Whether delay damages for retirement pay falls under other income provided for in Article 21 (1) 10 of the Income Tax Act (negative)

In light of the provisions of Article 41(3) of the former Enforcement Decree of the Income Tax Act (amended by the Presidential Decree No. 17032 of Dec. 29, 2000), a contract on a property right under Article 21(1)10 of the Income Tax Act refers to a contract on a property right and a contract on a labor contract shall be deemed not to be included in labor contract. Although the delayed payment of retirement pay is damages due to the nonperformance of retirement payment obligation, as long as retirement allowance payment obligation itself is an obligation arising from the effect of labor contract, it shall not be deemed as damages due to breach of a contract on a property right under the above Act, so the delayed payment shall not be deemed to constitute

Article 21 (1) 10 of the Income Tax Act; Article 41 (3) of the former Enforcement Decree of the Income Tax Act (amended by the Presidential Decree No. 17032 of Dec. 29, 2000)

[Plaintiff-Appellant] Plaintiff 1 and 2 others (Law Firm Gyeong, Attorneys Park Jae-soo et al., Counsel for plaintiff-appellant)

Park Jong-ro (Attorney Lee Jae-soo et al., Counsel for the plaintiff-appellant)

Head of tax office

Changwon District Court Decision 2002Guhap2725 delivered on October 2, 2003

February 20, 2004

1. Revocation of the first instance judgment.

2. The defendant's disposition rejecting the correction of global income tax for the year 2000 against the plaintiff on April 12, 2002 shall be revoked.

3. The total costs of the lawsuit shall be borne by the defendant.

As set forth in the text.

1. Details of the disposition;

A. The Plaintiff was originally a worker belonging to the Samwon-si Special River (ju) in the 66th degree of Changwon-si, Changwon-si, and was transferred to the Changwon Special River (hereinafter referred to as the “Seoul Special River”).

B. On December 200, the Plaintiff filed a lawsuit claiming retirement allowance against Sam-U.S. special lectures and rendered a judgment to pay to the Plaintiff delay damages calculated at the rate of 25% per annum from the day following the delivery of a copy of the complaint to the day of full payment of the principal and the amount of the retirement principal to the Plaintiff.

C. On December 200, Sam-U.S. Special Course paid 10,036,478 won (hereinafter “instant damages for delay”) to the Plaintiff along with the retired principal, and deemed it as other income under the Income Tax Act, and paid 2,007,290 won (10,036,478 won x 20/100, and less than 10 won) and resident tax 200,720 won.

D. On May 31, 2001, the Plaintiff reported the global income tax base for the year 2000, and reported all of the instant damages for delay as other income under the Income Tax Act, and reported the calculated tax amount of KRW 1,730,886.

E. On March 28, 2002, the Plaintiff filed a claim for correction of global income tax on the ground that the instant damages for delay constituted retirement income, not other income under the Income Tax Act, but the Plaintiff’s claim for correction of global income tax. On April 12, 2002, the Defendant rejected the Plaintiff’s claim for correction on the ground that the instant damages for delay constituted other income.

[Ground for Recognition: Facts without dispute, Gap evidence 2-1, 2-2, Gap evidence 4-1 to 6-6, all purport of oral argument]

2. Whether the instant disposition is lawful

(a) A captain;

The Defendant asserts that the instant damages for delay falls under other income as compensation received due to a breach of a contract on the payment of retirement allowances, which is a contract on property rights, and thus, the instant disposition is lawful. Accordingly, the Plaintiff asserts that the damages for delay should be deemed as retirement income as well as the original income.

B. Relevant statutes

◇ 소득세법

Article 21 (Other Incomes)

(1) Other income shall be any of the following incomes, other than interest income, dividend income, real estate rental income, business income, labor income, temporary property income, annuity income, retirement income, transfer income, and forest income:

10. Overdue charge or indemnities caused by a breach or cancellation of a contract;

(2) Other income amount shall be the amount obtained by deducting necessary expenses required therefor from the gross income amount in the current year.

◇ 구 소득세법시행령(2000. 12. 29. 대통령령 제17032호로 개정되기 전의 것)

Article 41 (Scope of Royalty, etc.)

(3) The term “compensation or indemnities” in Article 21 (1) 10 of the Act means the indemnification received due to a breach or termination of a contract on the property right, and refers to the value of the indemnification money or other goods to compensate the damages exceeding the damages to the payment itself which forms the contents of original contract, regardless of the title thereof.

(c) Markets:

In light of the provisions of Article 41(3) of the former Enforcement Decree of the Income Tax Act, a contract under Article 21(1)10 of the former Enforcement Decree of the Income Tax Act refers to a contract on property rights and shall be deemed not to include a labor contract (see Supreme Court Decisions 90Da11813, Jun. 14, 191; 91Nu8180, Jun. 22, 1993; 91Nu8180, Jun. 22, 1993). Although the instant damages for delay are damages due to the nonperformance of the payment obligation of retirement allowances, the damages for delay cannot be deemed as damages due to breach of a contract on property rights as referred to in the above Acts and subordinate statutes, so the instant damages for delay cannot be deemed as other income (general rule 21-1 of the Income Tax Act / [other income], while the basic provisions of the Income Tax Act stipulate the delay of payment for which a lawsuit for payment is filed in accordance with the provisions of the Income Tax Act only regulate internal affairs and does not have the effect as a law binding on the public or citizens).

Therefore, the disposition of this case rejecting the Plaintiff’s application for correction on the premise that the damages for delay in this case constitutes other income is unlawful.

3. Conclusion

Thus, the plaintiff's claim of this case is justified, and the judgment of the court of first instance is unfair with different conclusions, so it is so decided as per Disposition by accepting the plaintiff's appeal.

Judges Park Jong-hun (Presiding Judge)