Judgments of the Supreme Court

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2019 (Gyo-Hi) 99

Date of the judgment (decision)

2020.03.19

Case Number

2019 (Gyo-Hi) 99

Reporter

Minshu Vol. 74, No. 3

Title

Judgment concerning the method of calculating the appraisal points of each parcel of residential land in the case of applying the lot calculation methods while finding two or more neighboring parcels of land to be one lot based on the Appraisal Standards for Fixed Assets

Case name

Case seeking revocation of the assessment and determination of real property acquisition tax

Result

Judgment of the First Petty Bench, quashed and decided by the Supreme Court

Court of the Prior Instance

Osaka High Court, Judgment of November 15, 2018

Summary of the judgment (decision)

In the case of applying the lot calculation methods while finding two or more neighboring parcels of land to be one lot based on the Appraisal Standards for Fixed Assets, the appraisal points of each parcel of land is calculated by multiplying the appraisal points per unit parcel area of the relevant lot calculated through application of the lot calculation methods by the parcel area of each parcel of residential land.

References

Article 73-13, paragraph (1), Article 73-21, paragraph (2), and Article 388, paragraph (1) of the Local Tax Act and Chapter I, Section 3, I, Chapter I, Section 3, II.(I)1., and Chapter I, Section 3, Appended Tables 3-1 and 3-2 of the Appraisal Standards for Fixed Assets (Public Notice of the Ministry of Home Affairs No. 158 of 1963)



Local Tax Act

(Tax Base for Real Property Acquisition Tax)

Article 73-13, paragraph (1)

(1) The tax base for real property acquisition tax is to be the price of real property when the real property is acquired.

(Determination of Price of Real Property, etc.)

Article 73-21, paragraph (2)

(2) Regarding real property for which the price of fixed asset is not registered in the fixed asset tax ledger or real property that falls under the provisions of the proviso to the preceding paragraph, a prefectural governor is to determine the price that should serve as the tax base for real property acquisition tax pertaining to the real property based on the Appraisal Standards for Fixed Assets referred to in Article 388, paragraph (1).

(Duties of the Minister for Internal Affairs and Communications in Relation to Fixed Asset Tax)

Article 388, paragraph (1)

(1) The Minister for Internal Affairs and Communications must specify the standards for the appraisal of fixed assets and the method and procedure for the implementation of appraisal (hereinafter referred to as the "Appraisal Standards for Fixed Assets") and issue a public notice thereof. In this case, the Appraisal Standards for Fixed Assets may provide that a prefectural governor must specify the matters concerning the details of the Appraisal Standards for Fixed Assets.



Appraisal Standards for Fixed Assets (Public Notice of the Ministry of Home Affairs No. 158 of 1963)

Chapter I

Section 3 Residential Land

I. Appraisal of Residential Land

Residential land (excluding residential land set forth in IV and V of this Section) is to be appraised based on a method in which appraisal points are assigned for each parcel of residential land and the value of each parcel of residential land is obtained by multiplying the value per appraisal point by the assigned appraisal points.

II. Assignment of Appraisal Points

The appraisal points of each parcel of residential land are to be assigned according to the circumstances of residential land in a municipality based on the "appraisal method for residential land in urban areas" with respect to residential land in areas that substantially constitute urban area-like forms, and also based on the "appraisal method for other residential land" with respect to residential land in areas that fail to substantially constitute an urban area-like form; provided, however, that if it is necessary according to the circumstances of residential land in the municipality, appraisal points of each parcel of residential land may be assigned based on the "appraisal method for residential land in urban areas" with respect to residential land located in areas that fail to substantially constitute an urban area-like form.

(I) Assignment of appraisal points of residential land based on the "appraisal method for residential land in urban areas"

1. Procedures for assigning appraisal points of residential land based on the "appraisal method for residential land in urban areas"

Appraisal points of residential land based on the "appraisal method for residential land in urban areas" are to be assigned through the following procedures:

(1) classifying residential land in a municipality into a commercial district, housing district, industrial district, sightseeing district, etc., and for each of those districts, selecting a standard residential land with respect to each area that considerably differs in the circumstances from the residential land that adjoins a main street in the area;

(2) for the standard residential land, obtaining a proper market value that is evaluated based on the actual sales value, assigning the road rate with respect to a main street which the standard residential land adjoins on the basis of the obtained proper market value, and assigning the road rates with respect to streets other than the main street (hereinafter referred to as "other streets") in comparison with the road rate of the main street; and

(3) assigning the appraisal points of each parcel of residential land by applying the "lot calculation methods" (Appended Table 3) on the basis of the road rate.

Appended Table 3 Lot Calculation Methods

1. Lot calculation methods

The appraisal points of each parcel of residential land are to be assigned based on the conditions of the site of the parcel of residential land and the road rate on the basis of the appraisal points obtained by applying the following lot calculation methods:

(1) depth-based price correction rate method;

(2) lateral road's influence-based addition method;

(3) two roads' influence-based addition method; and

(4) appraisal point calculation method for irregularly shaped land, land separated from roads, residential land whose frontage is very narrow, etc.

2. Finding of a lot

The appraisal points of each parcel of residential land are to be obtained by applying the lot calculation methods with respect to residential land in each lot. In this case, a lot is, in principle, to be made up of a parcel of residential land registered in the land tax ledger or supplemental land tax ledger; provided, however, that if it is necessary to sectionalize a parcel of residential land or two or more neighboring parcels of land into parts that are individually found to make up a single unit or to combine them, in light of the shape, use conditions, etc., each residential land that makes up a single unit is to be considered as one lot.

Main text of the judgment (decision)

The judgment in prior instance is quashed.

The appeal to the court of second instance filed by the appellee of final appeal is dismissed.

The costs of the appeal to the court of second instance and the final appeal shall be borne by the appellee.

Reasons

Concerning the reasons for a petition for acceptance of final appeal stated by the counsel for final appeal, MORISUE Yoshitaka

1. With regard to the fact that P, who was the co-owner of land located in Sakai City, acquired the share of another co-owner through partition of property in co-ownership for the same land and consequently received the assessment and determination of real property acquisition tax (hereinafter referred to as the "Disposition") from the Director of the Senboku Taxation Office of the Osaka Prefectural Government, the appellee (P died while the case was pending in the prior instance, and the appellee who is P's younger brother became the successor of this action through succession) alleged as follows: real property acquisition tax cannot be imposed with regard to the aforementioned acquisition pursuant to the provisions of Article 73-7, item (ii)-3 of the Local Tax Act (hereinafter referred to as the "Act") and the Disposition is thus illegal. Based on this allegation, the appellee filed this action against the appellant to seek revocation of the Disposition.

2. The outline of facts lawfully determined by the court of prior instance is as follows.

(1) A. Although real property acquisition tax is to be imposed on a person who acquires real property upon the acquisition of the real property (Article 73-2, paragraph (1) of the Act), Article 73-7, item (ii)-3 of the Act provides that real property acquisition tax may not be imposed with respect to the acquisition of real property through partition of property in co-ownership, except for the acquisition of a part that exceeds the share of the property in co-ownership which the person who acquires the real property already had before the partition (hereinafter referred to as an "excess share").

B. Article 73-13, paragraph (1) of the Act provides that the tax base for real property acquisition tax is to be the price of real property when the real property is acquired (meaning a proper market value; Article 73, item (v) of the Act). Article 73-21, paragraph (2) of the Act provides that regarding real property for which the price of fixed assets is not registered in the fixed asset tax ledger, a prefectural governor is to determine the price that should serve as the tax base for real property acquisition tax pertaining to the real property based on the Appraisal Standards for Fixed Assets referred to in Article 388, paragraph (1) of the Act.

C. In Chapter I, Section 3, the Appraisal Standards for Fixed Assets (Public Notice of the Ministry of Home Affairs No. 158 of 1963; hereinafter referred to as the "Appraisal Standards") provides that regarding residential land in areas that substantially constitute an urban-area like form, appraisal points are to be assigned for each parcel of land based on the appraisal method for residential land in urban areas and that the value of each parcel of residential land is to be obtained by multiplying the value per appraisal point by the assigned appraisal points. The appraisal method for residential land in urban areas consists of the following procedures: (1) selecting a standard residential land with respect to each area that considerably differs in the circumstances from the residential land that adjoins a main street in the area, (2) for the standard residential land, obtaining a proper market value that is evaluated based on the actual sales value, assigning the road rate with respect to the aforementioned main street on the basis of the proper market value per unit parcel area, and assigning the road rate with respect to other streets in comparison with the road rate of the main street, and (3) assigning the appraisal points of each parcel of residential land by applying the lot calculation methods (Appended Table 3 of the Appraisal Standards) on the basis of the road rate.

With regard to these lot calculation methods, Appended Table 3-1 of the Appraisal Standards provides that the appraisal points of each parcel of residential land are to be assigned based on the conditions of the site of the parcel of land and the road rate on the basis of the appraisal points obtained by applying the prescribed lot calculation methods, such as the depth-based price correction rate method. In addition, Appended Table 2 of the same provides as follows: the appraisal points of each parcel of residential land are to be obtained by applying the lot calculation methods to residential land in each lot; in this case, a lot is to be, in principle, made up of a parcel of residential land registered in the land tax ledger or supplemental land tax ledger; however, if it is necessary to sectionalize a parcel of residential land or two or more neighboring parcels of land into parts that are individually found to make up a single unit or to combine them, in light of the shape, use conditions, etc., each residential land that makes up a single unit is to be considered as one lot. Furthermore, Appended Table 3 and tables thereafter under the Appraisal Standards provide that appraisal points per unit parcel area are to be obtained by multiplying the road rate by the prescribed correction rates according to the circumstances of the lot and that the appraisal points of the lot is to be obtained by multiplying the obtained appraisal points per unit parcel area by the parcel area of the lot.

(2) A. P and the appellee respectively acquired one-half of the share of land at X-X, X-cho, X-ku, Sakai City before parcel subdivision (hereinafter referred to as the "land before parcel subdivision") through legacy from Q, who died in March 2013, and registered the transfer of ownership to that effect.

B. P and the appellee decided to conduct partition of property in co-ownership for the land before parcel subdivision. On November 11, 2014, they registered the parcel subdivision of the land before parcel subdivision into lands described in 1 and 2 in the Item List attached to the judgment in first instance (hereinafter these lands are to be referred to as "Land 1" and "Land 2" in this order, and they are to be collectively referred to as the "Lands"), and on November 30, 2014, P acquired the appellee's entire share of Land 1 (hereinafter this acquisition is to be referred to as the "Acquisition") while the appellee acquired P's entire share of Land 2. On December 1, 2014, P and the appellee registered the transfers of the entire share to that effect.

Hereby, P and the appellee came to independently own Land 1 and Land 2, respectively. The registered parcel area of Land 1 is 617 square meters while that of Land 2 is 566 square meters.

C. The shapes and positional relationship of the Lands are as indicated in the drawing attached to the judgment in first instance. Since before the aforementioned parcel subdivision, the Lands have not been physically sectionalized by any structure, etc. and have been uninterruptedly paved, and the entirety of the Lands has been utilized as a parking area in a unified manner. For example, walls and fences at the boundary with neighboring land and part of the parking area were laid across the Lands.

(3) Upon receipt of the delegation of the authority from the Osaka Prefectural Governor, the Director of the Senboku Taxation Office of the Osaka Prefectural Government calculated the price of Land 1 based on the Appraisal Standards under Article 73-21, paragraph (2) of the Act because Land 1 was real property whose price had not been registered in the fixed asset tax ledger at the time of the Acquisition. The Director then determined that the Acquisition includes the acquisition of an excess share because the calculated price of Land 1 exceeds the amount equivalent to one-half of the price of the land before parcel subdivision, and on November 5, 2015, the Director made the Disposition against P to set the tax basis amount pertaining to the excess share as 1,013,000 yen and the tax amount as 30,300 yen.

The aforementioned price of Land 1 was calculated by (1) considering the Lands to make up a single unit in light of the shape, use conditions, etc. and finding them to be one lot, (2) calculating appraisal points per square meter of the Lands by applying the lot calculation methods based on the road rate of the street that is in contact with the lot, (3) calculating the appraised amount of the Lands by multiplying the calculated appraisal points per square meter of the Lands by the parcel areas of the Lands and the value per appraisal point, and (4) multiplying the calculated appraised amount by the parcel area ratio between Land 1 and the Lands (617 square meters/1,183 square meters).

3. Based on the aforementioned facts, the court of prior instance determined as follows: whether there is any excess share pertaining to the acquisition of real property through partition of property in co-ownership and the amount of such excess share should be determined based on a price that should serve as the tax base for real property acquisition tax pertaining to the real property, and application of the lot calculation methods while finding the Lands to be one lot in calculating the price of Land 1 based on the Appraisal Standards in the Disposition conforms to the Appraisal Standards. The court of prior instance then determined as summarized below and upheld the claim for the revocation of the Disposition.

In the Disposition, the price of Land 1 was calculated by first calculating appraisal points of the entirety of the Lands that was found to be one lot and then dividing the calculated appraisal points in proportion to the parcel area ratio. However, in the case of determining whether there is any excess share, a slight difference in appraisal will lead to a different determination. Therefore, it is necessary to calculate the price by a more careful method. In the case where parcels of land that make up one lot are owned by different persons, the parcels of land are in the relationship in which they are contributed by their owners to make up the relevant one lot. Consequently, it should be said to be better suited for fairness to divide the appraisal points in proportion to the price of each parcel of land. Moreover, in this case, as long as Land 1 and Land 2 differed in the parcel area, it was obvious that an excess share would necessarily arise with respect to Land 1 whose parcel area is larger, if the price of the Lands is divided in proportion to the parcel area ratio. In such case, the Disposition contains illegality in that the price of Land 1 was unthinkingly calculated by a proportion calculation in accordance with the parcel area ratio without trying any other reasonable calculation method.

4. However, the aforementioned determination of the court of prior instance cannot be upheld for the following reasons.

(1) A. The Appraisal Standards provide that appraisal points of each parcel of residential land assigned by the appraisal method for residential land in urban areas are to be obtained by applying the lot calculation methods with respect to residential land in each lot and that in such a case, a lot is, in principle, to be made up of a parcel of residential land registered in the land tax ledger or supplemental land tax ledger. As an exception thereof, the Appraisal Standards provide that if it is necessary to sectionalize a parcel of residential land or two or more neighboring parcels of land into parts that are individually found to make up a single unit or to combine them, in light of the shape, use conditions, etc., each residential land that makes up a single unit is to be considered to be one lot. This exception is considered to provide as follows: the lot calculation methods are to be applied by considering the range that is found to make up a single unit in light of the shape, use conditions, etc. as one lot, irrespective of the parcel boundary, if it is necessary to do so in terms of the balance of appraisal, because, as the parcel boundary is not necessarily in line with the shape, use conditions, etc. of the land, if the aforementioned principle is strictly observed, objective exchange value of residential land cannot be reasonably calculated and the appraised amount will differ depending on the method of parcel subdivision or parcel consolidation, which may cause imbalance in appraisal.

B. The Appraisal Standards set no explicit provisions on the way of calculating appraisal points of each parcel of residential land in the case of applying the lot calculation methods while finding two or more neighboring parcels of residential land to be one lot.

However, lot calculation methods provided in the Appraisal Standards are intended to weigh in the influence on the price of residential land exerted by the depth, circumstances of contact with a road, shape, etc. of lots that adjoin a street based on the road rate that indicates the price per unit parcel area of a standard lot that adjoins the street, in comparison with these circumstances of the standard lot. Specifically, for residential land in one lot, appraisal points per unit parcel area are obtained by multiplying the road rate by the prescribed correction rates according to the circumstances of the lot, and appraisal points of the lot are obtained by multiplying the obtained appraisal points per unit parcel area by the parcel area of the lot. As mentioned in A. above, the case where two or more neighboring parcels of residential land should be found to be one lot is the case where these parcels of residential land are found to make up a single unit in light of the shape, use conditions, etc. In such a case, each parcel of residential land is merely a constituent element of the relevant lot that makes up a single unit, and it is not suited for the purpose of individually calculating objective exchange value. Based on these, in the case of finding two or more neighboring parcels of residential land to be one lot and applying the lot calculation methods, it is reasonable to consider that the calculated appraisal points per unit parcel area of the lot are equally applicable to the entirety of the lot.

C. Based on the above, in the case of applying the lot calculation methods while finding two or more neighboring parcels of residential land to be one lot based on the Appraisal Standards, the appraisal points of each parcel of land should be calculated by multiplying the appraisal points per unit parcel area of the lot calculated by applying the lot calculation methods by the parcel area of each parcel of residential land. There is no reason for adopting a different idea from this even in the case of calculating a price that should serve as the tax basis for real property acquisition tax pertaining to real property based on the Appraisal Standards under Article 73-21, paragraph (2) of the Act in order to determine whether there is any excess share pertaining to the acquisition of the real property through partition of property in co-ownership and the amount of such excess share or in the case where parcels of land that make up one lot are owned by different persons.

(2) When considering this in terms of the relationship between the parcels of residential land that make up one lot and the relevant lot, it can be said that the appraisal points or price of each parcel of residential land is calculated by dividing the appraisal points or price of the entirety of the lot calculated by applying the lot calculation methods in proportion to the parcel area ratio of the parcel of residential land. In that case, calculation of the price of Land 1 by multiplying the price calculated by applying the lot calculation methods while finding the Lands to be one lot by the parcel area ratio between Land 1 and the Lands in the Disposition can be considered to have followed the appraisal method provided in the Appraisal Standards.

(3) The Disposition was made with respect to the Acquisition by calculating a price that should serve as the tax base for real property acquisition tax pertaining to Land 1 based on the Appraisal Standards under Article 73-21, paragraph (2) of the Act and calculating the tax base and tax amount pertaining to the excess share based on the calculated price. Based on the above, the aforementioned price of Land 1 cannot be considered to contain illegality of exceeding the price decided in accordance with the appraisal method provided in the Appraisal Standards, and there are also no circumstances where said price should be considered to contain illegality of exceeding the proper market value as an objective exchange value (see 2001 (Gyo-Hi) No. 224, the judgment of the Second Petty Bench of the Supreme Court of October 29, 2004, Saibanshuminji No. 215, at 485; 2012 (Gyo-Hi) No. 79, the judgment of the Second Petty Bench of the Supreme Court of July 12, 2013, Minshu Vol. 67, No. 6, at 1255). Therefore, the Disposition made based thereon contains no illegality.

5. The determination of the court of prior instance that differs from the above contains violation of laws and regulations that obviously affects the judgment. The counsel's arguments are well-grounded as arguments to this effect, and the judgment in prior instance should inevitably be quashed. The judgment in first instance that dismissed the claim for the revocation of the Disposition is justifiable. Therefore, the appeal to the court of second instance filed by the appellee should be dismissed.

Accordingly, the Court unanimously decides as set forth in the main text.

Presiding Judge

Justice YAMAGUCHI Atsushi

Justice IKEGAMI Masayuki

Justice KOIKE Hiroshi

Justice KIZAWA Katsuyuki

Justice MIYAMA Takuya

(This translation is provisional and subject to revision.)