[1] In a case where a quasi-loan contract for consumption was concluded for the unpaid purchase price, whether the agreed delay loss after the due date falls under other income under the Income Tax Act (affirmative)

[2] Whether the neglect or exemption of the interest or damages for delay that can be collected constitutes a wrongful calculation under the Income Tax Act (affirmative)

[1] Damages for delay resulting from the delay of payment of an obligation are not damages to the payment itself, which is the content of the original contract, and the obligation is not the monetary obligation, and damages for delay of an obligation is not different. Thus, damages for delay arising from the delay of payment of a monetary obligation constitute other income as "compensation and compensation received due to a breach or termination of a contract" under Article 25 (1) 9 of the former Income Tax Act (amended by Act No. 4803 of Dec. 22, 1994). Therefore, even in cases where a party to a real estate sales contract agreed that the intermediate payment and remainder for which the execution of the contract was delayed shall be the object of a loan for consumption with interest payment, barring special circumstances such as extension of the payment period, even if there is no objection, it constitutes damages for delay, which constitutes other income.

[2] The neglect or exemption of interest or delay damages in the same state as a gratuitous loan can be collected constitutes a case where a reasonable economic person can not be deemed as a normal transaction to take place in light of social norms and customs, and thus, the tax burden has been unjustly reduced.

[1] Article 25 (1) 9 (see the current Article 21 (1) 10) of the former Income Tax Act (amended by Act No. 4803 of Dec. 22, 1994) / [2] Article 55 (1) (see the current Article 41 (1)) of the former Income Tax Act (amended by Act No. 4803 of Dec. 22, 1994)

[1] [2] Supreme Court Decision 95Nu7413 decided Mar. 28, 1997 (1) / [1] Supreme Court Decision 92Nu9357 decided Apr. 27, 1993 (Gong1993Ha, 1608) Supreme Court Decision 94Da3070 decided May 24, 1994 (Gong1994Sang, 1810) / [2] Supreme Court Decision 87Nu901 decided Nov. 17, 1989 (Gong1989, 307) Supreme Court Decision 90Nu10862 decided Nov. 27, 190 (Gong1991, 207) 92Nu108939 decided Feb. 9, 1993 (Gong1991, 207)

Park Young-ro (Attorney Yoon Young-young, Counsel for the plaintiff-appellant)

Head of the tax office

Seoul High Court Decision 94Gu18562 delivered on April 27, 1995

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

We examine the grounds of appeal.

1. On the first ground for appeal

The damages for delay resulting from the delay of the performance of an obligation is not damages to the payment itself which is the content of the original contract, and it does not mean that the obligation is the monetary obligation, so the damages for delay of an agreement arising from the delay of the monetary obligation is not different. Thus, the damages for delay of an obligation constitutes other income (see Supreme Court Decision 94Da3070 delivered on May 24, 1994) under Article 25(1)9 of the Income Tax Act as "the damages for delay and compensation received due to the breach or termination of a contract" (see Supreme Court Decision 94Da3070 delivered on May 24, 1994). Therefore, even in cases where the parties to a real estate sales contract agree to make the intermediate payment and the remainder whose performance has been delayed for the purpose of a loan for consumption with interest payment, barring any special circumstance such as the extension of the payment period even after the expiration of the loan

According to the facts duly admitted by the court below, on March 30, 1991, when selling real estate owned by the non-party company of which he and his family own stocks to the non-party company for which the payment of the intermediate payment and the balance is delayed, the plaintiff shall be paid damages for delay at the rate of 15% per annum. After the date of the balance payment agreement, the interest rate of KRW 1,400,000 shall be 15% per annum for the accrued intermediate payment and the balance after January 31, 1992, which is after the date of the balance payment agreement, and the due date shall be 15% per annum for the purpose of a loan for consumption with the maturity of June 30 of the same year, but it is again agreed that the interest after the due date shall not be paid. Accordingly, the exemption of the plaintiff is not a interest but a debt damages for delay, so the plaintiff's tax burden on other income shall be reduced.

Although the reasoning of the court below is inappropriate, the conclusion that the exemption of the plaintiff is the obligation for damages for delay corresponding to other income is proper, and there is no error in the misapprehension of legal principles as to interest income and other income. There is no reason to argue.

2. On the second ground for appeal

The judgment of the court below that the Plaintiff’s act of exempting the above damages for delay constitutes an act of unreasonably reducing the tax burden on other income. It does not appear to have rejected the Plaintiff’s assertion that there is a justifiable reason to exempt the above damages for delay, but it is not appropriate to purport to the effect that the Plaintiff’s act of neglecting or exempting the interest or damages for delay without compensation can be collected, in light of social norms and customs, the act of neglecting or exempting the interest or damages for delay cannot be deemed as a normal transaction, and thereby unreasonably reducing the tax burden (see, e.g., Supreme Court Decisions 90Nu10862, Nov. 27, 1990; 92Nu10869, Feb. 9, 1993; 200Nu10869, Feb. 9, 1993). Accordingly, it is clear that the Plaintiff’s above assertion would be dismissed. Therefore, the lower court’s error did not affect the conclusion

3. Therefore, the appeal shall be dismissed and all costs of appeal shall be assessed against the losing plaintiff. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Jong-sik (Presiding Justice)