The acquisition cost of the land invested in kind by the Housing Reconstruction Association from its members

The acquisition price of the land invested in kind from the members of the Housing Reconstruction Association shall be the price calculated in the books within the scope of the market price.

Article 41 of the Corporate Tax Act Acquisition Value of Assets

Article 14 of the Enforcement Decree of the Corporate Tax Act

1. The plaintiff's claim is dismissed.

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

The defendant's rejection disposition of corporate tax for the business year of 2004 against the plaintiff on April 5, 2006 shall be revoked.

1. Details of the disposition;

The following facts are not disputed between the parties, or may be acknowledged by taking into account the whole purport of the pleadings in each entry in Gap evidence Nos. 1, 2, 4, 1-1, 2, 3, 2-1 through 15, 3-1, 3-2, 3-1, 3-2, and 3-2:

A. In order to reconstruct ○○ Housing on the ○○○dong, Seoul, ○○-dong, the Plaintiff was a reconstruction housing association that obtained an authorization for establishment from the head of ○○○○ on June 17, 2003 pursuant to Article 44 of the former Housing Construction Promotion Act. On July 24, 2003, the Plaintiff received an investment in kind of land from its members (hereinafter referred to as the “instant land’s increase”), and completed the registration of incorporation on July 30, 200, after implementing the reconstruction project and obtaining an approval for use on March 25, 2005.

B. On March 31, 2005, when the Plaintiff reported the Plaintiff’s tax base and tax amount of corporate tax for the business year 2004 to the Defendant, the Plaintiff paid the amount of income to KRW 1,353,012,00 (the amount calculated by multiplying the contract amount by the construction progress rate of KRW 2,05,000) and KRW 1,167,053,781 (i.e., construction site cost of KRW 580,434,159 + construction cost of KRW 2,067,50,50,000 + construction cost of KRW 2,067,50,80,80,80,378). Of the above sales cost of KRW 580,434,159, the amount of corporate tax calculated at KRW 3,10,976,00 (the arithmetic mean of the amount appraised by the appraisal institution of KRW 22,2531,581,475,75,0000

C. However, on December 1, 2005, the Plaintiff calculated the acquisition cost of the instant land on the basis of the appraised value when the Plaintiff filed a corporate tax return as above. In other words, in the case of calculating the amount by excluding the additional charges to be borne by the partners in the general sale price, the acquisition cost of the instant land would be KRW 4,078,822,692, and on this basis, based on the calculation of corporate tax for the business year 2004, the Plaintiff filed a claim for the correction of the corporate tax base and tax amount pursuant to Article 45-2 of the Framework Act on National Taxes and Article 25-3 of the Enforcement Decree of the same Act, and the Defendant dismissed the said claim on April 5, 2006 (hereinafter referred to as the “instant rejection disposition').

D. On April 21, 2006, the Plaintiff filed a request for adjudgment with the Director of the National Tax Tribunal, but the Director of the National Tax Tribunal dismissed it on September 8, 2006.

2. Whether the rejection disposition of this case is legitimate

A. The plaintiff's assertion

Upon entering into a reconstruction project contract with ○○○○ Development Co., Ltd., a contractor, the Plaintiff provided only the name of the project operator and substantial implementation of the project is in charge of the construction project, and the amount of general sales revenue, etc. is attributed to the contractor in full. In cases of calculating the value of the land invested in kind to the Plaintiff by the officially assessed price or the appraised price, etc., which is not the market price or actual transaction price, the Plaintiff’s interest in processing that is not related to the Plaintiff’s actual income by applying the officially assessed price or the appraised value, which is generally lower than the market price or actual transaction price. Therefore, in calculating the construction site cost among the sales cost, the amount calculated by subtracting additional contributions from the general sale price shall be calculated by considering the market price or actual transaction price of the instant land as the market price or the actual transaction price of the instant land. If calculated accordingly, the Plaintiff is not liable

(b) Related statutes;

○ Acquisition value of assets under Article 41 of the Corporate Tax Act

(1) The acquisition value of assets acquired by a domestic corporation through purchase, production, exchange, gift, etc. shall be the amount falling under any of the following subparagraphs:

1. For assets purchased from a third person, the amount of the purchase price plus incidental expenses;

2. For assets acquired through the corporation's own manufacture, production, construction, or other corresponding methods, the amount of the cost of production plus any incidental expenses;

3. For assets other than those under subparagraphs 1 and 2, the amount as prescribed by the Presidential Decree at the time of acquisition.

(2) Matters necessary for the calculation of the acquisition value of assets, such as the scope of purchase prices and incidental expenses under paragraph (1) shall be prescribed by Presidential Decree.

Article 52 (Dispudiation of Wrongful Acts)

(2) In the application of the provisions of paragraph (1), the standard for determination shall be the prices applied or to be applied in sound and generally accepted practices and normal transactions between persons without a special relationship (including rates, interest rates, rents, exchange rates and other corresponding rates; hereafter in this Article referred to as "market prices").

(4) In applying paragraphs (1) through (3), matters necessary for the types of wrongful calculation, assessment of market price, etc. shall be prescribed by Presidential Decree.

Article 14 of the Enforcement Decree of the Corporate Tax Act

(1) The value of properties other than cash acquired pursuant to each subparagraph of Article 16 (1) of the Act shall be the value under each of the following subparagraphs:

1. Where the acquired assets are stocks or contribution quotas (hereinafter “stocks”), the amount under each of the following items:

(c) In other cases, the market price as provided in Article 52 of the Act at the time of its acquisition (hereinafter referred to as “market price”): Provided, That in case of profits received by distribution from a person with a special relationship under Article 88 (1) 8, the amount shall be deducted; and

Article 72 (Acquisition Value of Assets, etc.)

(1) The acquisition value of assets under Article 41 (1) and (2) of the Act shall be the amount under each of the following subparagraphs:

3. Assets acquired through investment in kind, merger, or division: The value or the value of succession calculated in the book: Provided, That where the market value exceeds the market value, the amount of excess shall be excluded, and where monetary claims, etc. prescribed by the Ordinance of the Ministry of Finance and Economy of financial institutions falling under any subparagraph of Article 61

Article 89 (Scope of Market Price, etc.)

(2) In the application of Article 52 (2) of the Act, if the market price is unclear, the amount calculated by applying in sequence the following subparagraphs:

1. Where there is a value appraised by the appraisal evaluation corporation under the Public Notice of Values and Appraisal of Real Estate Act, the value thereof (in case there are not less than 2 appraised values, the average amount of the appraised values): Provided, That stocks, etc. shall

C. Determination

(1) On the other hand, Article 41(1)3 of the Corporate Tax Act provides that the acquisition value of assets purchased from others and assets other than those manufactured and produced by others shall be the amount determined by the Presidential Decree at the time of acquisition of such assets. Article 72(1)3 of the Enforcement Decree of the Corporate Tax Act delegated by it provides that the acquisition value of assets under Article 41 of the Corporate Tax Act shall be the value calculated in the account book in the case of assets acquired through investment in kind: Provided, That where the value exceeds the market value, the excess amount shall be excluded. Thus, the acquisition value of assets acquired through investment in kind means the amount calculated in the account book within the scope of the market value at the time of their acquisition. Here, the increase in the market value refers to the market value under Article 52 of the Corporate Tax Act (Article 14(1)1 (c) of the Enforcement Decree of the Corporate Tax Act) which is applicable or deemed applicable to a normal transaction between persons other than persons with a special relationship (Article 52(2) of the Corporate Tax Act).

(2) According to the above relevant Acts and subordinate statutes, the value of the assets acquired by the investment in kind is calculated within the scope of the market price in any case or within the scope of the market price. However, in the sense of limiting the amount calculated in the account book, only where the market price is unclear, the value of the assets appraised by the appraisal corporation under the Act on the Public Notice of Values and Appraisal of Real Estate, Etc. and Appraisal of Real Estate Act shall be the market price. According to the facts acknowledged as above, the market price of the land in this case at the time when the plaintiff was invested in kind from the association members is unclear because there is no actual transaction price. If there is such circumstance, the market price of the land in this case shall be KRW 3,110,976,00, which is the average amount of the appraised value of the land in this case calculated in the account book by the plaintiff as the acquisition price of the land in this case by the two appraisal corporations. Accordingly, it shall be deemed that there is no error of law in calculating corporate tax based on this.

(3) Furthermore, even if KRW 4,078,822,692, which deducts additional contributions from the general sale price of the land of this case, is not clear as it is the market price of the land of this case, the acquisition price of the land of this case shall be calculated based on the amount stated in the account book as well as the amount stated in the above account book, so it is clear that the amount of KRW 3,110,976,000, which does not exceed the market price of the plaintiff's assertion. Further, notwithstanding the express provision of Article 41 (1) 3 of the Corporate Tax Act and Article 72 (1) 3 of the Enforcement Decree of the same Act, the plaintiff's assertion that the value of the asset invested in kind is calculated in the account book shall be the value of the asset invested in kind without any legal basis, which is the general sale price of the plaintiff's assertion, and the interpretation of tax laws shall be interpreted in accordance with the principle of no taxation without the law, barring any special circumstance.

(4) The plaintiff also concludes a so-called contract for a construction project in the so-called share system and implements the project, but the actual project operator is the plaintiff's partnership but the plaintiff is not a corporation's income. However, the method of the construction project in the share system or the contract system claimed by the plaintiff is merely a matter of choice as to how to appropriate the construction cost (project cost) as the reconstruction association implements the project, and so-called plaintiff's share system cannot play a leading role compared with the contract system, but it does not mean that the association can not take the status of the project operator only under the name of the association as argued by the plaintiff. The plaintiff's assertion on this point is not acceptable.

(5) Therefore, the rejection disposition of this case, which rejected the plaintiff's request for correction of corporate tax for the business year 2004, is legitimate, and the plaintiff's assertion is without merit.

3. Conclusion

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