Publisher Obunsha Holding Co. should pay 10.7 billion yen in taxes for profits it made in 1995 by selling TV Asahi shares through a Dutch subsidiary, the Tokyo High Court ruled Wednesday, overturning a lower court nullification of the levy.
The Tokyo District Court had ruled in November 2001 that the National Tax Agency could not tax the profits, which were made in 1995, because they were earned before an amendment to the Corporation Tax Law in 1998 made such overseas tax-free deals impossible.
But on Wednesday, presiding Judge Hiromu Emi overturned the earlier ruling, saying, "The tax agency is able to impose taxes on the profit because it should be considered Obunsha's transferred assets, as the deal was made under the will of Obunsha."
The judge also noted that Obunsha Atlantic, the Tokyo-based publisher's 100 percent owned subsidiary and dummy company in the Netherlands, shared major board members with the parent company.
In 1991, Obunsha sold around 3,500 shares of Asahi National Broadcasting Co., now known as TV Asahi Corp., at face value to Obunsha Atlantic, the court said.
Obunsha Atlantic increased its own stock in February 1995 by allocating the new shares to a third party. It sold 90 percent of the new shares to another Dutch company.
Obunsha Atlantic later made huge profits by selling the TV Asahi shares, but Japanese tax authorities were assumed unable to levy taxes on the profits because Obunsha Atlantic had been placed under the control of that Dutch company.
The National Tax Agency imposed 10.7 billion yen in taxes, including penalties, in December 1998, saying Obunsha failed to declare about 25 billion yen in income earned through the transactions.
The agency said the publisher evaded taxes on Obunsha Atlantic's sale of its new shares to the Dutch firm.