Seoul Administrative Court-2014-Gu Partnership-575 (Law No. 18, 2015)

Cho Jae-2014-west-4250 ( December 4, 2013)

Since Non-Performing Loan Resolution Fund constitutes a non-profit domestic corporation under the Corporate Tax Act, the Plaintiff’s Note, which is written on different premise, is not accepted.

It is reasonable to view that the Non-Performing Loan Resolution Fund is a foundation with basic property for the public interest under Article 13 (1) 2 of the Framework Act on National Taxes and thus falls under a non-profit domestic corporation under the Corporate Tax Act, and that the value of assets received without compensation means the value of assets received without compensation or consideration for improving the financial structure of the foundation.

Article 18(8) of the Corporate Tax Act provides for exclusion from taxable income

2015Nu60824 Disposition of revocation of revocation of corporate tax rectification

○ Bank and 14

○ Head of Tax Office and 8

April 27, 2017

June 1, 2017

1. All appeals filed by the plaintiffs are dismissed.

2. The costs of appeal are assessed against the Plaintiffs.

Cheong-gu and purport of appeal

The decision of the court of first instance is revoked. The decision of the court of first instance is revoked. The notice of rejection of the request for corporate tax for the business year of 2008 as stated on the corresponding date in the list of rejection of the request for corporate tax for the business year of 2008 and the corresponding date in the list of rejection of the request for corporate tax for the business year of 2009 as stated on the corresponding date is revoked, respectively.

1. Quotation of judgment of the first instance;

The reasoning of this court's judgment is as follows, and it is identical to the reasoning of the first instance court's judgment, except for the addition of the judgment on the plaintiffs' argument in the first instance court in Paragraph (2). Thus, it is cited by Article 8 (2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act.

○ Part 5 of the 5th page “instant dividend” is regarded as “distribution of this case”.

○ The following shall be added under Part 5 (8):

E. On August 1, 2014, when the lawsuit of this case was pending in the court of first instance, the Gyeongnam Bank, Inc., was merged into the KNF branch owners of KNB, Gwangju Bank, a stock company, into the KNF branch owners of KNB, and the KNF owners of KNB as the Gyeongnam Bank, a stock company, and the trade name of the KNF owners as the Gyeongnam Bank, respectively (hereinafter “Plaintiff Gyeongnam Bank,” and “Plaintiff Gwangju Bank”). On the other hand, the KNF merged one bank on September 1, 2015, and changed its trade name to one bank on the same day (hereinafter “each “Plaintiff, Korea Exchange Bank,” and “Plaintiff IF”) as of September 1, 2015.

○ 5th page 9 (hereinafter referred to as “the fifth page”) adds “the purpose of the whole pleadings” to:

○ From 5 10 up to 7 10 pages.

○ 7 pages 11 "3." shall be read as "2."

○ The 7th page "Preliminary Claim" in the 19th page is regarded as "the 2nd preliminary claim".

○ The second part of the 8th page is "a rejection". The second part is "a rejection".

[1] Korea Asset Management Corporation .......... 8 and 9 of the 8th page is higher than ..........

○ The “instant construction project” in Part 13 of the 8th page is regarded as “property construction project”.

○ Headings 5 to 8 below the 9 upper end table are as follows:

3) Article 2(5) of the Addenda to the former Asset Management Corporation Act (No. 5371, Aug. 22, 1997) provides that the remaining property of the Fund shall be returned to a financial institution that contributed the Fund after the end of the operation period of the Fund. However, there was a ground for returning the remaining property of the Fund even before the end of the operation period pursuant to the proviso of Article 2(5) of the Addenda to the former Asset Management Corporation Act (amended by Act No. 8698, Dec. 21, 2007) (hereinafter referred to as the “Annex to the former Asset Management Corporation Act”).

Pursuant to the revised supplementary provision, the Fund paid the instant shares to the Plaintiffs from 2010 to 2012, which was before the end of the operating period, and at the time, the Asset Corporation Management Committee (hereinafter referred to as the "Management Committee") decided not to pay any separate interest at the time of repayment of the Fund.

○ Under Part 7, Nos. 11, 14, 15, 17, 18, 21, 12, 2, 13, 17, 14, 14, and 15 under the table of 10, each "Fund" shall be deemed to be the "Fund" respectively.

○ Article 2(c) of the Corporate Tax Act is Article 1(2)(c) of the Corporate Tax Act.

(c)

○ The Fund in Part 9 of the 11st page shall be raised to “the Fund” as “the Fund.

The term "non-performing Resolution Fund Bonds" in the 11th and 14th, shall be "Non-Performing Resolution Fund Bonds" respectively.

§ 11. The phrase, “Article 40.1,” in Part 17, will be deleted.

Pursuant to Section 20 of title 11, "The Asset Management Corporation Act", "Article 41, Paragraph 2, and the same Act shall be added."

○ 12. The following shall be added to the 3rd page ". operated":

In addition, funds subject to the National Finance Act, such as the funds in this case, should be managed and operated in accordance with the purpose of the establishment of the fund and the public interest (Article 62 of the National Finance Act), and the government should submit the fund operation plan to the National Assembly by 120 days before the fiscal year begins (Article 66 through 68 of the same Act).

Each "committee" of the 12 pages 5 and 6 shall be deemed to be the "Management Committee", and the 6th "written" shall be deemed to be "written".

○ The 12th page “1.9.9” of the 12th page “1.19.1,” and the 3th page “paragraph 3,” respectively.

○ The 12th page 12 of the 12th page "the Fund of this case" is "the purpose of the Fund of this case".

○ There is an order to see “assign” the 12th page 20 of the 12th page.

Each of the 13th, 13th, and 2th, "the Corporation" shall be deemed to be "Assets Corporation", and "the Non-Performing Loan Resolution Fund and the Fund from which the Fund accrues" shall be deemed to be "the principal and interest of Non-Performing Loan Resolution Fund Bonds issued by the Fund", respectively.

○ The 14th page 1 to 4th page are as follows.

○ Article 29(1) of the former Corporate Tax Act (amended by Act No. 9898, Dec. 31, 2009); Article 56(1)3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22577, Dec. 30, 2010) provides that “a fund established under the Act and subordinate statutes as an organization corresponding to a non-profit domestic corporation that can appropriate reserve funds for its proper purpose business as deductible expenses.”

○ The 14th page 5 to 8th page are as follows.

Article 2(1)8(d) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17826, Dec. 30, 2002; Presidential Decree No. 20619, Feb. 22, 2008) specifies the business related to the acquisition and liquidation of non-performing loans through the Fund as an item excluded from the profit-making business of a non-profit corporation.

The 14th page 9,10 "Enforcement Decree of the Corporate Tax Act" is the "Enforcement Decree of the Corporate Tax Act (wholly amended by Presidential Decree No. 15970, Dec. 31, 1998)".

○ The following shall be added at the last place below the 14th page:

3) The nature of the shares of this case

In light of the provisions of the former Asset Management Corporation Act and the interpretation thereof, it is reasonable to view that the provision that the residual property of the Fund shall be returned to the relevant institution after the expiration of the period of operation of the Fund under Article 2 of the Addenda of the former Asset Management Corporation Act in accordance with the standards of disposal taking into account the contribution ratio, etc. is rather than the return of profits to investors. Therefore, the Plaintiffs’ assertion on the premise that the instant shares are earnings from the investment of the financial institution is not reasonable in this respect.

A) Article 39(1) of the former Asset Management Corporation Act provides for an “contribution of a financial institution” as one of the financial resources to create the instant fund. However, in light of the fact that Article 9 of the same Act provides that the capital of the Asset Management Corporation is comprised of investments by financial institutions and the Government, and that the meaning of the contribution refers to an increase in property losses and losses by paying money or bearing obligations according to one’s own intent.” In addition, the said financial institution’s contribution means a payment of money and valuables, and it does not mean an investment in which the financial institution intends to make profits.

B) Article 39(1) of the former Asset Management Corporation Act provides for “1. Financial resources from the creation of the Fund of this case, funds transferred from the Corporation, 2.3. Funds created by the issuance of Non-Performing Loan Resolution Fund Bonds, 4. Loans from the Bank of Korea, 5. Loans from persons other than the Bank of Korea, 6. Operational earnings and other revenues.” This is distinguishable from contributions, transferred funds, funds from the creation of bonds, borrowed funds, borrowed funds, profits, and other revenues. Therefore, it cannot be deemed that the members of the Fund, which are the premise for return of profits from the investment, are presented.

C) As long as financial institutions, including the Plaintiffs, do not have invested in the Fund, it is deemed that the former Asset Management Corporation Act, Article 2 of the Addenda to the former Asset Management Corporation Act, had the relevant institution return residual property after the expiration of the period of operation of the Fund in accordance with the guidelines for disposal taking into account the contribution ratio, etc., it is a policy provision stipulating the method of disposal of residual property after the expiration of the period of operation, and it cannot be deemed that the financial institutions, including the Plaintiffs, etc. are entitled

D) Furthermore, the Fund is established for the efficient liquidation of non-performing loans, etc. owned by financial institutions, and is used for the liquidation business of non-performing loans, etc., so it does not directly aim at generating profits (Articles 38 and 41 of the former Asset Management Corporation Act).

4) The time when the amount distributed was reverted to gross income

(A) Article 40(1) of the Corporate Tax Act provides that “The year in which earnings and losses of a domestic corporation accrue shall be the business year which includes the date on which the earnings and losses are determined.” It shall be deemed that the income has been realized if the right which is the cause of such income has not been actually generated, and the so-called principle of confirmation of right is adopted for the calculation of taxable income. Such right settlement principle shall be deemed as the date when the right which is the cause of income has been realized and the income has been finally determined, and shall be deemed as having accrued when the income is not the time when the income has been realized, and shall be deemed as the principle that the amount of the remaining assets of the Fund shall be imposed in advance on the premise that it will be realized in the future. However, the concept of “determined” in the above right settlement principle shall not be defined as a general principle that does not include any exception to the time when the assets are acquired and disposed of, and shall not be determined within a certain period of time when the assets are disposed of within 19 months after the end of the business year.

C) In full view of the purport of each statement in Eul evidence Nos. 8 through 11, the Government shall inspect the assets and liabilities of the Fund as of the end of June 2006 and the end of December 2007; on September 26, 2008, the 81.4 billion won was decided by the 8081.4 billion won at the 8th 2008 Operational Plan of Non-Performing Loan Resolution Fund (hereinafter “Non-Performing Loan Resolution Fund”) to newly establish the items to be refunded to financial institutions in the expenditure plan; thereafter, the National Assembly approved the payment of the above amount to be refunded to financial institutions; accordingly, on December 29, 2008, the remaining assets were first returned to financial institutions including the plaintiffs; on March 6, 2009, the 2009 Operational Plan for Non-Performing Loan Resolution Fund (hereinafter “Non-Performing Loan Resolution Fund”) was first resolved to revise the Operational Plan for Non-Performing Loan Resolution Fund (hereinafter “Non-Performing Fund”) to the Plaintiffs.

D) Therefore, the time when the plaintiffs can be deemed to have secured the taxpayer's money by enabling the management and control of the shares of this case. Therefore, it is reasonable to deem that the business year to which the shares of this case accrue is 2010 or 2012. In this regard, the plaintiffs' assertion is without merit.

○ Each "preliminary Claim" of Nos. 15 and 16 is regarded as "preliminary Claim", respectively.

○ 22 pages 19 through 31 are as follows.

A Addenda No. 5371, 5371, and 22, 197

Article 2 (Operation Period, etc. of Fund)

(1) The financial resources of the Fund under Article 39, the non-performing loans under Article 41 (2) 1, and the acquisition of assets for self-help plan as prescribed by the Presidential Decree may be conducted only for five years after the enforcement date of this Act.

(2) The takeover under Article 26 (1) 1 shall be executed with the financial resources of the Fund during the period under paragraph (1).

(3) After the operation period of the Fund referred to in paragraph (1) has expired, the repayment of principal and interest of bonds and borrowings and disposal of acquired assets, etc., residual property of the Fund shall be returned to the relevant institution according to the disposal standards taking into account the contribution ratio, etc. referred to in Article 39 (1) 1 and

Addenda No. 5371, Aug. 22, 1997 (amended by Act No. 8140, Dec. 30, 2006 and Act No. 8698, Dec. 21, 2007)

Article 2 (Operation Period, etc. of Fund)

(1) The raising of financial resources of the Fund pursuant to the provisions of Article 39 (1) 2, 3, 3-2, and 4 through 6 may be made not later than November 22, 2007 only in cases where it is necessary to repay non-performing bonds issued by financial institutions in order to dispose of such non-performing bonds, and the raising of financial resources pursuant to the provisions of Article 39 (1) 7 may be made from November 23, 2002 to the end of the period of operation of the Fund pursuant to the provisions of paragraph (4).

② 제41조 제2항 제1호의 규정에 따른 부실채권 및 대통령령이 정하는 자구계획대상자산의 인수는 이 법 시행일부터 2002년 11월 22일까지 이를 할 수 있다. <신설 2006.12.30>

(3) The takeover under Article 26 (1) 1 shall be made out of the financial resources of the Fund for the period under paragraph (2).

(4) The Fund may be operated by November 22, 2012.

(5) The Fund shall complete the repayment of principal and interest of bonds and borrowings and the disposal of acquired assets, etc. by the date on which the operation period under paragraph (4) expires, and shall refund its residual assets to the contributor, etc. according to the operation standards in consideration of the contribution ratio, etc. under Article 39 (1) 1 (referring to the one prior to deletion under the amended Framework Act on the Management of Charges (Act No. 7058) through 3 and 3-2 within three months after the expiration of the operation period: Provided, That where it is obvious that the Minister of Finance and Economy has residual assets at the end of the operation period as a result of an actual inspection of the assets and liabilities of the Fund under Article 7 (1) of the Public Capital Redemption Fund Act, and it is possible to estimate such amount, part of the estimated residual assets may be refunded before the expiration of the operation period (referring to the presumed residual assets).

(6) Detailed criteria, time, procedures, methods, etc. for the disposal of the Fund pursuant to the provisions of paragraph (5) and other necessary matters shall be prescribed by the Presidential Decree.

2. Judgment on the plaintiffs' assertion in the trial

A. The plaintiffs' assertion

1) Application of the provision to exclusion of dividend income from gross income

If the Fund is recognized as a corporation, the instant disposition that did not apply the provision for exclusion of dividend income under Article 18-3 of the Corporate Tax Act shall be applied to the instant dividend amount received by the Plaintiffs from the instant funds, but the instant disposition that did not apply is unlawful (the Plaintiff added the instant claim to the “preliminary claim in the trial,” and set the order of preliminary claim in the first instance trial as “preliminary claim in the second instance”).

(ii)Appropriation of deficit carried forward;

If the provision on exclusion of dividend income from taxable income cannot be applied to the distribution of this case, the distribution of this case constitutes "value of assets received without compensation" under Article 18 subparagraph 8 of the former Corporate Tax Act (amended by Act No. 10423, Dec. 31, 2010) and thus, the distribution of this case should be appropriated for losses carried forward after the deadline for deduction.

B. Determination

1) As to the assertion that the provision on exclusion of dividend income applies

A) The amendment history of the provision on exclusion of import dividends from taxable income

(1) Although the Monopoly Regulation and Fair Trade Act has been prohibited from establishing a holding company in the past, when there was a need to introduce a holding company for corporate restructuring, the establishment of the holding company, which is mainly engaged in controlling the business of the domestic company through stock ownership, was limited upon the amendment by Act No. 5813 on February 5, 199 (see Articles 8, 8-2, and 8-3). In addition, in order to resolve double taxation in consideration of the characteristics of the holding company that mainly receives dividends from the subsidiary, the Corporate Tax Act amended by Act No. 6047 on December 28, 199, newly established a provision for exclusion from taxable income (Article 18-2) that allows the holding company to exclude the amount equivalent to the specified ratio of dividend income that it received from the subsidiary from the taxable income subject to corporate tax (Article 18-2).

(2) On the other hand, the Financial Holding Companies Act was enacted on October 23, 200 to ensure that a financial holding company that controls a company engaged in financial business can be established in order to enhance the competitiveness of a financial institution through the financial institution’s largeization and integration. Accordingly, Article 18-2 of the Corporate Tax Act amended by Act No. 6293, Dec. 29, 200, included a financial holding company under the Financial Holding Companies Act in a holding company. In addition, to promote the equity of taxation with a holding company, Article 18-2 of the Corporate Tax Act newly established a provision on the exclusion of taxable income (Article 18-3) that allows a general domestic corporation, other than a holding company, to adjust and resolve double taxation,

B) Determination

The amount in excess of a specified amount of dividend income received from another domestic corporation that has invested by a domestic corporation other than a non-profit domestic corporation under the Corporate Tax Act shall not be included in gross income when calculating the amount of income of the relevant domestic corporation for each business year (Article 18-3

Considering the following circumstances that can be seen by comprehensively taking into account the purport of the entire pleadings, the provision of Article 18-3 of the Corporate Tax Act cannot be applied when calculating the amount of income of the plaintiffs. Therefore, this part of the allegation added in the trial by the plaintiffs is without merit.

(1) Article 18-3 of the Corporate Tax Act may apply to cases where a domestic corporation that is not a non-profit domestic corporation has made an investment in a domestic corporation that is not a non-profit domestic corporation. The term "investment" refers to the act of investing capital, money, property, etc. to a corporation, etc. for operating a business, and the term "contribution" refers to the act of increasing the remaining property instead of incurring property loss by paying money or bearing an obligation on the basis of its will, which includes the act of making an investment. As long as the plaintiffs made an investment in the Fund of this case that is a non-profit domestic corporation, there is no room for

(2) In addition, Article 18-3 of the Corporate Tax Act may apply to cases where a domestic corporation that is not a non-profit domestic corporation has "amount of dividend received from a domestic corporation that is not a non-profit domestic corporation." The amount of dividend means the amount of dividend or surplus distribution and the amount deemed as dividend or distribution under Article 16 of the Corporate Tax Act (see Article 18-2 of the Corporate Tax Act). The instant amount of dividend paid to the Plaintiffs by the Fund, which is a non-profit domestic corporation, cannot constitute dividend or surplus distribution, and since the instant amount of dividend was paid before the end of the operating period of the Fund, it cannot be deemed as a distribution of residual property due to dissolution of the Fund, and thus, it cannot be deemed as a case of deeming it as a distribution of residual property pursuant to Articles 18-2(1) and 16(1)4 of the Corporate Tax Act. Accordingly, Article

(3) The purpose of Article 18-3 of the Corporate Tax Act is to prevent double taxation on a single income by imposing a tax again at the stage of a domestic corporation with respect to the income already imposed on which the corporate tax was levied, in cases where a domestic corporation received dividend income from another domestic corporation invested. However, the Fund is merely a corporate tax recognized and paid pursuant to the relevant provisions, which cannot be deemed an advance payment of the tax to be paid by the Plaintiffs, as a tax paid for a separate reason separate from the Plaintiffs, and thus, it cannot be deemed that the taxation on the instant dividend amount constitutes double taxation on the same income as the tax already paid by the Fund.

2) As to the assertion of appropriation of deficit brought forward

(A) the regulations and purport of the loss brought forward

Article 18 subparag. 8 of the Corporate Tax Act and Articles 10(2) and 18(1)1 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22220, Jun. 28, 2010) provide that the amount appropriated to compensate for losses carried forward among the gains accruing from the receipt of assets shall not be included in gross income in calculating the income amount for each business year, and the losses carried forward appropriated for the gains accruing from the receipt of assets, etc. shall be deemed as deductible in calculating the tax base for each business year, and the losses carried forward appropriated for the gains from the receipt of assets, etc. shall be deemed as deductible in calculating the tax base for each business year. This means that the losses carried forward appropriated for the gains from the receipt of assets, etc. shall be deemed as having been deducted in calculating the tax base for each business year, which is the taxpayer corporation, with the purport that the gains from the receipt of assets can no longer be seen as having been deducted in calculating the income amount for each business year.

B) Determination

Considering the following circumstances that can be seen by comprehensively considering the purport of the entire pleadings in the facts acknowledged as above, the distribution of this case cannot be deemed as "value of assets received free of charge" and thus, this part of the allegation added in the trial by the plaintiffs is without merit.

(1) In light of the above purport of the principle of no taxation without the law, or the interpretation of tax laws and regulations shall be interpreted in accordance with the law, barring any special circumstance, and it shall not be extensively interpreted or analogically interpreted without any justifiable reason. In particular, the strict interpretation of the provision that can be seen as a clearly preferential provision among the requirements for reduction and exemption accords with the principle of fair taxation (see, e.g., Supreme Court Decision 2003Du7392, May 28, 2004). In light of the above purport, “value of assets received free of charge” refers to the value of assets received without any consideration or compensation for improving the financial structure of the corporation.

(2) The Plaintiffs received the instant shares from the Fund. Article 2(5) of the Addenda of the former Asset Management Corporation Act amended by Act No. 8698, Dec. 21, 2007; and Article 2(5) of the Addenda of the amended Act (amended by Act No. 8698, Dec. 21, 2007) provides that the Minister of Finance and Economy may return part of the estimated residual assets even before the end of the management period, if the assets and liabilities of the Fund are verified to have any residual assets at the end of the management period and the amount can be estimated. The foregoing Addenda provision provides for the method of disposal of residual assets of the Fund, and does not provide for the purport that the Fund may donate assets to the Plaintiffs for improvement

(3) Article 2(5) of the Addenda provides that the Fund shall be returned to the 'person who has made the contribution according to the "standards for disposal taking into account the contribution ratio, etc.'. The share of this case is not paid without any consideration or compensation, but paid to the person who has made the contribution, etc. under the former Asset Management Corporation Act, such as the plaintiffs.

(4) The Plaintiffs asserts that the instant shares may only be deemed as assets gratuitously received if they are not dividends for investors. However, the concept of mutual conflict cannot be deemed as conflicting, and there may be cases where the shares do not fall under assets received at the same time without paying dividends. Therefore, such logic of the Plaintiffs is difficult to accept. It is reasonable to view that the instant shares also constitute the distribution of residual assets for contributors pursuant to Article 2 of the Addenda to the former Asset Management Corporation Act, not the return of profits to investors, and it is difficult to view the said shares as the same as the donation received free of charge without paying any consideration or compensation, and it seems that they do not fall under the assets received at the same time, as it does not fall under dividends.

3. Conclusion

Since the judgment of the first instance is justifiable, the plaintiffs' appeal is dismissed as it is without merit.