Planning Trust and LLP - icaiahmedabad（规划信任和LLPicaiahmedabad）.pdf

Tax Planning through Trust and LLP Dhinal Shah Chartered Accountant Tax planning • Tax planning means planning the affairs lawfully so that minimum tax is payable by the assessee • CIT v. A. Raman Co. (67 ITR 11)(SC): “Legislative injunction in taxing statutes may not, except on peril of penalty, be violated, but it may lawfully be circumvented” • Though “tax evasion” cannot be accepted, it is sound law and certainly not bad morality for anybody to arrange his affairs to reduce the brunt of taxation to a minimum: • Duke of Westmister v. IR (19 TC 490)(HL), • CIT v. Keshavlal Patel (55 ITR 637)(SC), • CIT v. B M Kharwar (72 ITR 603)(SC) • Justice Ranganath Misra in McDowell Co. Ltd. v. CTO [1985] 154 ITR 148 (SC) : Tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods 2 Tax planning • Vodafone International Holdings B.V. vs. UOI (341 ITR 1)(SC): It cannot be said that all tax planning is illegal/illegitimate/impermissible. In the application of a judicial anti- avoidance rule, the Revenue may invoke the “substance over form” principle or “piercing the corporate veil” test only after it is able to establish on the basis of the facts and circumstances surrounding the transaction that the impugned transaction is a sham or tax avoidant • Banyan and Berry – 222 ITR 831 (Guj) – While planning adopted as a devise to avoid tax had been deprecated, the principal can not be