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TITLE 【Syllabus of Latest Opinion】Supreme Court Decision 2017Du44084 Decided August 20, 2020 【Revocation of Disposition Notifying Income Amount Change】 [full Text]
Summary
[1] Meaning of the term “assets which do not yield any profit” in “purchasing assets which do not yield any profit” stipulated in Article 3-2 Subparag. 3 of the former Enforcement Decree of the Adjustment of International Taxes Act regulated as an international transaction to which Article 52 of the Corporate Tax Act regarding the repudiation of wrongful calculation may apply
How it can be handled in the case of rejecting wrongful calculation regarding the purchase of such “assets which do not yield any profit”
[2] In the case where: (a) Foreign Corporation A was guaranteed with so-called “Put Back Option,” acquiring new stocks allocated to the third party issued by Stock Company B from Stock Company B, but, as the period for exercise of the Put Back Option expires without its exercise, retroactively drew up an additional agreement including the contents regarding the extension of the period with Stock Company B; (b) Stock Company B transferred the said stocks to Stock Company C, which is its largest shareholder, after Stock Company B purchased the said stocks at the value of exercise of the Put Back Option from Foreign Corporation A based thereon; and (c) the tax authority included the “amount exceeding market prices,” which is the value based on the supplementary assessment methods prescribed in the Inheritance Tax and Gift Tax Act at the time of the above purchase transaction subtracted from purchase prices of the stocks, in the gross income of Stock Company B by applying the provision regarding the repudiation of wrongful calculation under the Corporate Tax Act, disposed of income as dividends of Foreign Corporation A, and notified Stock Company B of the changes in the amount of income, the case holding that Stock Company B’s above stock purchase corresponds to purchasing “assets which do not yield any profit,” which lack economic rationality subject to the repudiation of wrongful calculation in international transactions, and thus the tax authority ought to include an amount equivalent to deemed interest of an amount equivalent to purchase prices during the period, from the day on which Stock Company B acquired the said stocks till the day on which the company collects purchase prices by disposing of the stocks, in the gross income and notify the resultant changes in the amount of income
[3] Whether the whole disposition of taxation ought to be cancelled in a case where a justifiable amount of tax of the disposition of taxation is not calculated (affirmative), and, in such a case, whether the court is liable to calculate a justifiable amount of tax ex officio (negative)
Whether this is likewise applicable to the calculation of a justifiable amount of income in relation to the notification of the changes in the amount of income (affirmative)
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