early 2007west0703 (2009.05.07)

Whether additional corporate tax loss deduction charges are legitimate

Where the amount of retroactive deduction of loss due to the error in the disposition of corporate tax correction is calculated erroneously, the additional dues for retroactive deduction of loss following re-revision shall not be attributable to the taxpayer.

The contents of the decision shall be the same as attached.

1. On December 4, 2006, the part that exceeds KRW 545,905,080 among the disposition of imposition of corporate tax belonging to the business year 2001, and the part that exceeds KRW 12,022,560 among the disposition of imposition of corporate tax belonging to the business year 2002, and the part that exceeds KRW 10,416,360 among the disposition of imposition of corporate tax belonging to the business year 202 shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same is as the disposition (the date of disposition written in the purport of the claim seems to be written in writing on December 18, 2006).

1. Circumstances of the disposition;

A. Plaintiff’s report of corporate tax

1) From June 13, 1998, the Plaintiff started a new construction work of Gangnam-gu apartment (hereinafter referred to as the “instant apartment”) on the ground, such as Gangwon-si BBdong 84, Gangwon-do, and completed it on February 21, 2001.

2) In filing a return on corporate tax attributed to the Defendant for the business year 1998-2001, the Plaintiff calculated the profit and loss for each business year from the pre-sale area based on the pre-sale area, and the tax base and calculated tax amount are the same as the initial report column of the Plaintiff’s report

B. The defendant's corrective disposition on April 21, 2005

Under Article 69 (2) of the Enforcement Decree of the Corporate Tax Act, the defendant shall calculate the annual sales proceeds and sales cost of the apartment in this case based on the degree of completion of the construction of the above apartment (hereinafter referred to as the "rate of completion of construction") other than the sales area, and there is no completed construction or unsold land, which is appropriated as the end-of-life goods in the business year 1998 by appropriating the costs incurred in the business year 1998 as the whole expenses for the end-of-life goods. Therefore, the business year 1999 shall be deemed not to have completed construction and unsold land, which are the basic goods, and the profits and losses thereafter have been calculated again, and based thereon, the defendant shall revise and notify the corporate tax for the plaintiff on April 21, 2005 for the business year of 199-201, and the tax base and calculated tax shall be the same as

(c) Retroactive deduction;

On May 21, 2005, the Plaintiff filed an application for the retroactive deduction of corporate tax for the business year 2001 and 2002, based on the tax base and tax amount of the business year 2000, which was changed by the Defendant’s above correction, and on July 8, 2005, the Defendant respectively refunded corporate tax of 545,905,080 and corporate tax of 2002 business year 31,006,360 to the Plaintiff.

(d) Decisions of the National Tax Tribunal on August 31, 2006;

On July 14, 2005, the Plaintiff filed an appeal with the National Tax Tribunal. In light of Article 69(2) of the Enforcement Decree of the Corporate Tax Act, Article 79 of the Corporate Tax Accounting Standards (amended by March 30, 2001), and the purpose of the exclusion period of imposition, the National Tax Tribunal made a decision on August 31, 2006 that when calculating profits and losses for the business year 198-2001 due to the pre-sale sales of the apartment in this case without considering the exclusion period of imposition, the period of imposition for the business year 1998, for which the exclusion period of imposition has not elapsed without changing the tax base and tax amount, the tax base and tax amount should be corrected on the basis of the profits and losses calculated as above.

E. Re-revision on December 4, 2006 by the defendant

In accordance with the purport of the above decision, the Defendant re-revisions corporate tax for the business year 199-2001 as stated in the column for the re-revision of the details, such as the Plaintiff’s report of corporate tax, etc., and estimated the Plaintiff’s retroactive deduction of corporate tax, pursuant to Article 72(5) of the Corporate Tax Act and Article 110(5) of the Enforcement Decree of the same Act, the amount equivalent to the interest accrued during the business year from July 9, 2005 to December 4, 2006, which is the date of the notification of refund, was added to KRW 112,238,080 for the business year from July 9, 2006, and KRW 1,606,20 for the business year of 202 (hereinafter “instant disposition”).

(f) Decision of dismissal by the Tax Tribunal;

On May 7, 2009, the Plaintiff appealed against the instant disposition and filed an appeal with the Tax Tribunal, and the Tax Tribunal rendered a decision to dismiss the Plaintiff’s appeal.

[Ground for Recognition: Facts without dispute, entry of Gap evidence 1-1, 2-2, 2-1, and 2-2, and purport of whole pleadings]

2. Whether the instant disposition is lawful

A. Summary of the plaintiff's cause of claim

Since the Plaintiff received a retroactive deduction of corporate tax belonging to the business year 2001 and 2002 due to the Defendant’s erroneous interpretation of the Framework Act on National Taxes, applying Article 72(5) of the Corporate Tax Act to the Plaintiff, which was not attributable to the Plaintiff, should be deemed unfair and reasonable.

(b) Related statutes;

The entry in the attached Form is as specified in the relevant statutes.

C. Determination

1) On the other hand, in cases where a taxpayer violates various obligations, such as a tax return and tax payment, as prescribed by individual tax law, in order to facilitate the exercise of the right to impose taxes and the realization of a tax claim, an additional tax under the tax law is an administrative sanction imposed without a justifiable reason, and the taxpayer’s intentional intent or negligence is not considered. On the other hand, such a sanction is not imposed in cases where a taxpayer is not unreasonable to have known of his/her duty, and there is a circumstance that it is unreasonable for the taxpayer to reasonably present his/her duty or to expect the performance of his/her duty to the party concerned, etc. (see, e.g., Supreme Court Decision 95Nu10181, Nov. 14, 1995).

2) With respect to this case, when the Plaintiff filed a return of corporate tax for the business year from 1998 to 201, it is wrong to calculate profits and losses for each business year from pre-sale based on the pre-sale area rather than the rate of work progress under Article 69(2) of the Enforcement Decree of the Corporate Tax Act. However, the instant disposition is for the following reasons: (a) the Defendant made a return of corporate tax for the business year from 2001 to 31,006,360 won belonging to the Plaintiff for corporate tax for the business year 202 and the amount of corporate tax for 31,006,360 won belonging to the Plaintiff; and (b) the Defendant’s re-revision of the tax base for the business year from 200 to 200, rather than due to the Plaintiff’s erroneous return, it is reasonable to view that the Defendant’s re-revision disposition falls under the Plaintiff’s tax base and tax amount for the business year from 2000 to 2005.

3. Conclusion

Thus, since the disposition of this case is illegal, all of the plaintiff's claims seeking its revocation are justified, and they are accepted respectively, and it is so decided as per Disposition.