Disposition Revocation of Notice of Change

An act of a representative director, etc., who is a substantial manager of a corporation to appropriate the corporation's funds is not conducted under the premise of recovery from the beginning, barring any special circumstances, and thus, the disbursement of the amount constitutes the outflow from the company.

Article 67 of the Corporate Tax Act; Article 106 of the Enforcement Decree of the Corporate Tax Act

Seoul Administrative Court-2017-Gu Partnership-5688 Revocation of Disposition of Notice of Change in Income Amount

○○ Co., Ltd.

○ Head of Doz.

November 3, 2017

December 8, 2017

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

On May 16, 2016, the Defendant’s notice of change in the amount of income is revoked, respectively, as terms and conditions, the income amount of the Plaintiff is KRW 000,000,000 as bonus for the year 201, and KRW 00,000 as bonus for the year 2012, and KRW 00,000 as bonus for the year 2013 as bonus for the year 2013.

1. Details of the disposition;

A. The Plaintiff leased part of the private house 10, which the Seoul ○○○○ Group 3, as a lodging room of the △ Elementary School. The rent from March 2010 to February 2013 (hereinafter “the instant rent”) was deposited into the account of △△ Bank in the name of the Plaintiff’s representative director / agreement as follows.

B. The Plaintiff reported the corporate tax for each taxable period including the amount of income of the instant rent, but did not account for the deposit of the instant rent, and appropriated the instant rent as the claim for attempted rent in the account book.

C. From August 26, 2013 to September 6, 2013, the Seoul Special Metropolitan Office of Education conducted an audit on the instant rent, and confirmed the payment of the instant rent, and notified the Defendant of the taxation data.

D. From January 25, 2016 to February 23, 2016, the Defendant issued on-site verification with respect to the Plaintiff, and deemed that the instant rent was out of the company, and was reverted to the representative director, and disposed of as a bonus for each business year on i.e., terms and conditions, and notified the Plaintiff of the change in the amount of income on May 19, 2016 (hereinafter “instant disposition”).

E. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on August 1, 2016, and the Tax Tribunal dismissed the decision on November 25, 2016.

Facts that there is no dispute over the basis of recognition, Gap evidence 1 through 3, 8, Eul evidence 1 and 4 (including each number, if any) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The Plaintiff is subject to seizure of the deposit account and the instant rent claim, and after receiving the instant rent from the Plaintiff to the △△ Bank account in the name of the representative director on consignment in the management of the Plaintiff, deposited it in cash, and used it as operating funds for the Plaintiff and its affiliate companies, and did not use the instant rent individually. The Plaintiff’s accounting of the instant rent in the form of a temporary account is merely limited to a temporary account to adjust when it is deemed that the representative director received the instant rent, and thus, it cannot be said that the said royalty was attributed to the representative director, since it was deemed that it was a nominal processing obligation, and that it was normally accounted after the separation from the company.

B. Relevant statutes

It is as shown in the attached Form.

C. Facts of recognition

1) Of the instant rents, the remainder 25,00,000 won, excluding the sum deposited on February 24, 2013 and March 23, 2013, was deposited in the account of △△△ Bank, immediately after being deposited in the account of △△ Bank, was deposited in two accounts of △△△ Bank under the name of △△△ Bank after a fixed deposit. The details of the account of △△△ Bank and △△ Bank are verified, other than the Plaintiff, including the Plaintiff, △△△△ Bank, △△△△△, △△△△△, and △△△△△ Bank, etc., the details of the deposits, overseas remittance,

2) Through daily receipts and disbursements report and daily financial statements, L/C ○○ included several financial accounts, including the details of cash withdrawal and transfer between accounts, and the account and the balance of the account. Of these, L/C ○○ includes personal expenses, such as electric charges and communications charges of other affiliates, expenses such as employees’ pay and food expenses, and 'private privately placed cosmetics purchase', and 'bundled money'.

3) When the Plaintiff pays employee’s benefits, etc. in cash, the Plaintiff accounts as payment of benefits, etc. on the cash receipt and disbursement book with the representative director’s provisional payment. The remainder of the provisional payment is KRW 0,000,000,000 as of January 1, 201, and KRW 000,000 as of the end of 201, and KRW 00,000,000 as of the end of 2012.

4) On July 24, 2013, the time of the audit by the Seoul Special Metropolitan Office of Education, the Plaintiff, at the time of the audit by the Seoul Special Metropolitan City Office of Education, deducted KRW 000,000,000 from the claim of the accrued rent, which is stated in the account book, and kept an account for the representative director to reflect KRW 00,000,000,000 from the balance of the paid rent by the representative director. The Plaintiff did not conclude a loan agreement for consumption separate from the said provisional payment.

Facts without dispute over the basis of recognition, Gap evidence 3 through 8, Eul evidence 1 through 3, 6, 7 (including branch numbers), and the purport of the whole pleadings.

D. Determination

Unless there exist special circumstances, the act of the representative director, etc., who is the actual manager of a corporation, uses the corporation's funds on the premise of recovery at the beginning, and thus, it constitutes an outflow from the company as an expenditure itself. As to special circumstances that cannot be deemed as not premised on recovery from the utilization time, it shall be determined individually and specifically by taking into account all the circumstances, including where the intent of the representative director, etc. is identical to the intent of the corporation or where it is difficult to see that the corporate economic interest with the representative director, etc. is in fact identical through the actual status of the corporation, such as the representative director, etc., which is the principal manager of the embezzlement, and the degree of control over the corporation, the circumstances leading to the embezzlement, and the measures taken by the corporation after the embezzlement, etc.

In full view of the following circumstances revealed from the above facts, it is reasonable to view that the instant rent was out of the country at the time of deposit into the account of terms and conditions, and thus, the instant disposition is lawful.

1) Simple ○○, even if the instant rent was paid to the Plaintiff’s personal account, was managed separately without any accounting process on the Plaintiff’s account books until July 24, 2013, and was used as an affiliate’s operating fund and an expense for personal use. As such, this constitutes a case where the representative director uses the corporation’s funds in an abnormal manner, and even if part of the instant rent was actually used as the Plaintiff’s operating fund, this is likewise applicable.

2) The Plaintiff kept accounts as the representative director’s provisional receipts and disbursements prior to cash payments. Even if the instant rent was used for the Plaintiff’s operating funds through the above accounting process, even if the instant rent had been used for the Plaintiff’s operating funds, the Plaintiff and the representative director continued to conduct provisional transactions from before the instant rent was deposited, and managed without being separated from the instant rent-related provisional receipts and disbursements, and the representative director may withdraw and use the company fund under his/her counter-annual title as long as the instant provisional deposit was appropriated for the corporate liability. Therefore, it is difficult to view the said provisional deposit as a nominal processed debt for which the first half of the amount was not scheduled.

3) On July 24, 2013, the Plaintiff, while deducting the claim for the accrued rent from the accounts on July 24, 2013, managed the accounting for including the representative director's receipts and disbursements and the representative director's provisional payments. However, as the accounting audit was conducted with respect to the lessee, it was merely arranged on the account book, and the funds were not actually introduced to the Plaintiff, and the representative director did not conclude a loan agreement for consumption with respect to the paid amount, so it cannot be deemed that the funds out of the account were recovered merely due to the above accounting, and such ex post facto circumstances do not affect the recognition of the outflow from the company in the business year 2011 and 20

4) Meanwhile, in light of the fact that the standardized terms and conditions were received the instant rent in one’s account and did not account at any time in the Plaintiff’s account book, it is difficult to deem that the said terms and conditions were premised on the collection from the time when the instant rent was appropriated.

3. Conclusion

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