1986 (11) TMI 111

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..... apital contribution in the AOP were as under: Name Capital (i) Mam Chand Rs. 25,000 (ii) Subhash Chand Rs. 25,000 (iii) Sanjay Kumar Rs. 50,000 Out of the above, Mam Chand and Subhash Chand were partners of the assessee firm. Sanjay Kumar was minor admitted to the benefits of the partnership of the assessee firm. A further fact noticed by the ITO was that the above sums had been withdrawn by the three parties above from their respective capital accounts in the books of the assessee firm and transferred to the credit of the AOP. The ITO wanted to satisfy himself about the genuineness of the AOP. He required the members of the AOP to be produced .....

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..... Nos. 1895 1896/Del/83 dt, 7th April, 1984. But the decision of the Tribunal in that case was apparently given without noting an earlier decision of the Tribunal in the case of Shamlal Bros. vs. ITO ITA No. 2942/Del/1980 dt.9th Oct., 1980. In that case, a contrary view was taken. (ii) The only source of income of the AOP was the interest credited to it in the books of the assessee firm on the sum of Rs. 1,00,000 transferred to its credit from the capital of the three parties mentioned above. It is not necessary in this context to consider, whether the AOP was genuine or otherwise. No doubt, the AOP was formed and as evidenced by a Memorandum in writing. But where the only purpose of formation of such an AOP was tax avoidance such an AOP .....

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..... ed. For the Department, reliance was placed on the order of AAC. Smt. Kakkar referred in particular to the new judicial response to tax avoidance as stated in McDdowell Co. Ltd. vs. CTO (1985) 47 CTR (SC) 126 : (1985) 154 ITR 148 (SC). In our view, there is no room for interference. It is true that it was held in CIT vs. A. Raman Co. (1968) 67 ITR 11 (SC) that avoidance of tax liability by so arranging commercial affairs that charge of tax is distributed, is not prohibited. But this view no longer holds the field. There has been sea-change in the judicial attitude to tax avoidance since then. The observations on tax avoidance in A. Raman Co. were specifically disapproved by the Supreme Court in McDowell In McDowell the Court observed .....

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