JUDGMENT

CHINNAPPA REDDY, J.:— While I entirely agree with my brother, Ranganath Misra, J. in the judgment proposed to be delivered by him, I wish to add a few paragraphs, particularly to supplement what he has said on the "fashionable" topic of tax avoidance, My excuse for inflicting this extra opinion is that the ingenious attempts to rationalise and legitimise tax avoidance have always fascinated and amused me and made me wonder how ready the minds are to adapt themselves and discover excuses to dip into the treasury.

2. The shortest definition of tax avoidance that I have come across is "the art of dodging tax without breaking the law". Much legal sophistry and judicial exposition have gone into the attempt to differentiate the concepts of tax evasion and tax avoidance and to discover the invisible line supposed to exist which distinguishes one from the other. Tax avoidance, it seems, is legal; tax evasion is illegal.

3. Though initially the law was, and I suppose the law still is, "there is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied", During the period between the two World Wars, the theory came to be propounded and developed that it was perfectly open for persons to evade (avoid) income-tax if they could do so legally. For some time it looked as if tax avoidance was even viewed with affection. Lord Sumner in Inland Revenue Commissioners v. Fishers Executors, 1926 AC 395 said:

"My Lords the highest authorities have always recognised that the subject is entitled so to arrange his affairs as not to attract taxes imposed by the Crown so far as he can do so within the law, and that he may legitimately claim the advantage of any expressed term or of any emotions that he can find in his favour in taxing Acts. In so doing he neither comes under liability nor incurs blame."

4. Lord Tomlin echoing what Lord Sumner had said observed in Inland Revenue Commissioners v. Duke of Westminster, 1936 AC 1 as follows, typifying the prevalent attitude towards tax avoidance at that time:

"Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however, unappreciative the Commissioners of Inland Revenue or his fellow tax payers may be of his ingenuity, he cannot be compelled to pay an increased tax."

5. Then came World War II and in its wake huge profiteering and racketeering, something which persists till today, but on a much larger scale. The attitude of the Courts towards avoidance of tax perceptibly changed and hardened and in Lord Howard De Waldan v. Inland Revenue Commissioners, (1942) 1 KB 389 Greene, M. R., dealing with the construction of an anti-avoidance section said:

"For years a battle of manoeuvre has been waged between the legislature and those who are minded to throw the burden of taxation off their own shoulders on to those of their fellow subjects. In that battle the legislature has been worsted by the skill, determination and resourcefulness of its opponents of whom the present appellant has not been the least successful. It would not shock us in the least to find that the legislature has determined to put an end to the struggle by imposing the severest penalties. It scarcely lies in the mouth of the tax payer who plays with fire to complain of burnt fingers."

6. Expressing the same sentiment and dissertating on the moral aspects of tax avoidance, Lord Simon in Latilla v. Inland Revenue Commissioners, 1943 AC 377 said:

"My Lords, of recent years much ingenuity has been expended in certain quarters in attempting to devise methods of disposition of income by which those who were prepared to adopt them might enjoy the benefits of residents in this country while receiving the equivalent of such income without sharing in the appropriate burden of British taxation. Judicial dicta may be cited which point out that, howeve