[1] Whether the existence of justifiable grounds constitutes an exception to a corporation's real estate for non-business use under Article 18 (3) of the former Enforcement Rule of the Corporate Tax Act (negative)

[2] In a case where a financial institution, etc. acquires real estate through the exercise of mortgage pursuant to Article 18 (4) 11 of the former Enforcement Rule of the Corporate Tax Act does not regard it as a non-business real estate of a corporation, whether it constitutes a non-business real estate (negative)

[1] If a certain real estate falls under any subparagraph of Article 18 (3) of the former Enforcement Rule of the Corporate Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 1968 of March 12, 1994), it constitutes real estate for non-business use unless there is an exception under paragraph (4), and the existence of so-called legitimate cause does not constitute real estate for non-business use.

[2] Real estate acquired by a financial institution, etc. through the exercise of mortgage shall be excluded from non-business real estate for one year from the date of acquisition under Article 18 (4) 11 (a) of the former Enforcement Rule of the Corporate Tax Act, and the period after the date of delegation of sale to the Korea Assets Management Corporation under subparagraph (b) shall be excluded from non-business real estate unless special provisions exist. Thus, where a financial institution delegates the sale of real estate acquired through the exercise of mortgage to the Korea Assets Management Corporation after one year from the date of acquisition of the real estate, it shall not be excluded from non-business real estate for the preceding business year because it is delegated to the Korea Assets Management Corporation as of the end of the business year, and it constitutes non-business real estate for the period from the date of

[1] Article 18-3(1)1 of the former Corporate Tax Act (Amended by Act No. 5418, Dec. 13, 1997; see current Article 28(1)4(a)); Article 43-2(1) and (3) of the former Enforcement Decree of the Corporate Tax Act (Amended by Presidential Decree No. 14080, Dec. 31, 1993; see current Article 49(1) and (2)); Article 18(3) and (4) of the former Enforcement Rule of the Corporate Tax Act (Amended by Presidential Decree No. 1968, Mar. 12, 1994; / [2] Article 18-3(1)1 of the former Corporate Tax Act (Amended by Act No. 5418, Dec. 13, 1997; see current Article 28(1)4(1)4(1)1 of the former Enforcement Rule of the Corporate Tax Act (Amended by Presidential Decree No. 194138, Apr. 19, 196)

[1] Supreme Court Decision 93Nu13469 delivered on November 26, 1993 (Gong1994Sang, 222), Supreme Court Decision 97Nu1280 delivered on February 13, 1998 (Gong1998Sang, 802), Supreme Court Decision 97Nu2641 delivered on March 13, 1998 (Gong198Sang, 108Sang, 106 delivered on April 24, 1998 (Gong198Sang, 1534) (Gong1534 delivered on December 23, 1998)

Dongbu Mutual Savings and Finance Company (Law Firm, Kim & Lee, Attorneys Yellow-in et al., Counsel for the defendant-appellant)

Head of the tax office;

Seoul High Court Decision 96Gu41948 delivered on July 25, 1997

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

We examine the grounds of appeal.

Article 18-3 (1) of the former Corporate Tax Act (amended by Act No. 5418 of Dec. 13, 1997) provides that an amount (limited to interest on the asset value among loans) calculated as prescribed by the Presidential Decree among interest on loans paid each business year to a domestic corporation that acquires or holds assets falling under any of the following subparagraphs shall not be included in deductible expenses for the purpose of calculating the income amount of each business year, and Article 43-2 (1) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 1408 of Dec. 31, 1993) provides that real estate which is not directly related to the business of the corporation or for the purpose of acquiring profits from the increase of land price by considering the actual use of the real estate in subparagraph 1 shall not be included in deductible expenses. Article 43-1 (3) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 14080 of Dec. 31, 199) provides that real estate falling under one of the following subparagraphs shall not be used for non-business purposes:

As determined by the court below, if the plaintiff corporation, which is a mutual savings and finance company under the Mutual Savings and Finance Company Act, acquired the right of collateral on December 29, 192 with respect to the real estate of this case and thereafter entrusted the sale to the Korea Assets Management Corporation on March 9, 1994, the real estate of this case shall be a non-business real estate under Article 18 (3) 1 of the above Enforcement Rule, but the period from the date of acquisition to the Korea Assets Management Corporation under Article 18 (4) 11 (a) of the above Enforcement Rule shall be excluded from the real estate for non-business use unless there is a special provision, and it shall not be determined on a business year as to whether the real estate for non-business use constitutes non-business use. Thus, the real estate of this case shall not be excluded from the real estate for non-business use for the previous business year because it was entrusted to the Korea Assets Management Corporation as of June 30, 1994 as of the end of the business year of this case.

In addition, as alleged in the grounds of appeal, the plaintiff corporation entered into a sales contract with the non-party company on May 15, 1993 to sell the real estate of this case to KRW 1,863,00,000,000, including the down payment of KRW 185,000,000 on the same day, and the above sales contract was cancelled on October 5, 1993 on the ground that the payment of the intermediate payment and the balance was delayed, there is no ground to regard the date of cancellation of the sales contract as the acquisition of the real estate of this case as stipulated in Article 18 (4) 11 (a) of the above Enforcement Rule. In addition, in light of the above legal principles, it is not reasonable to sell the real estate of this case on the ground that there is a justifiable reason not to sell the real estate of this case on the ground of the above, or it cannot be viewed as excluded from the real estate for non-business use as well as the real estate of this case as it does not fall under the grounds of appeal for appeal.

Therefore, since the real estate of this case constitutes non-business real estate for 69 days from December 30, 1993 to March 8, 1994, the defendant's measure that deemed that the real estate of this case constitutes non-business real estate for the same period cannot be deemed unlawful (it seems that the defendant's act of 69 days when the defendant viewed the number of days corresponding to non-business real estate as 69 days, it seems that it was erroneous that the pertinent period was up to March 9, 194).

The decision of the court below that made the above conclusion is just, and it cannot be said that there were errors in the misapprehension of legal principles as alleged in the grounds of appeal.

Therefore, the appeal is dismissed and all costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Yong-hun (Presiding Justice)