McDowell & Co. Ltd. v. CTO

154 ITR 148Supreme Court of India1985#68 most cited

What is McDowell & Co. Ltd. v. CTO authority for?

The Supreme Court held that while legitimate tax planning is permissible, transactions structured as a "colourable device" or "subterfuge" solely to avoid tax are impermissible. It mandates a judicial shift to look beyond the form to the substance of a transaction, allowing the lifting of the corporate veil in tax evasion arrangements.

741

judgments rely on this decision, according to BharatTax’s citation analysis of 366,470 Indian tax judgments — from 2008 to 2026.

Also referred to as

McDowell & Co. Ltd. v. CTO · 154 ITR 148 · tax avoidance vs. tax planning · colourable device · substance over form · lifting corporate veil · tax evasion · accommodation entry · genuineness of transaction · sections 143(3) · 147 · 68 · 69C

Also reported as

22 Taxmann 113 SCC 2301 SCR 914

Sections most often in play

Section 143(3)Section 148Section 147Section 68Section 69CSection 133ASection 132(4)Section 143(2)

Issues it is cited on

colourable deviceazadi bachao andolanlive linkentry operatorpenny stocksection 10(38)genuineness of the transactionlong term capital gainsaddition u/s 68share application moneyaccommodation entrysection 131

Judgments citing McDowell & Co. Ltd. v. CTO

DCIT - 14(2)(1), Mumbai vs. Idea Cellular Ltd., Mumbai

In the result, the ground no

ITA 5945/MUM/2017[2012-13]Status: DisposedITAT Mumbai24 Jul 2025AY 2012-13

Bench: Ms. Kavitha Rajagopal, Jm & Smt. Renu Jauhri, Am

Section 194Section 250Section 40Section 9(1)(vi)

…reference: “11. The Supreme Court has approved a decision of the Madras High Court in M.V. Valliappan v. ITO [1988] 170 ITR 2381, where the Madras High Court has held that Azadi Bachao Andolan's case (supra) [at page 758 ] : "the decisions in McDowell [1985] 154 ITR 148 (SC) cannot be read as laying down that every attempt at tax planning is illegitimate and must be ignored, or that every transaction or arrangement which is perfectly permissible under law, which has the effect of reducing the tax burden of the assessee, must be looked upon with disfavour." 12. In view of the aforesaid legal principles laid down…

Idea Cellular Ltd, Mumbai vs. ACIT Hq (Judl.) to CIT-14, Mumbai

In the result, the ground no

ITA 5765/MUM/2017[2012-13]Status: DisposedITAT Mumbai24 Jul 2025AY 2012-13

Bench: Ms. Kavitha Rajagopal, Jm & Smt. Renu Jauhri, Am

Section 194Section 250Section 40Section 9(1)(vi)

…reference: “11. The Supreme Court has approved a decision of the Madras High Court in M.V. Valliappan v. ITO [1988] 170 ITR 2381, where the Madras High Court has held that Azadi Bachao Andolan's case (supra) [at page 758 ] : "the decisions in McDowell [1985] 154 ITR 148 (SC) cannot be read as laying down that every attempt at tax planning is illegitimate and must be ignored, or that every transaction or arrangement which is perfectly permissible under law, which has the effect of reducing the tax burden of the assessee, must be looked upon with disfavour." 12. In view of the aforesaid legal principles laid down…

Professional Automotives Private Limited, Jammu vs. Assistant Commissioner of Income Tax, Central Circle-1, Jaipur

In the result the appeal of the assessee in ITA no

ITA 812/JPR/2025[2016-17]Status: DisposedITAT Jaipur23 Jul 2025AY 2016-17

Bench: DR. S. SEETHALAKSHMI (Judicial Member), SHRI RATHOD KAMLESH JAYANTBHAI, आयकर अपील /ITA Nos.809 to 815/JP/2025 निर्धारण वर्ष /Assessment Years :2013-14 to 2019-20 Professional Automotives Pvt. बनाम ACIT, Ltd. Bahu Plaza, Bahu Plaza, Jammu Vs. Central Circle- 1, and Kashmir Jaipur स्थायी लेखा सं./जी.आई.आर. सं./PAN/GIR No.:AAACP9608E अपीलार्थी/Appellant प्र]त्यर्थी/Respondent निर्धारिती की ओर से / Assessee by :Shri Tarun Mittal, CA राजस्व की ओर से /Revenue by: Shri Ajey Malik, CIT (Th. V.C)

For Appellant: Shri Tarun Mittal, CAFor Respondent: Shri Ajey Malik, CIT (Th. V.C)
Section 143(3)Section 37(1)

…the mouth of the assessee. No Court or the Tribunal should countenance an assessee the attitude of failure to produce relevant material and ask the adversary to disprove it. This attitude was decried by Chinnappa Reddy, J. in McDowell & Co. Ltd. v. CTO [1985] 154 ITR 148 (SC). It is held by the Hon'ble ITAT in the case of KhopadeKisanraoManikrao v. Assistant Commissioner of Income-tax [2000] 74 ITD 25 (Pune) (TM)/[2000] 69 TTJ 135 (Pune) (TM) [27-01-2000] as under- 134. Having held that the seized record is not the complete record of unaccounted transactions, the question which arises is whether these facts justi…

DCIT, Central Circle-1(3), Bengaluru vs. Late Shri V G Siddhartha, Represented by Legal Heir Ms. Malvika Hegde, Bengaluru

ITA 2132/BANG/2024[2018-19]Status: DisposedITAT Bangalore16 Jul 2025AY 2018-19

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

…est was based on an informal agreement was found to be unsubstantiated and treated as a colourable device to forgo the income and artificially inflate the loss. The AO referring to the judgment of Hon’ble Supreme court in the case of McDowell & Co reported in 154 ITR 148, in the case of Sumati Dayal reported in 80 Taxman 89, in the case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption w…

DCIT, Central Circle-1(3), Bengaluru vs. Late Shri V G Siddhartha, Represented by Legal Heir Ms. Malvika Hegde, Bengaluru

ITA 2131/BANG/2024[2017-18]Status: DisposedITAT Bangalore16 Jul 2025AY 2017-18

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

…est was based on an informal agreement was found to be unsubstantiated and treated as a colourable device to forgo the income and artificially inflate the loss. The AO referring to the judgment of Hon’ble Supreme court in the case of McDowell & Co reported in 154 ITR 148, in the case of Sumati Dayal reported in 80 Taxman 89, in the case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption w…

DCIT, Central Circle-1(3), Bengaluru vs. Late Shri V G Siddhartha, Represented by Legal Heir Ms. Malvika Hegde, Bengaluru

In the result the appeal filed by the revenue is hereby dismissed

ITA 2130/BANG/2024[2016-17]Status: DisposedITAT Bangalore16 Jul 2025AY 2016-17

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

…est was based on an informal agreement was found to be unsubstantiated and treated as a colourable device to forgo the income and artificially inflate the loss. The AO referring to the judgment of Hon’ble Supreme court in the case of McDowell & Co reported in 154 ITR 148, in the case of Sumati Dayal reported in 80 Taxman 89, in the case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption w…

DCIT, Central Circle-1(3), Bengaluru vs. Late Shri V G Siddhartha, Represented by Legal Heir Ms. Malvika Hegde, Bengaluru

In the result the appeal filed by the revenue is hereby dismissed

ITA 2129/BANG/2024[2015-16]Status: DisposedITAT Bangalore16 Jul 2025AY 2015-16

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

…est was based on an informal agreement was found to be unsubstantiated and treated as a colourable device to forgo the income and artificially inflate the loss. The AO referring to the judgment of Hon’ble Supreme court in the case of McDowell & Co reported in 154 ITR 148, in the case of Sumati Dayal reported in 80 Taxman 89, in the case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption w…

Mr. Ishaan Hegde L/R of Late Sri. V G Siddhartha, Bangalore vs. The Deputy Commissioner of Incomer Tax, Central Circle-1(3), Bangalore

In the result the appeal filed by the revenue is hereby dismissed

ITA 1459/BANG/2024[2018-19]Status: DisposedITAT Bangalore16 Jul 2025AY 2018-19

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

…est was based on an informal agreement was found to be unsubstantiated and treated as a colourable device to forgo the income and artificially inflate the loss. The AO referring to the judgment of Hon’ble Supreme court in the case of McDowell & Co reported in 154 ITR 148, in the case of Sumati Dayal reported in 80 Taxman 89, in the case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption w…

Mr. Ishaan Hegde L/R of Late Sri. V G Siddhartha, Bangalore vs. The Deputy Commissioner of Incomer Tax, Central Circle-1(3), Bangalore

ITA 1458/BANG/2024[2017-18]Status: DisposedITAT Bangalore16 Jul 2025AY 2017-18

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

…est was based on an informal agreement was found to be unsubstantiated and treated as a colourable device to forgo the income and artificially inflate the loss. The AO referring to the judgment of Hon’ble Supreme court in the case of McDowell & Co reported in 154 ITR 148, in the case of Sumati Dayal reported in 80 Taxman 89, in the case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption w…

Mr. Ishaan Hegde L/R of Late Sri. V G Siddhartha, Bangalore vs. The Deputy Commissioner of Incomer Tax, Central Circle-1(3), Bangalore

In the result the appeal filed by the revenue is hereby dismissed

ITA 1457/BANG/2024[2016-17]Status: DisposedITAT Bangalore16 Jul 2025AY 2016-17

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

…est was based on an informal agreement was found to be unsubstantiated and treated as a colourable device to forgo the income and artificially inflate the loss. The AO referring to the judgment of Hon’ble Supreme court in the case of McDowell & Co reported in 154 ITR 148, in the case of Sumati Dayal reported in 80 Taxman 89, in the case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption w…

Mr. Ishaan Hegde L/R of Late Sri. V G Siddhartha, Bangalore vs. The Deputy Commissioner of Incomer Tax, Central Circle-1(3), Bangalore

In the result the appeal filed by the revenue is hereby dismissed

ITA 1456/BANG/2024[2015-16]Status: DisposedITAT Bangalore16 Jul 2025AY 2015-16

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

…est was based on an informal agreement was found to be unsubstantiated and treated as a colourable device to forgo the income and artificially inflate the loss. The AO referring to the judgment of Hon’ble Supreme court in the case of McDowell & Co reported in 154 ITR 148, in the case of Sumati Dayal reported in 80 Taxman 89, in the case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption w…

Mr. Ishaan Hegde L/R of Late Sri. V G Siddhartha, Bangalore vs. The Deputy Commissioner of Incomer Tax, Central Circle-1(3), Bangalore

ITA 1455/BANG/2024[2014-15]Status: DisposedITAT Bangalore16 Jul 2025AY 2014-15

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

…est was based on an informal agreement was found to be unsubstantiated and treated as a colourable device to forgo the income and artificially inflate the loss. The AO referring to the judgment of Hon’ble Supreme court in the case of McDowell & Co reported in 154 ITR 148, in the case of Sumati Dayal reported in 80 Taxman 89, in the case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption w…

Mr. Ishaan Hegde L/R of Late Sri. V G Siddhartha, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore

ITA 1454/BANG/2024[2013-14]Status: DisposedITAT Bangalore16 Jul 2025AY 2013-14

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

…est was based on an informal agreement was found to be unsubstantiated and treated as a colourable device to forgo the income and artificially inflate the loss. The AO referring to the judgment of Hon’ble Supreme court in the case of McDowell & Co reported in 154 ITR 148, in the case of Sumati Dayal reported in 80 Taxman 89, in the case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption w…

Mr. Amarthya Siddhartha L/R of Late Sri. V G Siddhartha, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore

ITA 1453/BANG/2024[2018-19]Status: DisposedITAT Bangalore16 Jul 2025AY 2018-19

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

…est was based on an informal agreement was found to be unsubstantiated and treated as a colourable device to forgo the income and artificially inflate the loss. The AO referring to the judgment of Hon’ble Supreme court in the case of McDowell & Co reported in 154 ITR 148, in the case of Sumati Dayal reported in 80 Taxman 89, in the case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption w…

Mr. Amarthya Siddhartha L/R of Late Sri. V G . Siddhartha, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore

ITA 1452/BANG/2024[2017-18]Status: DisposedITAT Bangalore16 Jul 2025AY 2017-18

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

…est was based on an informal agreement was found to be unsubstantiated and treated as a colourable device to forgo the income and artificially inflate the loss. The AO referring to the judgment of Hon’ble Supreme court in the case of McDowell & Co reported in 154 ITR 148, in the case of Sumati Dayal reported in 80 Taxman 89, in the case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption w…

Mr. Amarthya Siddhartha L/R of Late Sri. V G . Siddhartha, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore

In the result the appeal filed by the revenue is hereby dismissed

ITA 1451/BANG/2024[2016-17]Status: DisposedITAT Bangalore16 Jul 2025AY 2016-17

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

…est was based on an informal agreement was found to be unsubstantiated and treated as a colourable device to forgo the income and artificially inflate the loss. The AO referring to the judgment of Hon’ble Supreme court in the case of McDowell & Co reported in 154 ITR 148, in the case of Sumati Dayal reported in 80 Taxman 89, in the case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption w…

Mr. Amarthya Siddhartha L/R of Late Sri. V G . Siddhartha, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore

Appeal of the revenue is hereby dismissed

ITA 1449/BANG/2024[2014-15]Status: DisposedITAT Bangalore16 Jul 2025AY 2014-15

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

…was based on an informal agreement was found to be unsubstantiated and treated as a colourable device to forgo the income and artificially inflate the loss. The AO referring to the judgment of Hon’ble Supreme court in the case of McDowell & Co reported in 154 ITR 148, in the case of Sumati Dayal reported in 80 Taxman 89, in the case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redempt…

Mr. Amarthya Siddhartha L/R of Late Sri. V G . Siddhartha, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore

In the result the appeal filed by the revenue is hereby dismissed

ITA 1448/BANG/2024[2013-14]Status: DisposedITAT Bangalore16 Jul 2025AY 2013-14

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

…est was based on an informal agreement was found to be unsubstantiated and treated as a colourable device to forgo the income and artificially inflate the loss. The AO referring to the judgment of Hon’ble Supreme court in the case of McDowell & Co reported in 154 ITR 148, in the case of Sumati Dayal reported in 80 Taxman 89, in the case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption w…

Mrs. Malavika Hegde L/R of Late Sri. V G Siddhartha, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore

In the result the appeal filed by the revenue is hereby dismissed

ITA 1447/BANG/2024[2018-19]Status: DisposedITAT Bangalore16 Jul 2025AY 2018-19

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

…est was based on an informal agreement was found to be unsubstantiated and treated as a colourable device to forgo the income and artificially inflate the loss. The AO referring to the judgment of Hon’ble Supreme court in the case of McDowell & Co reported in 154 ITR 148, in the case of Sumati Dayal reported in 80 Taxman 89, in the case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption w…

Mrs. Malavika Hegde L/R of Late Sri. V G Siddhartha, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore

In the result the appeal filed by the revenue is hereby dismissed

ITA 1446/BANG/2024[2017-18]Status: DisposedITAT Bangalore16 Jul 2025AY 2017-18

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

…est was based on an informal agreement was found to be unsubstantiated and treated as a colourable device to forgo the income and artificially inflate the loss. The AO referring to the judgment of Hon’ble Supreme court in the case of McDowell & Co reported in 154 ITR 148, in the case of Sumati Dayal reported in 80 Taxman 89, in the case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption w…