Seoul High Court Decision 96Gu37888 (Law No. 1997.01)

Where the tax law has been amended disadvantageously to a taxpayer, the scope of application of transitional provisions

In a case where there is an amendment of the tax law, the tax law at the time when the tax liability is established among the laws before and after the amendment shall be natural in light of the principle of no payment in law. However, in a case where the tax law is amended disadvantageous to the taxpayer, the former law should be applied in a case where the former law is applied in favor of the taxpayer by providing for special transitional provisions.

Basic Act

[1] The meaning of "justifiable cause" under Article 84-4 (1) of the former Enforcement Decree of the Local Tax Act; / [2] The application of the former Enforcement Decree of the Local Tax Act where the tax law was revised disadvantageous to taxpayers, but the former Enforcement Decree of the Local Tax Act requires the taxpayer to apply the former Act favorable to taxpayers with transitional provisions

[3] Whether Article 6 of the Addenda to the Local Tax Act ( December 22, 1994) provides that as an exception to the principle of non-payment of laws, Article 6 of the Addenda to the Local Tax Act shall apply the former Act favorable to taxpayers (affirmative)

[1] "Justifiable reasons" under Article 84-4 (1) of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 14481 of Dec. 31, 1994) which provides land for non-business use of the corporation subject to acquisition tax refers to the external reasons for which the corporation cannot use its mind, such as prohibition, restriction, etc. as prescribed by the law. In principle, the internal reasons of the corporation are limited to cases where the corporation's internal reasons do not have sufficient time to do with normal efforts and promotion for using its unique duties and do not exceed the period without fault of the corporation.

[2] In a case where there is an amendment of a tax law, the application of the tax law at the time when the tax liability is established, among the laws before and after the amendment, shall be natural in light of the principle of no payment in law. However, in a case where the tax law was revised disadvantageous to the taxpayer, the former law should be applied in a case where the former law is applied in favor of the taxpayer by providing special transitional provisions for the protection of the taxpayer’s vested rights and trust.

[3] Article 1 of the Addenda of the Local Tax Act ( December 22, 1994) provides for the period of its application as the general principle that the tax law at the time when the tax liability becomes effective shall be applied, and Article 6 of the Addenda provides for the period of its application. In a case where the tax law is amended disadvantageous to the taxpayer as an exception to the principle of non-payment of law, it shall be deemed that the provision that the previous law that is favorable to the taxpayer shall be applied exceptionally to the taxpayer for the purpose of protecting the taxpayer's vested right and trust

[1] Articles 10-3(1)3 and 112(2) of the former Local Tax Act (amended by Act No. 4794, Dec. 22, 1994; see current Article 290(2)3); Articles 110-3(2) and 84-4(1)/ [2] of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 14481, Dec. 31, 1994); Article 128-2(1) of the former Local Tax Act (amended by Act No. 4794, Dec. 22, 1994; see current Article 290(2)3); Article 290(2)3 of the Local Tax Act; Article 112(2) of the Addenda (amended by Act No. 4794, Dec. 22, 1994); Article 29-4(1)/6 of the former Local Tax Act (amended by Act No. 2948, Dec. 29, 294, 294)

[1] Supreme Court Decision 92Nu1773 delivered on June 23, 1992 (Gong1992, 2311), Supreme Court Decision 95Nu7482 delivered on November 10, 1995 (Gong1995Ha, 395Ha, 3951), Supreme Court Decision 97Nu7097 delivered on January 23, 1998 (Gong1998Sang, 632), Supreme Court Decision 97Nu5121 delivered on November 27, 1998 (Gong1999Sang, 7Nu3132 delivered on February 24, 199 (Gong199, 587) / [23] Supreme Court Decision 97Nu79649 delivered on April 36, 195 (Gong1999, 587) / [23] Supreme Court Decision 96Nu75949 delivered on April 36, 1985

Plaintiff, Appellant, Appellee (Attorney Kim Dong-soo, Counsel for the plaintiff-appellant)

Defendant, Appellee and Appellant (Attorney Kim Tae-tae, Counsel for the defendant-appellant)

Seoul High Court Decision 96Gu37888 delivered on July 1, 1997

All appeals are dismissed. The costs of appeal are assessed against each appellant.

1. Plaintiff’s ground of appeal

As the plaintiff was established under the provisions of the Livestock Industry Cooperatives Act on July 2, 1992, the plaintiff purchased the land of this case during the land readjustment project, which was conducted by the Korea Land Development Corporation on July 22, 1992, and paid all remainder on September 22, 1992. The land of this case was completed on December 31, 1993 and made it possible to build a new building on the land of this case. However, on December 195, the plaintiff entered into a contract for construction work with the non-party 2, 196 to build a new office on the land of this case on the ground of the non-party 1, 2, 3, 1995, and the non-party 2, 3, 196, 196, 196, 2, 3, 196, 196, 4, 196, 3, 196, 196, 196, 196.

In light of records and relevant evidence, such fact-finding by the court below is acceptable and there is no illegality in violation of the rules of evidence as alleged in the grounds of appeal.

Article 84-4(1) of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 14481, Dec. 31, 1994; hereinafter the same) stipulating land for non-business use of a corporation subject to heavy acquisition tax refers to the external reasons for which the corporation cannot use its mind, such as prohibition, restriction, etc. under the relevant Acts and subordinate statutes. In the case of the internal reasons of the corporation, it shall be deemed that the corporation has exceeded the period without any negligence of the corporation because it has fulfilled its normal efforts and promotion for using its unique duties and there is no time to do so (see, e.g., Supreme Court Decisions 92Nu1773, Jun. 23, 1992; 95Nu7482, Nov. 10, 195; 97Nu7097, Jan. 23, 1998).

In accordance with the facts acknowledged by the court below, the plaintiff acquired the land of this case on September 2, 1992 and started construction on the land of this case on December 31, 1993, which was possible to build a new building, and not later than 9 months until September 22, 1994 for which the grace period of 2 years has expired from the date of acquisition of the land of this case, and later, until December 195, 1995, the plaintiff neglected the land of this case even though there were no internal reasons as well as external reasons that may obstruct the direct use of the land of this case for its own business, even though it was possible to impose the above acquisition tax on January 30, 1996. Thus, the construction work on the land of this case was commenced on September 11, 1996, and thus, it cannot be deemed that the plaintiff did not use the land of this case directly within the grace period.

Although the reasoning of the court below is somewhat inappropriate, the conclusion that the court below did not use the land of this case directly for its unique business is justified, and there is no error of law by misapprehending the legal principles as to the existence of justifiable grounds, which are the elements of non-business judgment of a corporation.

The plaintiff's ground of appeal pointing this out is not acceptable.

2. As to the Defendant’s grounds of appeal (to the extent of supplement in case of supplemental appellate briefs not timely filed)

In a case where there is an amendment of the tax law, the term “the tax law at the time when the tax liability becomes effective” of the law before and after the amendment shall be natural in light of the principle of no taxation. However, in a case where the tax law was amended disadvantageous to a taxpayer, the former law should be applied in a case where the former law requires the taxpayer to apply the former law favorable to the person liable for tax payment by providing special transitional provisions for the protection of the taxpayer’s vested rights and trust (see, e.g., Supreme Court Decisions 83Nu453, Apr. 9, 1985; 94Nu502, Jun. 30, 1995; 94Nu15387, Jun. 30, 1995).

Article 128-2 (1) of the former Local Tax Act (amended by Act No. 4794 of Dec. 22, 1994) provides for exemption from registration tax, and the proviso provides for exemption from registration tax: Provided, That if the relevant real estate is not used directly for its proper business without any justifiable reason within one year from the date of registration or enrollment, registration tax shall be collected additionally. However, Article 290 (2) of the amended Local Tax Act (amended by Act No. 4794 of Dec. 22, 1994) provides for exemption from registration tax and registration tax in the main sentence of Article 290 (2) of the amended Local Tax Act (amended by Act No. 4794 of Dec. 22, 1994). However, if the relevant real estate is not used directly for its proper business without any justifiable reason within one year from the date of acquisition, the exempted acquisition tax and registration tax shall be collected additionally, and Article 1 of the amended Local Tax Act provides for exemption from registration tax or reduction under the previous provisions at the time of this Act enters into force.

Considering the above legal principles and the purport of each provision, Article 1 of the Addenda provides for the time of application of the general principle that the tax law at the time when the tax liability is established shall be applied, and Article 6 of the Addenda provides for the time of application thereof. In the event that the tax law is revised disadvantageous to the taxpayer as an exception to the principle of non-payment of law, it shall be deemed that the provision that the previous law that is favorable to the taxpayer shall be applied to the taxpayer for the purpose of protecting the taxpayer'

Therefore, the decision of the court below that the registration tax and education tax collection disposition in this case were unlawful is just, and the defendant's ground of appeal on this point is not accepted.

3. Conclusion

Therefore, all appeals are dismissed, and the costs of appeal are assessed against each appellant. It is so decided as per Disposition by the assent of all Justices who reviewed the appeal.

Justices Kim In-sik (Presiding Justice)