Dong Mine Housing Industry Co., Ltd. (Attorney Park Chang-chul, Counsel for the plaintiff-appellant)

Head of Yeongdeungpo Tax Office

September 10, 2004

1. All of the plaintiff's claims are dismissed.

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

The defendant's disposition of imposition of corporate tax of 872,19,560 won for the business year of 1999 against the plaintiff on March 3, 2003, corporate tax of 185,62,250 won for the business year of 200, and corporate tax of 186,349,340 won for the business year of 201 shall be revoked.

1. Details of the disposition;

[Basis for recognition: Each entry of Gap 1-1, 1-2, 1-3, Eul 1-1 through 1-6, 2-1 through 2-8, 3-1 through 3-10, 4-1 through 4-10, 5-1 through 5-10, 6-1, 6-2, and 6-3]

Article 28(1)4, Article 27 subparag. 1 of the Corporate Tax Act (amended by Presidential Decree No. 17035, Dec. 29, 200); Article 49(1)1 of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 1703, Dec. 31, 1999; Presidential Decree No. 1658, Dec. 31, 2009; Presidential Decree No. 1970, Apr. 19, 200; Presidential Decree No. 1970, Nov. 29, 2006; Presidential Decree No. 19758, Nov. 29, 2006; Presidential Decree No. 1981, Dec. 3, 2006; Presidential Decree No. 19758, Mar. 19, 200).

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

(1) According to Article 9(1) of the National Tax Collection Act, when intending to collect a national tax, a notice stating the taxable year, items, amount of tax, grounds for the calculation thereof, deadline and place of payment of the national tax must be issued to the taxpayer. In this case, the defendant’s notice of tax payment becomes unclear in the grounds for calculation of the amount of tax, and thus, each of the dispositions

(2) Article 33(2) of the Housing Construction Promotion Act provides that a plan for the establishment of a unit and a welfare facility shall be included in a business plan to build housing exceeding a certain scale, and Article 50(1) of the Regulations on Standards, etc. for Housing Construction, which is a Presidential Decree, provides that the total area of the neighborhood and retail markets and stores established in a housing complex shall not exceed the area calculated by the ratio of six square meters per household. The Plaintiff constructed a commercial building, which is a unit and a welfare facility, as a legal obligation within the scope prescribed by the aforementioned relevant Act and subordinate statutes. Thus, the instant unsold housing unit cannot be deemed as a non-business real estate or a leased real estate. Thus, each of the instant dispositions otherwise reported is unlawful.

(3) Among the unsold sale prices in this case, the commercial buildings listed in attached Form 2 possessed by the Plaintiff among the unsold sale prices in this case are part of the commercial buildings constructed by the Plaintiff as legal obligations as above, and they have been inevitably held as public offices due to their lack of sale or lease. Thus, it is not directly related to the Plaintiff’s business, and it is not related to the Plaintiff’s business, but it is not owned by the Plaintiff for the purpose of acquiring profits from the increase of land price, and thus, it is not a real

Even if the above commercial building constitutes non-business real estate, considering that the plaintiff has made efforts to sell the above commercial building under the above circumstances, but it was not possible to sell the commercial building, the disposition of this case, which reported differently, is unlawful, even though the plaintiff has justifiable grounds for holding the above commercial building.

(4) Among the unsold sales prices in this case, the commercial buildings listed in attached Form 3, which were leased to another business year among the unsold sales prices in this case, are part of the commercial buildings constructed by the Plaintiff as legal obligations as seen above, which are not constructed for the purpose of lease, but merely constructed for the purpose of sale, but merely leased for the purpose of sale. However, although the Defendant deemed otherwise and the Defendant did not include the loan interest paid in relation to the deductible expenses for the business year of 1998, in excess of the amount of KRW 392,938,674, and thus, the carried-over losses for the pertinent business year were insufficiently counted, and thus, the Plaintiff’s loss carried-over losses was not properly deducted from the Plaintiff’s income for the pertinent

According to Article 18-3 (2) 3 of the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998), Article 43-2 (11) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970 of Dec. 31, 1998), Article 18 (2) 8 of the former Enforcement Decree of the Corporate Tax Act (amended by Ordinance No. 86 of May 24, 1999), the above commercial building constitutes a "exclusive real estate" under Article 18 (2) 3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970 of Dec. 31, 1998), the above commercial building constitutes a "real estate for non-business purposes" under subparagraph 1 (a) of the same subparagraph, and thus, it cannot be deemed that it constitutes a "real estate leased business for 90% or more of its total assets for 196 years" (amended by Presidential Decree No. 15970 of the former Corporate Tax Act).

Even if the plaintiff does not correspond to the "corporation that mainly carries on the real estate rental business" as of the end of the 198 business year, each of the above commercial buildings as seen above is mandatory construction by the plaintiff pursuant to Article 33 (2) of the Housing Construction Promotion Act, and does not mean that it is directly related to the plaintiff's business. The plaintiff has made efforts to sell the above commercial buildings before the completion of construction, but all of the apartments sold or leased by the plaintiff was made by the plaintiff as a common residential apartment with low profitability and low value as a national housing type, and it was not sold in lots. Thus, each of the dispositions of this case reported differently is unlawful.

B. Relevant statutes

Attached 4. The entry is as shown in Annex 4.

(c) Markets:

(1) Whether the procedure for duty payment notice is violated

According to Article 9(1) of the National Tax Collection Act, when collecting a national tax, a taxpayer must issue a written notice indicating the taxable year, item, tax amount, and the basis for calculation thereof, payment deadline, and place of payment of the national tax to the taxpayer. According to Article 70 of the Corporate Tax Act and Article 109 of the Enforcement Decree of the same Act, when imposing corporate tax, it shall be notified to the tax notice along with the calculation statement of the tax base and the amount of the tax amount. In the case of the tax items imposed on the total income generated during the pertinent taxable period, such as corporate tax on the income for each business year, it is sufficient to notify the tax notice to the taxpayer by specifying the tax year, the tax base for the pertinent taxable year, and the basis for calculation of the tax amount, and it is not necessary to enter the substantial basis, route, circumstance, or basis for calculation of the amount of tax such as earnings and losses for each business year (see, e.g., Supreme Court Decisions 90Nu8527, Jul. 12, 1991; 92Nu68, Jan. 197

In this case, according to the statements in Gap 1-1, 1-2, and 1-3, the defendant's taxation disposition of this case can be acknowledged that the defendant imposed and notified the total tax amount for the year of reversion of taxation and the amount of tax payable, and the tax base, tax rate, deducted tax amount, etc. which are the basis for the calculation thereof. The calculation statement of corporate tax requested by the above-mentioned-related Acts and subordinate statutes is sufficient to the extent stated in the above tax payment notice. On the other hand, the disposition of this case cannot be deemed unlawful on the ground that the above-related Acts and subordinate statutes did not state the substantial basis, route, circumstance, or basis of calculation of the amount of tax, such as gross income and deductible expenses, which are business years (Supreme Court Decision 2001Du1014 Decided January

(2) Whether legal obligatory building facilities cannot be deemed non-business real estate

Article 50(1) of the Regulations on Standards, etc. for Housing Construction provides only the upper limit for the commercial buildings, etc. installed within a housing complex. As such, the Plaintiff is required to construct and sell a reasonable size of commercial buildings within the upper limit by well predicting the demand, etc. at the time. Even if each of the above commercial buildings was installed pursuant to Article 33(2) of the Housing Construction Promotion Act, and the Plaintiff leases it to others or owns it as a public room, as long as each of the above commercial buildings constitutes “non-business real estate” or “rental real estate,” the interest, etc. on related loans shall not be included in deductible expenses, as seen thereafter.

(3) Whether it constitutes real estate for non-business use

Article 18-3 of the former Corporate Tax Act (wholly amended by Act No. 5581 of Dec. 28, 1998) provides that the term "those held to acquire profits from land price increase" is larger than that of "those prescribed by the Presidential Decree" under Article 18-3 of the former Corporate Tax Act (wholly amended by Act No. 5581 of Dec. 28, 1998) or "those held to acquire profits from land price increase" under Article 18-2 of the Enforcement Decree of the former Corporate Tax Act, and therefore, the term "those held to acquire profits from land price increase" under Article 18-3 of the same Act or "those held to acquire profits from land price increase" under Article 18-4 of the Enforcement Decree of the former Corporate Tax Act are deemed to be excluded from deductible expenses. However, Article 18-3 of the former Enforcement Decree of the Corporate Tax Act provides that the corporation's ownership of real estate shall not be included in deductible expenses for non-business purposes under Article 80 of the former Enforcement Decree of the Corporate Tax Act.

According to the health stand, Gap 3, 4, 5, 6, Eul 15-1, 15-2, and 16 as to this case, the plaintiff can recognize the fact that the plaintiff has possessed the commercial buildings for which three years have passed since it was stated in attached Form 2, and each commercial building listed in attached Form 2 falls under the real estate stipulated in Article 18 (4) 12 of the above Enforcement Rule, and as long as each commercial building listed in attached Form 2 falls under this, the above commercial building shall be deemed to fall under non-business real estate (the above legal principle is the same as the Corporate Tax Act, the Enforcement Decree of the same Act, the Enforcement Decree of the same Act, and the Enforcement Rule of the same Act, even after each amendment was made in the same manner as of May 24, 1999).

On the other hand, each of the above commercial buildings appears to have not been sold by means of the plaintiff's mispredicting the demand and construction, and the testimony of witness Kim Byung-6 alone is insufficient to recognize that the plaintiff made efforts to construct and sell each of the above commercial buildings according to the size of the apartment complex in consideration of market feasibility, etc., but there is no other evidence to recognize otherwise, the fact that each of the above commercial buildings is held as a public room by the plaintiff due to the lack of sale cannot be said to have a justifiable reason.

(4) Whether the leased real estate constitutes a leased real estate

The purpose of Article 18-3(2)3 of the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998) is to prevent the deterioration of the financial structure of an enterprise due to unreasonable corporate expansion dependent on capital of others, to prevent corporate economic activities through investment in real estate and non-productive business through financial assets, thereby inducing the sound economic activities of an enterprise through the productive management of corporate funds, as one of the conditions that do not include interest paid on the loans owned by a corporation in excess of the standards for efficient utilization of national land in deductible expenses. In addition, Article 43-2(5) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970 of Dec. 31, 198) provides that the scope of such corporation and real estate shall be delegated to the Presidential Decree for the purpose of achieving the purpose of legislation of the same Act. In addition, Article 28-1 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970 of Dec. 31, 1998) provides that the aforementioned real estate shall be individually delegated to the same purpose.

In full view of the purport of the entire pleadings as to this case, the Plaintiff may establish a new commercial building listed in the list of annexed Table 3 as a corporation with a loan amounting to two times its own capital, and may recognize the fact that it has leased it for 198 business years without using it directly. Therefore, each of the above commercial buildings constitutes "rental real estate" under Article 18 (2) 8 of the Enforcement Rule.

In addition, Article 18 (21) of the above Enforcement Rule provides that the main business shall be determined by the provisions of each subparagraph of paragraph (11), and Article 18 (3) of the above Enforcement Rule provides that "the main business shall be the business with the largest amount of revenue in the case of other businesses." In full view of the overall purport of the arguments in each subparagraph in Articles 12 and 3, the plaintiff is the business with the largest amount of revenue in the sales, and thus the lease business does not constitute the main business (the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998) and Article 9 (5) of the former Corporate Tax Act (amended by Presidential Decree No. 15970 of Dec. 31, 198) and Article 14 (6) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970 of Dec. 31, 198) provides that the criteria for determining whether the "exclusive real estate rental business in this case is a main business."

On the other hand, each of the above commercial buildings appears to have not been sold by means of the plaintiff's mispredicting the demand and construction, and the testimony of witness Kim Byung-6 alone is insufficient to recognize that the plaintiff made an effort to construct and sell each of the above commercial buildings in accordance with the size of the apartment complex in consideration of market feasibility, etc., but there is no other evidence to recognize otherwise. In this case, the fact that each of the above commercial buildings was leased by the plaintiff during the 1998 business year due to the lack of sale cannot be said to have a justifiable reason.

3. Conclusion

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

Judges Yu Nam-nam (Presiding Judge)