJ is impossible.

Even if the transfer value of each real estate of this case is KRW 520,000,000, the Plaintiff

J received a total of KRW 359,476,021 (i.e., KRW 30,00,000 + KRW 4,884,240 in arrears of local taxes + KRW 324,591,781 in arrears of secured debt of the right to collateral security (i.e., KRW 520,520,000 - KRW 359,476,021) from the JJ. In light of the property status of the JJ, the measure of this case was unlawful on any other premise.

3) Since the Plaintiff reported the transfer of each of the instant real estate, the imposition of penalty tax is unlawful.

The Defendant reported the tax base, etc. of capital gains tax on each real estate of this case by the Plaintiff

The disposition of this case was rendered on the ground that the amount of 69,80,199 tax was not calculated by adding 43,904,324 won for non-reported penalty tax, but the Plaintiff submitted to the Defendant each of the documents stating that no capital gains tax exists on May 27, 2010 and December 20, 2011, and “tax-free explanatory data on January 9, 2012”. Although the Defendant should report the tax base, etc. of capital gains tax on each of the real estate of this case by submitting each of the above documents, the Defendant did not take any measures against the Plaintiff’s submission of each of the above documents, and thus, the disposition of this case was unlawful as it abused discretion in violation of Article 47(1) of the Framework Act on National Taxes.

(b) Related statutes;

It is as shown in the attached Table related statutes.

3. Whether the instant disposition is lawful

A. Relevant legal principles

The Income Tax Act does not actually generate income but finally causes the right to such income.

The so-called principle of confirmation of a right to taxable income is adopted when income is realized. However, even in cases where a claim that is the cause of income accrues, if it is objectively apparent that a claim that is the cause of income becomes impossible to recover due to the debtor’s bankruptcy, etc., income tax that is the object of economic benefits loses the premise, and thus, it cannot be imposed on such income as taxable income. In such a case, it must be clearly stated that the taxpayer has no income subject to taxation by asserting and proving such circumstance (see, e.g., Supreme Court Decisions 2009Du11874, Jan. 14, 201). In addition, the issue of whether a claim that is the cause of income subject to taxation is impossible ought to be determined by an objective method of assessment based on social norms by taking account of the debtor’s financial condition and payment ability, etc. (see, e.g., Supreme Court Decisions 201Du1536, Oct. 25, 2002; 201Du31601, Mar. 16, 2019

(b) Fact of recognition;

1) SSS for the purpose of manufacturing and selling water quality purification products and the business of manufacturing and selling such products is September 2002.

11. The real estate of this case was acquired and used as the factory site and building of SSS factory.

2) On November 17, 2004, the Plaintiff: (a) the Changwon District Court 2003Taman 31981 decided November 17, 2004

In the auction procedure of movable property, the amount of KRW 231,10,000 was purchased, and thereafter, the company operated by KK for the use of each of the instant real property as its place of business.

Investment Agreements

JJ: JJ

B: KK

Article 1:Business Purposes

A shall establish a new corporation and take over all of the VVV patents and technology currently in existence.

shall operate a new business.

Article 3:New Investment

(1) A new investment cost shall be responsible for completing the relocation of a factory in progress of an auction.

(2) All the affairs after investment shall be conducted by a newly established corporation.

(3) A shall sell the auction of the PP Bank, pay the tax in arrears to theCC group in the name of the Plaintiff, and obtain a loan under the name of A with the credit of the Plaintiff.

Article 4:Share of Shares

3) On June 9, 2005 and December 21, 2005, the Plaintiff borrowed a total of KRW 200,000,000 from UUU Mutual Savings Banks (UU Mutual Savings Banks) and completed the registration of creation of a neighboring mortgage on each of the instant real estate to the Savings Bank on the same day.

4) VV obtained a loan of KRW 300,000,000 from the date of September 20, 2007 to the PP Bank Co., Ltd. (hereinafter “PP Bank”), and paid KRW 200,000,000 among them, repaid the Plaintiff’s existing loan obligations to the Plaintiff’s UUU Mutual Savings Bank, and used the remainder of KRW 100,000,000 as business funds. On the same day, the Plaintiff completed the registration of the establishment of a mortgage over each of the instant real estate to the PP Bank.

5) On September 23, 2009, JJ concluded an investment contract with KK as follows:

① A 51% B 49%, and all managements are responsible for A, and technology is responsible for B.

② A shall pay 30 million won (30,000,000) to the Plaintiff, and KRW 30,000,000 on September 30, 209

(10,000,000) payable in installments by December 30, 200000 per year (10,000,000) per year by November 15, 200.

6) On October 1, 2009, the Plaintiff: JJ on October 1, 2009, the registration of ownership transfer concerning each of the instant real estate.

The JJ borrowed KRW 460,00,000 from the TT Livestock Industry Cooperatives (hereinafter referred to as the “TT Livestock Industry Cooperatives”) on the same day, and completed the registration of establishment of a neighboring mortgage on each of the instant real estate in the TT Livestock Industry Cooperatives. The J paid KRW 30,00,000 to the Plaintiff. VVV paid KRW 324,591,781 to the PP Bank total amount of the collateral security obligation against the above collateral security obligation, and subrogated for the Plaintiff’s delinquent local tax amount of KRW 4,884,240 to the PlaintiffCC group.

7) As the JJ delayed the repayment of the above loans to TTF, the TTF applied for a voluntary auction on each of the instant real estate by Changwon District Court 2010ta4758, and received a decision to commence voluntary auction from the above court on February 22, 2010, and OO purchased each of the instant real estate in the auction procedure for the above real estate on January 3, 2011.

8) 한편 JJJ은 2010. 2. 2. 김QQ에게 자신이 거주하고 있던 YY시 RR동

The sales of 691-2 8, 908, 808, and 80,000 won were sold, and the divorce was made on July 21, 2010, and no property tax or automobile tax was paid from 2010 to 2014.

9) The JJ failed to pay 5,659,59,590 won in aggregate of the acquisition and property taxes on each of the instant real property to CC-gun. On December 29, 2011, CC-gun treated 5,659,590 won in total of the above acquisition and property taxes as the grounds for the loss of the JJ’s property. The JJ failed to pay 67,582,553 won in full for the remainder of the loans owed to TTS-gun.

[Ground of recognition] The evidence mentioned above, Gap evidence Nos. 4 through 7, 9 through 11, 13, 14, 26 through 29, Eul evidence Nos. 2, witness of the court of first instance, witness of the court of first instance, witness of the court of first instance, witness of the court of second instance, witness of the court of second instance, order for submission of financial transaction information to △△ Savings Bank, and result of this court's order for submission of financial transaction information to △△ Savings Bank, and investigation of the Korean Credit Information Institute

C. Determination

1) As to whether the transfer value of each of the instant real estate was 520,000,000

Comprehensively taking into account the above facts and the evidence, the following circumstances are acknowledged: ① the sales contract for each of the instant real estate established between the Plaintiff and the JJ stated the purchase price of KRW 520,00,000 in the sales contract for each of the instant real estate; ② the JJ also stated the transaction price of KRW 520,00,000 in the register for each of the instant real estate; ② the JJ paid KRW 30,000 to the Plaintiff on October 1, 2009, which completed the registration of ownership transfer of each of the instant real estate; paid KRW 4,884,240 to the Plaintiff on behalf of the Plaintiff at the local tax delinquent amount of CC; and paid KRW 324,591,781 in full with respect to each of the instant real estate; ③ all of the aforementioned acts by the JJ appear as compensation for the transfer of each of the instant real estate; ③ The Plaintiff’s assertion that the purchase price of each of the instant real estate remains 500,000.

2) As to whether the Plaintiff’s claim for the purchase price of KRW 160,523,979 against J. J. 1 was impossible, the transfer price of each of the instant real estate is KRW 520,00,00. The Plaintiff did not receive KRW 359,476,021 (i.e., KRW 30,000 + KRW 4,884,240 + KRW 324,591,781) as well as the amount of delinquent local taxes + KRW 160,523,979 (i.e., KRW 520,00 - KRW 359,476,00) as at the time of disposal of the Plaintiff’s real estate, and (ii) as at the time of disposal of the said real estate, the Plaintiff did not receive KRW 160,50,000, KRW 259,00 from the J. 25) as well as KRW 965,013,0.

4. Conclusion

Thus, the plaintiff's claim against the disposition of this case does not need to consider the remaining points.

Therefore, this part of the judgment of the court of first instance concerning the disposition of this case is unfair in conclusion, so the part against the plaintiff in the judgment of the court of first instance concerning the disposition of this case shall be revoked and the disposition of this case shall be revoked. It is so decided as per Disposition.