A. The meaning of "the interpretation of tax-related Acts or practices of national tax administration" under Article 18 (3) of the Framework Act on National Taxes is generally accepted by taxpayers.

B. The purport of imposing taxes on the legal dividends under Article 26 (1) of the former Income Tax Act (amended by Act No. 4281 of Dec. 31, 1990) and Article 19 of the former Corporate Tax Act (amended by Act No. 4282 of Dec. 31, 1990)

C. The meaning of "amount required for acquiring stocks of an extinguished corporation" under Article 26 (1) 4 of the former Income Tax Act (amended by Act No. 4281 of Dec. 31, 1990), and whether the face value of free-of-charged stocks following the capitalization of revaluation reserve fund is included (negative)

A. The phrase “it is generally accepted by taxpayers the interpretation of the tax-related Act or the practices of national tax administration” under Article 18(3) of the Framework Act on National Taxes refers to the extent that it is not unreasonable for taxpayers, who are not specific taxpayers, to accept such interpretation or practices without objection, and to trust such interpretation or practices.

B. Fictitious dividend under Article 26(1) of the former Income Tax Act (amended by Act No. 4281 of Dec. 31, 1990) and Article 19 of the former Corporate Tax Act (amended by Act No. 4282 of Dec. 31, 1990), the purpose of the deemed dividend is to impose tax on dividends in light of the principle of equity in taxation, inasmuch as the profit reserved in the company is an economic profit that is substantially similar to cash dividend in cases where the profit reserved in the company is returned to the shareholder or the investor due to the reasons stipulated in each of the above laws, such as legal reserve, earned surplus reserve, and other voluntary reserve, and thus, is not leaked out of the company’s performance

C. In the case of corporate merger, in determining whether the value of the stocks received by the stockholders of the corporation extinguished through the merger from the corporation surviving the merger or the corporation established after the merger has income in excess of the amount required for acquiring the stocks of the corporation extinguished through the merger, it cannot be concluded that the capitalizing the revaluation reserve fund, etc. is included in the “amount required for acquiring the stocks of the extinguished corporation”, and the required amount refers to the amount actually paid to acquire the stocks of the extinguished corporation. The acquisition value is a free transfer of stocks allocated without compensation according to the capitalizing the revaluation reserve fund, and the acquisition value is actually included in the acquisition value of the stocks previously held, so it cannot be deemed as “amount required for acquiring the stocks of the extinguished

A. Article 18(3)(b) of the Framework Act on National Taxes. Article 26(1) of the former Income Tax Act (amended by Act No. 4281 of Dec. 31, 1990); Article 19 of the former Corporate Tax Act (amended by Act No. 4282 of Dec. 31, 1990)

A.C. Supreme Court Decision 91Nu9824 delivered on March 31, 1992 (Gong1992,1462). Supreme Court Decision 90Nu2154 delivered on February 28, 1992 (Gong1992,1203). Supreme Court Decision 88Nu1957 delivered on September 29, 1989 (Gong1989,1601). (b) Supreme Court Decision 91Da10565 delivered on September 10, 1991 (Gong191,2509). (3) Supreme Court Decision 91Nu9886 delivered on March 13, 1992 (Gong192,136).

Korea Industrial Development Corporation and three plaintiffs et al., Counsel for the defendant-appellant and one other

Head of the luminous Tax Office and two others

Seoul High Court Decision 90Gu19376 delivered on August 22, 1991

All appeals are dismissed.

The costs of appeal are assessed against the plaintiffs.

We examine the grounds of appeal.

With respect to the first and second points

In order to apply the principle of good faith to the acts of tax authorities in tax and legal relations, the tax authorities should express the public opinion that is the object of trust to taxpayers, and the interpretation of the tax-related law or the practice of the national tax administration under Article 18 (3) of the Framework Act on National Taxes, which provides the principle of prohibition of retroactive taxation, generally accepted by taxpayers refers to the extent that such interpretation or practice is accepted by an unspecified general taxpayer who is not a specific taxpayer without objection, and that it is recognized that it is not unreasonable for taxpayers to trust such interpretation or practice (see, e.g., Supreme Court Decisions 8Nu1957, Sep. 29, 1989; 8Nu1957, Mar. 31, 1992; 91Nu9824, Mar. 31, 1992).

Since the theory of lawsuit is a statement of public opinion of the tax authority, the established rule of the National Tax Service (No. 1264-183, Oct. 5, 1981; No. 1264-342, Oct. 28, 1982; and No. 1264-342, Sep. 28, 1982) stating that "in calculating the fictitious dividend for a resident under Article 26 (1) 1 of the Income Tax Act, the tax authority shall not only include the face value of the corporation received by the shareholder by capitalizing the relevant shares of the corporation or capitalizing the revaluation reserve fund for the purpose of acquiring the shares of the corporation as at the time of the merger, as well as the capitalizing the face value of the corporation under Article 26 (1) 1 of the Income Tax Act." The tax authority shall also interpret other established rule (No. 1264-3402, Oct. 6, 1982; No. 3724, Oct. 16, 1984>

In the same purport, the court below is just in holding that there is no evidence to acknowledge that the tax authorities officially expressed the opinion as argued by the plaintiffs with respect to constructive dividend caused by a corporate merger, and that the opinion of the plaintiffs was changed at the time of the registration of the merger of this case, and that the modified tax law interpretation cannot be viewed as retroactively applying the changed tax law. In so doing, there is no violation of the rules of evidence, such

The theory of lawsuit is in violation of the rules of evidence in the judgment of the court below on the premise that the plaintiffs submitted the above established rules of September 26, 1981 to Gap evidence 3-1 and 2-2. However, according to the records, the plaintiffs did not submit such evidence at the court below, and the court below legitimately rejected the plaintiffs' assertion that the above tax disposition violates the principle of trust and good faith. Thus, there is no illegality in the omission of judgment, such as the theory of lawsuit. The argument is without merit.

On the third ground for appeal

Article 26 (1) of the Income Tax Act and Article 19 of the Corporate Tax Act provide that where profits reserved in the company in the form of legal reserve, earned surplus reserve, other voluntary reserve, etc. are returned to stockholders or investors due to the reasons stipulated in the above Article of the Act, such profits are in fact economic benefits similar to cash dividend, and thus, they are deemed as dividends in light of the principle of tax equity (see Supreme Court Decision 91Da10565 delivered on September 10, 1991). In addition, when a corporation’s surplus is transferred to its capital, it shall maintain the company’s property to the extent of its capital increase due to such transfer in light of the principle of capital adequacy, so it is possible to hold the company’s property reserves in the company, and further, when the earned surplus reserve is transferred to its capital, it shall be accumulated again to a certain extent, and even if the earned surplus reserve or the earned surplus reserve is increased, so it is possible to reserve the company’s property surplus to the stockholders or investors similar to the paid-in capital increase.

Therefore, Article 26 (1) 2 of the Income Tax Act (amended by Act No. 4281 of Dec. 31, 1990) and Article 19 subparagraph 2 of the Corporate Tax Act (amended by Act No. 4282 of Dec. 31, 1990) provide that "the value of stocks or shares received by stockholders, employees, and other investors shall be regarded as dividends at the time of capital transfer in case where all or part of a corporation's surplus earnings are transferred to capital or financing" in the main text of the same Article, it shall be immediately a statement of such reasons: Provided, That in the proviso of each of the above proviso, "the capital reserve under Article 459 of the Commercial Act and revaluation reserve under the Assets Revaluation Act shall be excluded in capital transfer" shall not be regarded as deemed as fictitious dividends in capital transfer. The purport of this provision is not to exempt the value of stocks received by stockholders, etc. according to capital transfer, but to protect the company's creditors through capital increase and promote corporate management by raising its credit rating, it shall be deemed as a kind of prescribed amount in capital transfer or capital transfer.

Therefore, in the case of a merger of corporations with the above proviso, it cannot be concluded that the value of the stocks received by the stockholders of the corporation extinguished through the merger from the corporation surviving the merger or the corporation established after the merger exceeds the amount required for acquiring the stocks of the corporation extinguished through the merger as stipulated in subparagraph 4 of the above Article, and it cannot be concluded that the face value of the free stock allocated by capitalizing the revaluation reserve fund, etc. is included in the "amount required for acquiring the stocks of the extinguished corporation", and the required amount refers to the amount actually paid to acquire the stocks of the extinguished corporation. The acquisition value is actually included in the acquisition value of the stocks which are received without compensation allocated by capitalizing the revaluation reserve fund, and the acquisition value is not the amount required for acquiring the stocks of the extinguished corporation, since it is actually included in the acquisition value of the stocks previously held (see Supreme Court Decision 91Nu923 delivered on March 31, 19

In this regard, the court below is just in holding that the face value of the gratuitous share of this case does not constitute the amount required for acquiring stocks of the extinguished corporation, and the theory of lawsuit cannot be accepted as it criticizes the judgment below that there is an error of law in the misapprehension of legal principles as to constructive dividend in the judgment below.

Therefore, the appeal is dismissed and the costs of appeal are assessed against the plaintiffs. It is so decided as per Disposition by the assent of all participating Justices.

Justices Song Man-man (Presiding Justice)