Plaintiff (Attorney Han Han-chul et al., Counsel for the plaintiff-appellant)

The Director of Gangnam District Office

March 19, 2008

Seoul Administrative Court Decision 2007Guhap5899 Decided July 26, 2007

1. Revocation of a judgment of the first instance;

2. The part that exceeds 59,125,480 won among the disposition imposing global income tax of KRW 866,605,480 against the Plaintiff on February 13, 2006 shall be revoked.

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

The same shall apply to the order.

1. Details of taxation; and

A. A. Around 191, Nonparty 1 was appointed as a manager of ○○○ Stock Company, which was in progress, and performed his duties until 1994, as a company owned by the head of the parent, Nonparty 2, Nonparty 3, and 4, etc., and the wife took charge of the sale of the property, debt repayment, etc. by the wife until 199.

B. However, during the process of Nonparty 3 filed a complaint against Nonparty 1 on charges of embezzlement, etc. around 200 and the investigation thereof was conducted, Nonparty 1 entered into a loan agreement with Nonparty 2, 3, and 4 (hereinafter “debtors”) stating that the Plaintiff received KRW 500 million from the Plaintiff on December 1992, and KRW 50 million on March 193, 199, and KRW 1 billion on the real estate as the purchase price for the land and the housing on the second floor (hereinafter “instant real estate”) owned by the debtor as the representative of the Cheong-dong, Chang-dong, dong, and Cheong-dong, and the second floor (hereinafter “instant real estate”). After entering into a loan agreement with Nonparty 3 to convert the Plaintiff into the loan, it was the sum of KRW 70 million on June 17, 199, KRW 50 million on June 23, 199, KRW 50 billion on June 29, 199.

C. Accordingly, the Defendant concluded a quasi-loan contract with the debtor to convert the sale price into the loan, and later concluded a quasi-loan contract with the debtor, but did not have any agreement on the date of payment of interest at the time of the conclusion of the contract. The Defendant recognized the remainder of KRW 1 billion, excluding KRW 1 billion of the leased principal, which the Plaintiff received in 1999, as interest income, as global income for the year 1999, and issued the instant tax disposition imposing global income tax of KRW 866,605,480 on the Plaintiff on February 13, 2006.

[Reasons for Recognition] Evidence Nos. 1 through 3, Evidence No. 4-1, 2, Evidence No. 1 to 5, Evidence No. 1 to 5, the testimony of Non-Party 1 as a witness of the first instance court, and the purport of the whole pleadings

2. Whether the taxation disposition is legitimate

A. The plaintiff's assertion

(1) On August 31, 1992, the Plaintiff: (a) took over △△△△△ Co., Ltd. established by the Plaintiff, and transferred its trade name to △△△△ Co., Ltd. (the trade name was changed to 6 corporation around October 23, 1993); (b) entered into the instant sales contract with Nonparty 1’s request to purchase the instant real estate owned by the debtor in the qualification of representative director of Nonparty 6 Co., Ltd. at KRW 1 billion; (c) around that time, the Plaintiff paid KRW 500 million first with the business funds of Nonparty 6 Co., Ltd.; and (d) around March 31, 1993 with Nonparty 6 Co., Ltd. as the debtor, the Plaintiff’s father, who was the Plaintiff’s father, provided the instant real estate owned by 7,000,000 won as collateral for the loan for consumption; and (d) thereafter, Nonparty 1 did not own the instant real estate at the time of Nonparty 1’s request to sell the instant property.

(2) Even if the person to whom interest income accrued is the Plaintiff, the Plaintiff and Nonparty 1 agreed to pay the interest at the end of each month at the time of entering into the instant quasi-loan loan agreement. On May 2003, the Plaintiff and Nonparty 1 agreed to pay the interest at the end of each month at the rate of 20% per annum, and changed to pay the interest at the end of each year at the rate of 20% per annum. Thus, the receipt time of interest income under the instant quasi-loan agreement shall be the end of each year as stipulated in the agreement. As such, the interest income amount under the instant quasi-loan loan agreement shall be the end of each year as stipulated in the agreement. As such, the interest income amount from January 1, 1999 to June 1, 199 (i.e., KRW 1 billion x 0.2 x 6/12), excluding the interest income amount received by the Plaintiff under the pretext of interest, was already 7-year exclusion period. Therefore, the portion of the instant taxation exceeds the global income tax amount of KRW 159.

(b) Related statutes;

[Income Tax]

Article 16 (Interest Income)

(1) Interest income shall be the following income generated during the relevant year:

12. Profits accruing from a non-business loan;

[Enforcement Decree of the Income Tax]

Article 45 (Receipt Date of Interests) The receipt date of the total amount of interest income shall be as follows:

9-2. Profits accruing from a non-business loan;

The payment date of interest pursuant to the agreement: Provided, That in cases where there is no agreement on the payment date of interest, or where interest is paid before the payment date of interest pursuant to the agreement, or where interest is paid excluded from the calculation of the gross income pursuant to Article 51 (7), it

C. Determination

(1) Whether a person to whom interest income accrued can be deemed as a non-party 6 corporation

In full view of the facts stated in Gap's evidence Nos. 5, 6, 23 through 26, 29, 43, 45, and 48, Gap 27, 28, 32, 44, and 50, Gap 30, 31, 33 through 38, 40 through 42, each of the evidence Nos. 1, 2, 39, and 49-1 to 42, the plaintiff's assertion that the non-party 6 corporation was the debtor, and the non-party 6 corporation's father-dong (number omitted) and its ground building was offered as security, and the non-party 1 was paid KRW 500 million out of the purchase price of this case to the non-party 6 corporation and the non-party 1 corporation's evidence Nos. 4 and 500,000,000 won, and the party's assertion that the non-party 6 corporation and the non-party 6 corporation's statement of this case cannot be accepted.

(2) Whether an agreement was made on the date of payment of interest

In light of the purport of the Plaintiff’s evidence Nos. 5, 6, and 8’s evidence Nos. 7-1, 2, and 3 and 4 as well as Nonparty 1’s testimony at the court of first instance, it is reasonable to view that the Plaintiff received interest rate of KRW 250 million from Nonparty 1, who represented the debtor, during the period from January 1993 to February 1994, and that the Plaintiff did not pay KRW 150 million as interest rate of KRW 150 million until October 1994, it is reasonable to deem that the agreement was concluded on the above 9-year loan interest rate of KRW 1,50 million after the lapse of the period from June 16, 199 to KRW 1,50,000,000 as interest rate of KRW 150,000,000,000,000,000,000,000).

(3) Sub-determination

Therefore, among the 1 billion won received by the Plaintiff as interest, the interest income amounting to 100 million won from January 1, 1999 to June 1, 199 (=1 billion won x 0.2 x 6/12 x 6/12) was already subject to the exclusion period of 7 years. As such, among the instant taxation, the amount exceeding 59,125,480 won (=26,360,000 won = 26,360,000 won + 80,40,000 won + 80,000,000,000,000 won x 26,360,000 x x 60,000 x 26,360,000 x 20,000) x 26,306,408,206 x 206,3636,406)

3. Conclusion

Therefore, the plaintiff's claim of this case seeking revocation in the purport of seeking confirmation of invalid part of the taxation disposition of this case is reasonable, and therefore, the judgment of the court of first instance is unfair in conclusion. Thus, the part exceeding KRW 59,125,480 among the taxation disposition of this case is revoked, and it is so decided as per Disposition.

Judges Cho Byung-hee (Presiding Judge)