In case the hospital has appropriated the medical expenses received in the provisional deposit account and the outflow from the company;

If a corporation fails to enter its sales on the account book despite the fact of sales, the total amount omitted in sales shall be deemed to have been leaked out of the company, except in extenuating circumstances, but if the medical expenses received from a corporate hospital is deposited in the provisional revenue account and appropriated in the provisional revenue account, it cannot be presumed that the above amount was leaked out of the company solely on the fact that it was not included in the income on the income statement for the pertinent business year. In such cases, the fact that it was leaked out of the company shall be proved by the tax authority.

Article 94-2 (1) 1 of the Enforcement Decree of the Corporate Tax Act (Ordinance No. 10978 of February 31, 1982)

Medical Corporation, the Attorney Tae-gu, Counsel for the defendant-appellant

Head of Ansan Tax Office

Daegu High Court Decision 85Gu200 delivered on September 24, 1986

The judgment below is reversed, and the case is remanded to the Daegu High Court.

The grounds of appeal are examined.

The lower court determined that the Defendant’s taxation of this case, which recognized each of the above items of gross income under the income statement, was lawful, based on the fact that the Plaintiff corporation received KRW 88,982,390 between July 1, 1982 and December 31 of the same year, and the amount of KRW 29,964,010 between January 1, 1983 and March 3 of the same year, but did not include it in the amount of income under the income statement, and that each of such items of income under the income statement was presumed to have been discharged from the company.

However, if a corporation fails to enter its sales on the account books despite the fact of sales, the total amount omitted in sales shall be deemed to have been leaked out of the company, barring any other special circumstances, but in this case, as determined by the court below, the above medical expenses received by the plaintiff corporation shall be deposited in provisional receipts, and it shall not be presumed that the above amount was leaked out of the company solely on the fact that it was not included in the income statement for each business year. In this case, the fact that it was leaked out of the company shall be proved by the defendant, who is the tax authority.

Nevertheless, unlike the above opinion, the court below erred in holding that the defendant's taxation was justified without considering whether the above amount was actually leaked out of the company in this case where it was shown that the above amount was reserved in the income statement as stated in the above statement of profits and losses, since there was a permit prior to the burden of proof that the plaintiff was presumed to be out of the company and the plaintiff was reserved in the company, and the court below rejected the above evidence, but according to the evidence No. 14, No. 27-1, and No. 27-2 of the above, the plaintiff corporation deposited the above amount of the medical expenses which was deposited in the provisional deposit account as mentioned above in January 1, 1984 with the electric profit and loss adjustment profit of the surplus account and included it in the ordinary income on the profit and loss statement, and the above amount was actually leaked out in the internal company. In conclusion, the court below erred in the misapprehension of the legal principles of the disposition of income as stipulated in Article 94-2 (1) 1 of the Enforcement Decree of the Corporate Tax Act.

Therefore, the judgment of the court below is reversed, and the case is remanded to the court below. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Jong-sik (Presiding Justice)