AZADI BACHAO ANDOLAN: ITS ROLE IN DEVELOPMENT OF TAX JURISPRUDENCE IN INDIA

This article is authored by Adv Sherry Samuel Oommen. Adv Oommen, who specializes in constitution, tax and corporate laws has also cleared the final exams of the Institute of Chartered Accountants of India, the Institute of Cost Accountants of India and the Institute of Company Secretaries of India. He has also completed his Masters Degree in Commerce, apart from obtaining a Post Graduate Diploma in Business and Corporate Laws from Symbiosis Pune. The views expressly are personal and should not be construed as a legal opinion.

- Adv Sherry Samuel Oommen

1. A brief precursor

The issue regarding whether a route adopted by a taxpayer qualifies as methodology of tax planning, tax avoidance or tax evasion has been an aspect that has haunted various courts in India. While the taxpayer has sought to reduce his tax liability, arguably through bona fide ‘tax planning’ tools, the argument of the department has pivoted around the ‘tool’ being a device of tax avoidance. From the angle of the department; it has been their contention that such stratagem ought to be ferreted by the courts. The Honourable Supreme Court has been faced with this controversy a number of times, arguably dating back to its judgment in the case of McDowell & Co Limited Vs CTO [1985] 154 ITR 148.

From the angle of first principles, it would augur well to recall the landmark decision in the case of Inland Revenue Commissioner Vs Duke of Westminster [1939] AC 1 where it was held that unless a subject falls clearly within the letter of the law, it would be totally inapposite for the Crown to recover taxes from the said subject. On the contrary, if a person clearly fell within the letter of the law, he must be taxed however great the hardship may appear to the judicial mind to be.

The freedom to arrange one’s affairs having regard to the letter of the law, so as to not attract taxes, apart from being accepted by the Courts in England was accepted by a few courts in India including by the Honourable Gauhati High Court in the case of George Williamson (Assam) Limited (2004) 265 ITR 626.

In the context of tax treaties and the availment of its benefits, the said issue regarding tax avoidance vs tax planning has also had a role to play. For instance, the Honourable Calcutta High Court in the case of