Seoul Urban Gas Co., Ltd. (Attorney Kim Dong-dong, Counsel for defendant-appellant)

Head of Seoyang-si (Law Firm TELS, Attorneys Jeong Young-young et al., Counsel for the plaintiff-appellant)

o October 13, 2004

Seoul Administrative Court Decision 2002Guhap31831 delivered on July 16, 2003

1.The judgment of the first instance shall be modified as follows:

2. The Defendant’s imposition of the registration tax of KRW 190,94,50 against the Plaintiff on December 11, 2001 and the local education tax of KRW 35,006,490, respectively, shall be revoked. The Defendant’s imposition of the registration tax of KRW 84,151,490 against the Plaintiff on January 12, 2002 and the imposition of the local education tax of KRW 52,032,824 against the registration tax of KRW 52,824 against the Plaintiff, and the local education tax of KRW 8,479,424 against the local education tax shall be revoked.

3. The plaintiff's remaining claims are dismissed.

4. The total cost of a lawsuit shall be ten minutes, one of which shall be borne by the plaintiff, and the other shall be borne by the defendant.

The decision of the first instance court shall be revoked. Each disposition of KRW 190,944,50, and KRW 35,06, and 490, imposed by the Defendant against the Plaintiff on December 11, 2001, shall be revoked, respectively, and each disposition of KRW 84,151,540, and KRW 15,427, and KRW 32,619,210, and KRW 5,72,860 for local education tax shall be revoked with respect to local education tax imposed by the Defendant on the Plaintiff on January 12, 2002.

1. Details of the disposition;

The following facts are without dispute between the parties, or evidence 1, 2, 3, 1 and 6 of evidence 1, 4 and 28, evidence 1 through 4, evidence 29, evidence 1 through 5, evidence 1 and 5, evidence 57-1, 2, 58 and 7-7-, evidence 1, 2, 72, 73, 74, evidence 1 and 6, evidence 1, evidence 2- 2, evidence 3- 3, evidence 4- 1 through 4, evidence 5- 5, evidence 1 and 5- 6-1, 2, 3, 7-14 and 8-1, 2, 3-1, 3-4, and 4-1 and 4 of evidence 4, evidence 5- 5- 5, evidence 1 and 6-14, evidence 14-1, 2-2, 3-1, 3-1, 4-2, and 4-1.

(a) Related Acts and subordinate statutes;

It is as shown in the attached Form.

(b) Establishing a branch office;

(1) The Plaintiff Company is a company with its head office in Gangseo-gu Seoul Metropolitan City 281, which is equipped with urban gas facilities under the Urban Gas Business Act and engages in the manufacturing, supply, and equipment of urban gas with the permission of general urban gas business.

B. On September 195, 1995, the Plaintiff Company leased the fourth floor of the building 887-5 ground friendly Flag, Goyang-si, Goyang-si, 1995, and established the sports branch.

(c) Acquisition of land, etc. and transfer of athletic branches;

(1) On May 2, 1996, the Plaintiff Company purchased the business territory transfer 236-1 4,888 square meters prior to 236-1, Yongsan-gu, Yongsan-do (hereinafter “the instant land”) from Goyang-si on May 22, 1996, and received the registration of ownership transfer on May 28, 1996.

B. On or around February 3, 1997, the Plaintiff Company started construction of 4 business facilities and broadcasting and communication facilities of reinforced concrete structure, the total floor area of 9,818 square meters on the instant land (hereinafter “instant building”) and completed registration of preservation of ownership on or around May 8, 1998, after obtaining approval for use on April 8, 1998, and transferred the Plaintiff Company’s business branch to the instant building on May 18, 1998 and used 70.67% of the instant land and building as the office of the sports branch to conduct urban gas business, such as urban gas sales.

(d) Reporting and paying the registration tax and local education tax;

(1) On May 28, 1996 and June 27, 1996, when the registration of ownership transfer with respect to the instant land was completed, the Plaintiff Company reported and paid KRW 32,852,710, and the local education tax amount equivalent to 20% of the registration tax base (land value) and the registration tax amount equivalent to 32,852,710, and the registration tax amount equivalent to 1% based on the general registration tax rate of 1%, and KRW 6,750,540, which are 16,426,250 (hereinafter the Gyeonggi-do Ordinance on Reduction and Exemption) (15,875,00 + 51,250 + 3,285,270 (3,175,000 + 1705,000 + 270) and actually paid the registration tax.

She also reported 14,145,046,754 won of the registration tax base of the building of this case at the time when the registration of initial use of the building of this case was completed, and reported and paid 40,805,630 won of registration tax and 8,161,120 won of local education tax calculated based on 0.8% of the general registration tax rate for the portion directly used by the plaintiff company (hereinafter referred to as "the portion directly used") among them (70.67% of the original amount) and 0.8% of the general registration tax rate, and 0,805,630 won of registration tax and 40,630 won of local education tax and 8,161,120 won of local education tax calculated based on 0.8% of the general registration tax rate for the portion leased by the plaintiff company of this case (hereinafter referred to as "lease portion").

E. Disposition of this case

(1) The Defendant issued the instant disposition imposing additional registration tax and local education tax as stated in the purport on the ground that the Plaintiff Company established a branch office in the overconcentration control region under the Seoul Metropolitan Area Readjustment Planning Act (hereinafter referred to as the “large city”), and the ownership transfer registration or ownership preservation registration of the instant land and buildings is subject to the heavy registration tax under the former Local Tax Act, and the tax rate equivalent to five times the general tax rate (50% reduction or exemption pursuant to the reduction or exemption Ordinance for the portion directly used) is only 70.67% of the instant land and buildings, and on the ground that the directly used portion among the instant land and buildings is only 70.67% of the directly used portion, the instant disposition was rendered on December 11, 2001 for the entire land of this case, including each additional tax on January 12, 2002.

The Defendant calculated the tax base of the instant land by mistake not exceeding KRW 3,185,271,480, but also KRW 3,185,00,00,00 as seen above, and deducted the original amount to be paid as tax payable (In addition, on December 11, 2001, the Defendant issued a disposition to additionally impose registration tax of KRW 161,280,680, and local education tax of KRW 29,568,120, by applying the heavy tax rate of KRW 4% to the leased portion of the instant building on December 11, 201).

2. The plaintiff's assertion

The plaintiff asserts that the disposition of this case is unlawful for the following reasons.

A. Under the former Local Tax Act and its Enforcement Decree, where an urban gas business operator acquires real estate for his/her business and has completed the registration of transfer of ownership or preservation, he/she shall be excluded from taxation of the registration tax.

B. According to the Gyeonggi-do Ordinance on Tax Reduction and Exemption enforced at the time of 1998, real estate used for urban gas business is subject to the reduction and exemption of registration tax, which includes the fact that the Local Tax Act does not apply to real estate used for urban gas business.

C. The establishment of a sports branch by the Plaintiff Company is not based on the Plaintiff Company’s own decision but based on the administrative order of the relevant administrative agency or local government, so it is unreasonable to apply the heavy registration tax provisions to this case, and the establishment of a sports branch is not subject to heavy registration tax because it actually falls under the relocation of part of the head office

3. Determination on whether a taxpayer is subject to heavy taxation under the Local Tax Act

A. Provisions of the Local Tax Act;

According to Article 138 (1) 3 of the former Local Tax Act (amended by Act No. 5615 of Dec. 31, 1998), real estate registration under Article 138 (1) of the former Local Tax Act (amended by Act No. 5615 of Dec. 31, 1998) and real estate registration after installation shall be applied at a rate of five times the general registration tax rate, but this provision shall not apply to the category of business prescribed by the Presidential Decree (hereinafter in this Article, the main provision that requires heavy taxation, the proviso provision that provides for exemption from heavy taxation), the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 15982 of Dec. 31, 198), and Article 101 (2) of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 15982 of Dec. 31, 198) that a person operating a type of business under paragraph (1) does not use the property for the category of business directly until one year is registered or registered.

(b) Enforcement Decree of the Local Tax Act;

Article 101 (1) of the Enforcement Decree of the former Local Tax Act lists the types of business to which the heavy taxation exemption provision applies according to delegation of the heavy taxation exemption provision, among which the amendment process of the provisions related to this case is as follows.

(1) The content of Article 101(1)1 and 2 of the former Enforcement Decree of the Local Tax Act was a gas business for the purpose of producing gas and supplying gas by pipes (Article 101(1)1 and 2 of the former Enforcement Decree of the Local Tax Act, and a water supply business for the purpose of supplying potable water or industrial water by pipes (Article 101(1)1 and 2 of the former Enforcement Decree of the Local Tax Act, which had been the same content from the time when a heavy taxation provision and a heavy taxation exemption provision are newly established).

D. On the other hand, Article 101(1)3 of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 15211 of Dec. 31, 1996) was added at the time of the amendment of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 15211 of Dec. 31, 1996, the contents were “infrastructure projects (including supplementary projects)” under Article 2 of the Promotion of Private Capital

Article 101(1)1 and 2 of the former Enforcement Decree of the Local Tax Act was deleted at the time of amendment by Presidential Decree No. 15489 on October 1, 1997, and Article 101(1)3 of the former Enforcement Decree of the Local Tax Act was amended, and Article 2(3) of the latter Act was amended.

Article 101 (1) 3 of the former Enforcement Decree of the Local Tax Act was amended by Presidential Decree No. 17447 on December 31, 2001 as of December 31, 2001, and the contents of Article 101 (1) 3 of the former Enforcement Decree of the Local Tax Act were changed as of the present. The contents are "infrastructure projects under Article 2 subparagraph 2 of the Act on Private Participation in Infrastructure (including supplementary projects under Article 2 subparagraph 8 of the same Act)" (the former Act on Private Investment Inducement in Infrastructure was amended as of December 31, 198, but the Enforcement Decree of the Local Tax Act cited it was delayed later).

(c) Provisions of the Infrastructure Act;

(1) According to Article 2 subparag. 1, subparag. 2, and subparag. 3 of the former Act on the Promotion of Private Capital into Social Overhead Capital (amended by Act No. 5624, Dec. 31, 1998; hereinafter the former Act on the Promotion of Private Capital into Social Overhead Capital; hereinafter the former Act on the Social Overhead Capital); and Article 2 subparag. 1, subparag. 2, and subparag. 3 of the former Act on the Promotion of Private Participation into Social Overhead Capital (amended by Act No. 5624, Dec. 31, 1998); and Article 2 subparag. 4 of the Water Supply and Waterworks Installation Act provides that “social overhead capital projects” refers to projects concerning the construction, extension, or improvement of social overhead capital facilities.

According to Article 2 subparagraph 2 of the Act on Social Overhead Capital after the technical amendment, “social overhead capital facilities projects” refers to projects concerning the establishment, extension, improvement, or operation of social overhead capital facilities.

Article 22 of the former Act on the Establishment, Extension, or Improvement of Social Overhead Capital (Article 3 of the former Act on the Social Overhead Capital and Infrastructure and Article 28 of the former Act) was included in the Act on the Operation thereof.

D. Interpretation of Article 101(1)3 of the Enforcement Decree of the Local Tax Act

(1) Article 101(1) of the Local Tax Act provides that the provision on heavy taxation exemption applies to a real estate acquired by a person operating a type of business falling under Article 101(1) of the Local Tax Act where the person directly runs the category of business in the real estate includes not only the case where the real estate acquired by the urban gas business entity is used as the site for urban gas storage facilities, but also the case where the real estate is used as an office for urban gas business. However, in the instant case, the provision on heavy taxation exemption shall apply to the portion directly used among the land and buildings in the instant case, as long as the urban gas business operated by the Plaintiff company constitutes an infrastructure project under Article 101(1)3 of the former Enforcement Decree of the Local Tax Act (amended by December 31, 196).

B. However, according to Article 2 subparag. 4 of the former Enforcement Decree of the Social Overhead Capital Markets Act, the term “infrastructure project” means a project to build, expand, or improve an infrastructure. According to Article 2 subparag. 3 of the same Act, Article 2 subparag. 5 of the Urban Gas Business Act, and Article 2(3) of the Enforcement Rule of the same Act, “urban gas facilities,” which are one of the infrastructure, refer to urban gas manufacturing business places, acquiring bases, and piping facilities. Thus, in cases where an infrastructure project under Article 101(1) subparag. 3 of the former Enforcement Decree of the Local Tax Act refers to an infrastructure project defined in Article 101(1) subparag. 4 of the former Enforcement Decree of the Local Tax Act, heavy taxation exemption provisions apply only to real estate used for the business to build, expand, or improve urban gas facilities itself, and there is no room to interpret that heavy taxation exemption provisions do not apply to real estate used as an office mainly for the sale of urban gas as in the instant direct use.

Article 10(1)3 of the former Enforcement Decree of the Local Tax Act provides that, unlike Article 101(1)3 of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 1068, Apr. 1, 2007; Presidential Decree No. 2010, Apr. 1, 2007; Presidential Decree No. 2010, Jan. 19, 201; Presidential Decree No. 2010, Jan. 19, 201; Presidential Decree No. 2010, Jan. 19, 2006; Presidential Decree No. 2010, Jan. 19, 2006; Presidential Decree No. 2010, Jan. 19, 2006; Presidential Decree No. 2020, Jan. 19, 201).

x) Accordingly, the portion of the instant building used directly and the portion of the instant land used directly shall be the part directly used by the Plaintiff Company for its business, which is an infrastructure, for the construction, extension, or improvement of urban gas facilities, and the provision on heavy taxation exemption shall apply to the registration of ownership transfer or preservation. Accordingly, the instant disposition on a different premise is unlawful.

(v) Furthermore, the amount of tax reported and paid by the Plaintiff Company for the direct use of the instant building and the instant land, as the amount of tax is reasonable for the Plaintiff Company, and there is no additional amount of tax to be paid for the portion of the instant building among the instant land. As the Plaintiff did not file a lawsuit with respect to the leased portion of the instant building, a reasonable amount of tax shall be calculated only for the portion of the instant land. As such, the calculation of the amount of tax is identical to that indicated in the separate sheet of tax, the portion exceeding the registered tax amount of KRW 52,032,824 and the local education tax amount of KRW 8,479,424 among the instant dispositions concerning the instant land shall be revoked, and the portion of

4. Conclusion

Therefore, the plaintiff's claim of this case is justified within the above scope of recognition, and the remaining claims are dismissed without merit. Since the part against the plaintiff, which has different conclusions from the judgment of the court of first instance, is unfair, the judgment of the court of first instance shall be modified as above, and it is so decided as per Disposition.

Judges Lee Jong-sung (Presiding Judge)