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Report No. 29

111. Views of Courts in India as to avoidance.-In many Indian decisions1-2-3-4-5-6-7 it has been pointed out, that legal avoidance cannot be regarded as reprehensible.

The following passage in the judgment in a Bombay case8 puts the matter lucidly.-

"It has also been stated that the same result may be achieved by two entirely different transactions, and it may be that whereas one transaction could be subjected to tax, the other might not be, and it is not open to the Court to tell the assessee that he could rather have entered into a transaction which subjected him to taxation rather than a transaction which permitted him to escape taxation. A citizen is perfectly entitled to exercise his ingenuity so as to arrange his affairs as may make it possible for him legally and lawfully not to pay tax, and if his ingenuity succeeds, however reluctant the Court may be to acknowledge the cleverness of the assessee, the Court must give effect to the letter of the taxation law rather than strain that letter against the assessee."

1. Bai Sakinaboo (in re:), AIR 1932 Born 116 (117) (Beaumont C.J. and Rangnekar J.).

2. Central Talkies Circuit (in re:), AIR 1941 Bom 205 (206, 207) (Beaumont C.J. and Kania J.).

3. Devarajulu Co. v. I.T.C., AIR 1950 Mad 718 (722), para. 10.

4. Meyyappa v. I.T.C., AIR 1951 Mad 506 (513, 514), para. 17.

5. Ganga Sagar v. Emp., AIR 1929 All 919 (923) (Mukerjee J.).

6. Rajniti v. C.I.T., ILR 9 Pat 194: AIR 1930 Pat 33 (35) (Courtnev-Terrell C.J.).

7. See also article in AIR 1953 Journal 26.

8. Provident Investment Co. v. I.T. Commissioner, AIR 1954 Bom 95 (97), para. 3 (Chagla C.J.).

112. Methods of checking evasion.-It may also be noted, that besides the imposition of penalities and institution of prosecutions, there are many other methods of preventing illegal evasion of taxes, particularly, strengthening the administrative machinery and streamlining the procedure. We need not repeat what has been said in the valuable reports of the various Committees1 that had occasion to go into the subject2.

1. Appendices 12 to 15 to this Report may be seen in this connection.

2. See para. 100, supra.



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