[1] Whether the standard of interpretation of the laws and regulations on the requirements for tax reduction and exemption and whether the "stocks of a domestic corporation" under Article 45 (5) of the former Enforcement Decree of the Regulation of Tax Reduction and Exemption Act on the deduction of income from capital increase are also included

[2] The requirements for the application of the good faith principle or the principle of respect for tax practice under Article 18(3) of the Framework Act on National Taxes, and the burden of proof for the existence of such practice (=taxpayer)

[3] The case holding that it is insufficient to recognize that the tax authority expressed a public opinion or opinion that it is not exempt from taxation, or that the interpretation of tax-related Acts was generally accepted by taxpayers and formed trust

[1] Article 55(1) of the former Regulation of Tax Reduction and Exemption Act (amended by Act No. 4451 of Dec. 27, 191) provides that where a domestic profit-making corporation increases its capital by obtaining monetary contributions from persons, etc. other than a corporation, and registers for change of its capital, an amount calculated by the formula prescribed by the Act for a certain period of time shall be deducted from the amount of income of each business year, and Paragraph (2) provides that where the balance as of the end of each month does not exceed 10/100 of the increased capital amount, the provisions of Paragraph (1) shall apply to income deduction only when the balance as of the end of each month does not exceed 10/100 of the increased capital amount. Considering that Article 45(5) of the former Enforcement Decree of the Regulation of Tax Reduction and Exemption Act (amended by Presidential Decree No. 13545 of Dec. 31, 191) provides that a domestic corporation's income deduction of its own stocks is excluded from the domestic corporation's capital increase or decrease of its own stocks without any other reason.

[2] The principle of good faith or the principle of respect for tax practices stipulated in Article 18(3) of the Framework Act on National Taxes applies only to cases where there are special circumstances that, even if there are cases where the protection of taxpayers’ trust is deemed to correspond to the concept of justice, and the interpretation of tax law or the practice of national tax administration generally accepted by taxpayers refers to the extent that, even a erroneous interpretation or practice, it is acknowledged that it is unreasonable for taxpayers, who are not a specific taxpayer, to have accepted it as justifiable by an unspecified general taxpayer, who is not a specific taxpayer, to trust such interpretation or practice. The burden of proof for the existence of such interpretation or practice is the taxpayer.

[3] The case holding that it is not enough to recognize that the tax authority has expressed a public opinion or opinion that it does not impose any tax, or that there is a lack of recognition that the tax authority has formed trust by being generally accepted by the taxpayer in relation to the theory of explanation on the provisions of Article 55 (2) of the former Regulation of Tax Reduction and Exemption Act (amended by Act No. 4451 of Dec. 27, 1991) with regard to the amendment of the Act, such as "amount disbursed to acquire stocks of another domestic corporation" or "acquisition value of stocks of another domestic corporation", or that the public official belonging to the Ministry of Finance and Economy has used the phrase of "total acquisition value of stocks of another corporation" in the article explaining the contents of the amendment of the Act, which is based on monthly newspapers.

[1] Article 5 (1) and (2) 2 of the former Regulation of Tax Reduction and Exemption Act (amended by Act No. 4451 of Dec. 27, 191), Article 45 (5) of the former Enforcement Decree of the Regulation of Tax Reduction and Exemption Act (amended by Presidential Decree No. 13545 of Dec. 31, 191) / [2] Article 18 (3) of the Framework Act on National Taxes, Article 26 of the Administrative Litigation Act / [3] Article 18 (3) of the Framework Act on National Taxes, Article 5 (1) and (2) of the former Regulation of Tax Reduction and Exemption Act (amended by Act No. 4451 of Dec. 27, 191), Article 5 (5) of the former Enforcement Decree of the Regulation of Tax Reduction and Exemption Act (amended by Presidential Decree No. 13545 of Dec. 31, 191) (amended by Presidential Decree No. 5454 of Dec. 54)

[1] Supreme Court Decision 92Nu18603 delivered on February 22, 1994 (Gong1994Sang, 1123), Supreme Court Decision 97Nu2090 delivered on March 27, 1998 (Gong1998Sang, 1247) / [2] Supreme Court Decision 86Nu96 delivered on May 26, 1987 (Gong1987, 1081), Supreme Court Decision 86Nu537 delivered on August 18, 198 (Gong1987, 147, 14799) 29Nu522 delivered on November 28, 198 (Gong1990, 175) 29Nu394989 delivered on October 10, 199 (Gong194, 1975) 198Nu3294989 delivered on September 26, 1992

E. S. P.S. Co., Ltd. (Attorney Shin Sung-sung et al., Counsel for the plaintiff-appellant)

Head of Yeongdeungpo Tax Office

Seoul High Court Decision 2000Nu7645 delivered on January 17, 2001

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

We examine the grounds of appeal.

1. As to the interpretation of the former Enforcement Decree of the Regulation of Tax Reduction and Exemption

A. Article 55(1) of the former Regulation of Tax Reduction and Exemption Act (amended by Act No. 4451 of Dec. 27, 1991; hereinafter referred to as the "Act") provides that where a domestic profit-making corporation obtains monetary contributions from persons, etc. other than a corporation, and increases its capital and registers for change of its capital, an amount calculated by the formula prescribed by the Act for a certain period shall be deducted from the income amount in each business year. Paragraph (2) of the same Article provides that only if the balance as of the end of each month does not exceed 10/100 of the increased capital amount, the provisions of Paragraph (1) concerning income deduction shall apply to cases where it does not exceed 10/100 of the increased capital amount, and Article 45(5) of the former Enforcement Decree of the Regulation of Tax Reduction and Exemption Act (amended by Presidential Decree No. 13545 of Dec. 31, 191; hereinafter referred to as the "Enforcement Decree") provides for the extension of shares or investment shares within 290.

B. According to the reasoning of the judgment below, the court below rejected the plaintiff's assertion that the "domestic corporation's stocks" under Article 45 (5) of the Enforcement Decree of the Act refer only to the stocks of another domestic corporation, and the domestic corporation's own stocks are excluded from the "stocks of the domestic corporation" under the amendment history of the relevant provision related to the income deduction system or the grammatic interpretation. Since the defendant's own stocks are disbursed to the plaintiff by the end of August 1994 in excess of 10/100 of the increased capital amount including the acquisition amount of the stocks of the corporation, the defendant excluded the income deduction from the capital increase of Article 5 (1) of the Act and additionally collected 11.5 billion won in corporate tax amount of 1994.

Examining the relevant provisions and records in light of the aforementioned legal principles, the above judgment of the court below is just, and there is no error in the misapprehension of legal principles regarding the concept of "domestic corporation's stocks" under the Enforcement Decree with respect to the exclusion requirement for income deduction for capital increase, or the interpretation thereof.

The grounds of appeal disputing this issue are rejected.

2. As to the principle of prohibition of retroactive taxation

A. The principle of good faith or the principle of respect for tax practices stipulated in Article 18(3) of the Framework Act on National Taxes applies only to cases where, even if there are special circumstances deemed that the protection of taxpayers’ trust is consistent with the concept of justice by sacrificeing the principle of legality. In this context, the interpretation of tax-related Acts or the practice of national tax administration generally accepted by taxpayers refers to the extent that, even if a wrongful interpretation or practice is done, it is recognized to the extent that it is unreasonable for taxpayers to believe such interpretation or practice by being accepted as justifiable by an unspecified general taxpayer who is not a specific taxpayer. The burden of proving such interpretation or practice is the taxpayer (see Supreme Court Decision 91Nu13670 delivered on September 8, 192, etc.).

B. According to the reasoning of the judgment below, the court below acknowledged facts as stated in its reasoning, and determined as follows: the court below used the expression "amount disbursed to acquire stocks of another domestic corporation" or "acquisition value of stocks of another corporation" in relation to the explanation on the provisions of Article 55 (2) of the Act in the book such as "85 revised tax law" or "amended tax law", which was published by the Ministry of Finance and Economy at the time, along with the amendment of the law, or "amount disbursed to acquire stocks of the other domestic corporation" or "acquisition value of stocks of the other domestic corporation", or used the phrase "total acquisition value of stocks of the other corporation" in the book which was published by the Ministry of Finance and Economy at the time of April 193, 193, which used the phrase "total acquisition value of stocks of the other corporation" on the ground that the plaintiff expressed public opinion or opinion of the tax authority. Such determination alone did not violate the principle of prohibition of retroactive taxation or protection of trust on the ground that it is insufficient to recognize that the tax authority formed trust by generally accepted interpretation, etc.

In light of the above legal principles and records, the judgment of the court below is just, and there is no error in the misapprehension of legal principles as to the principle of retroactive taxation prohibition as otherwise alleged in the ground of appeal.

The ground of appeal disputing this issue is rejected.

3. 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 Yoon Jae-sik (Presiding Justice)