TMI Blog2006 (12) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... t. R. Sivaraman for the respondent. JUDGMENT The judgment of the court was delivered by P. D. Dinakaran J.— This tax case appeal has been preferred raising the following substantial question of law : "Whether, on the facts and circumstances of the case, the Tribunal was right in holding that section 40A(2) of the Income-tax Act is not applicable merely because the goods in question were sophisticated and specialised components ?" 2. Brief facts which are necessary to dispose of the appeal are recapitulated as under : The respondent/assessee is a public limited company engaged in the manufacture and sale of wind turbine generators. The relevant assessment year is 1993-94. The Assessing Officer, finding that the purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act, which reads as under : "40A . Expenses or payments not deductible in certain circumstances.—. . . (2) (a) Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of this sub-section, and the Assessing Officer is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction : Provided that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s behind taxation laws as much moral sanction as is behind any other welfare legislation and it is a pretence to say that avoidance of taxation is not unethical and that it stands on no less a moral plane than honest payment of taxation and therefore, the proper way to construe a taxing statute, while considering a device to avoid tax, is not to ask whether the provisions should be construed literally or liberally nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax and whether the transaction is such that the judicial process may accord its approval to it. It is neither fair nor desirable to expect the Legislature to intervene and take care of every device and sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... putes. 8. Now, let us analyse the power and jurisdiction conferred on the Assessing Officer under section 40A(2)(a) of the Act, which revolves on the discretion conferred on him in the context of the "Assessing Officer is of opinion". The words "is of opinion" indicate that the opinion must be formed by the Assessing Officer and it is of course, implicit that the opinion must be an honest opinion, having been formed based on the circumstances available before him. In other words, what all, therefore, section 40A(2)(a) of the Act contemplates is that there should be some material available before the Assessing Officer for invoking section 40A(2)(a) of the Act to initiate action to disallow or refuse to deduct the excessive or unreasonabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer, one price quoted by M/s. Standard Engineering, which is concededly a sister concern of the assessee, and another by M/s. Indian Molasses Company, a third party, as stated below : Item of purchase Prices per set/unit to Difference Standard Engineering Indian Molasses Company Blades set 15,96,515 12,06,398 3,90,117 Gear box 13,35,907 10,59,031 2,76,876 10. The difference, as apparent from the above statistics, is glaring and works out to nearly 25 per cent. of the price per set/unit. 11. However, an argument is advanced by Mr. Sivaraman, learned counsel for the assessee that the burden is on the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2002] 256 ITR 82 (Mad), furnished the details of sales of similar goods made by M/s. Standard Engineering to any third party during the relevant period, assuming it is not possible to arrive at the fair market value of the impugned goods as contended by both the sides. In the same way, nothing prevented the Assessing Officer to satisfy with the details of the price quoted by M/s. Standard Engineering, for having sold identical goods to another party, who had also purchased it. 13. The assessee having not done anything to prove the above claim is not entitled to now complain that the Revenue has not discharged the burden and such argument advanced by Mr. Sivaraman, is totally misconceived. A similar view is also taken by the Bombay Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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