Mikio MORISHITA

The purpose of this paper is to consider the meaning of "economic substance" in taxation. In Japanese Income Tax Act （Article 12）, where a person to whom the revenue is legally imputed is merelynominal and other person enjoys it, the tax shall be imposed on the person who actually enjoys the revenue. This is called "the Principle of taxation on Actual Beneficiary". But it is not always easy to determine the person who actually enjoys the revenue from assets or business. In such a case, there are two ways of thinking. The first is a way of thinking in which a valid private-law contract is considered more important than economic substance. The second is a way of thinking in which economic substance is considered more important than a private-law contract. This provision（ Article 12） was enacted in 1950＇s, but opinions are divided among scholars on this point and there is room for further consideration. This paper will be considered this subject from legal and economic viewpoints.

The purpose of this paper is to consider the meaning of existence of Japanese Income Category System in Income Tax Act in recent years. The Japanese national tax system is based on the principle that" Income" should be taxed. And taxable income of individuals is divided into some categories based on "Earning Capacity". The amount of each of the categories of income is computed, and they are aggregated as" Ordinary Income Amounts". This system was enacted in 1950's, so there is the separation of the taxation theory from the present business situations, and not always suitable. We should recognize the importance of responding to the changing business environment surrounding individuals' economic activities.