National High Court Decision 2008Du1598 (Law No. 21, 2008)

Whether a real estate rental business is jointly carried on;

The wage and salary income payment statement is prepared by making payment of wages for the convenience of tax processing, and the disposition imposing the comprehensive income tax on the plaintiff even though the other party who has managed the leased building and acquired all profits is contrary to the substance over form principle.

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

Article 14 (Real Taxation under Framework Act on National Taxes)

Article 43 (Distribution of Income in Case of Joint Ownership, etc.)

1. The Defendant’s disposition of imposition of global income tax of KRW 6,591,590 against the Plaintiff on March 1, 2008 shall be revoked.

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

The same shall apply to the order.

1. Details of the disposition;

A. From September 17, 1994, the Plaintiff is treated as being paid KRW 8,400,000 in total from 2006 (from January 1, 2006 to December 31, 2006) to ○○ Industry Co., Ltd. (hereinafter “○○ Industry”) on the real estate rental business of ○○ building located in Seoul ○○○-dong, ○○-dong, with a share of 50% as a joint business proprietor of ○○dong, respectively, and ○○ Industries Co., Ltd. (hereinafter “○ Industry”).

B. On March 1, 2008, the Defendant deemed that the Plaintiff’s total amount of KRW 326,160,000, including the leased income amount of KRW 317,760,000 in 206 and the earned income of KRW 8,400,00 in 2006 received from the ○○ industry, when filing a global income tax base and tax amount for the year 2006, was omitted at the time of filing a return, and imposed and notified the Plaintiff of KRW 6,591,590 for global income tax (including additional tax) for the year 2006 (hereinafter “instant disposition”).

[Ground of recognition] Evidence Nos. 3, Eul evidence Nos. 1 through 8, 2-3, 4, 3-11, 5-5, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Although the Plaintiff is registered as a business operator jointly with ○○ Building Lease Business, in fact, ○○ Building Lease Business was acquired in full while ○○ Building Lease Business was operated solely by ○○ Building Lease Business. The Plaintiff did not run the ○ Building Lease Business, and the Plaintiff did not receive wage and salary from ○○ Industries. Thus, the Defendant’s disposition was unlawful.

(b) Related statutes;

Article 14 (Real Taxation under Framework Act on National Taxes)

Article 43 (Distribution of Income in Case of Joint Ownership, etc.)

Article 87 (Special Cases in Calculation of Income Amount for Joint Business Place)

(c) Fact of recognition;

(1) As a result of the death on March 5, 192 of 192, co-inheritors, such as wife Kim○, South-Nam-dong, Park Jong-dong, Sejongnam-dong, the Plaintiff, and women's gymbing, who are the bereaved family members, shall waive inheritance related to inheritance and make a registration of inheritance in the name of the Plaintiff's sole inherited property for the prevention of disputes over inheritance and for the convenience of the management of inherited property. The remaining co-inheritors except the Plaintiff agreed to distribute the inherited property according to the decision of Kim Il-young as the maintenance of the net Gambambl, etc., after filing a report of renunciation of inheritance with the Seoul Family Court on May 21, 1992. On November 19, 1992, the Plaintiff owned the inheritance solely under the name of the Plaintiff on the ground of inheritance with respect to ○○ building among inherited property, and had succeeded to 34% shares of the ○○ industry (300% shares of the inherited property) and succeeded to 34% shares of the remaining 36000% industry (36% shares).

(2) Since before the death of ○○ building, Park Dong had been managing the ○ building since before the death of ○○○○ Building. Even after the death of ○○○ Building, ○○ building continued to be managed independently by leasing ○○ building according to the intention of Kim○○ and acquiring the entire income equivalent to the rent. In the management and lease of ○○ building, the name of ownership was not registered in ○○ building, and the ownership was not registered in ○○ building, so that inconvenience was caused due to the fact that ○○ building’s ownership was not registered in ○○, and the Plaintiff received a registration of ownership transfer for 1/2 of ○ building from the Plaintiff on September 17, 1994, and registered as a joint business proprietor with the Plaintiff on 50% share of ○○ building with respect to ○○ building rental business, and thereafter, in managing ○○ building and acquiring the entire annual global income tax base and tax amount, ○○ building was registered in 1/2’s name and actually paid to the beneficiary of ○○ building.

(3) In running the ○○ Industry, Park Young-ap entered into a wage and salary payment record with the payment of KRW 5,600,000 to the Plaintiff each year from 2003 to 2007, for the convenience of tax treatment. With regard to the amount equivalent to the wage, he/she reported under the Plaintiff’s name at the time of filing global income tax base and tax amount each year, he/she paid his/her tax amount. The Plaintiff did not actually provide labor to the ○○ Industry or received benefits from the ○ Industry.

(4) At around 2006, there was a dispute over the inherited property among co-inheritors, including the Plaintiff. Accordingly, the Plaintiff did not report on the leased revenue of ○ building and the earned income portion of ○ industry when filing a report on the global income tax base and tax amount belonging to 2006.

[Ground of recognition] Each statement of Gap evidence Nos. 4-1, 5, 6, 7, 8, 13 (including numbers), Eul evidence Nos. 2-3, 4, 3, and 5 (including paper numbers), and the purport of the whole pleadings

D. Determination

According to the above facts, the Plaintiff did not operate ○ building rental business jointly with ○○ Building in 2006, a taxable period of the global income tax of this case, and did not receive benefits from ○○ industry. Thus, the Defendant’s disposition on the contrary is unlawful against the principle of substantial taxation.

3. Conclusion

If so, the plaintiff's claim shall be accepted for the reasons of the judgment as per Disposition.