“Azadi Bachao Andolan”
The decision most relied on for Azadi Bachao Andolan is Union of India v. Azadi Bachao Andolan (263 ITR 706), cited in 691 judgments on BharatTax.
Leading authorities on Azadi Bachao Andolan
A citizen is free to carry on business within the law, and mere tax planning without a motive to evade taxes through colorable devices is not frowned upon. The liability to taxation, for the purpose of tax treaty application, is a legal situation, not the fiscal fact of actual payment.
Legitimate tax planning is permissible, allowing taxpayers to arrange their affairs to minimize tax liabilities while respecting the "look at test" for transaction genuineness and the separate entity principle in corporate taxation. The source of funds for treaty-beneficial structures does not automatically invalidate the transaction.
For claiming relief under Chapter VI-A deductions like Section 80IB or 80IA, the audit report in Form 10CCB is not mandatory to be filed with the return of income, but can be submitted before the assessment is completed.
This case established a principle regarding the application of Double Taxation Avoidance Agreements (DTAAs) versus domestic tax law, particularly concerning the use of more beneficial provisions for an assessee, though its specific impact has been nullified by subsequent legal amendments.
Circulars issued by the CBDT are binding on Income Tax Authorities.
A penalty under sections like 271D or 271E is not automatically imposed if the assessee proves there was a reasonable cause for the failure. The interpretation of 'reasonable cause' is that which would prevent a person of average intelligence and ordinary prudence from acting negligently or in bad faith.
Legitimate tax planning, executed within the framework of law, is permissible and distinct from tax avoidance through colourable devices or sham transactions. The concept of 'colourable device' or 'sham' cannot be applied to defeat a legal situation unless the acts are of a doubtful or questionable bona fide character.
Gains from the indirect transfer of shares in a foreign company holding Indian shares are not taxable in India under the relevant tax treaty, which is considered a self-contained code to be interpreted plainly. Creating corporate structures or special purpose vehicles for investment to secure tax benefits is a legitimate business activity.
