Tax Avoidance

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Tax Avoidance

Tax avoidance is an art of dodging the tax authorities without breaking the law. It means when a taxpayer arranges his financial activities in such a manner that although it is within the four corners of the law but the assessee takes advantage of loopholes which exist in the tax law in order to reduce his tax liability.
                   In other words, though he has complied to the letter of law but not the spirit behind the law.


Following transactions are considered to be under the purview of tax avoidance:-

1. Use of colourable devices (use of dubious or unfair method for reduction in tax liability).

2. Facts of the case are presented in a false manner.

3. There is a malafide intention and spirit behind the law is avoided.

4. Doctrine of substance is defeated.
                           
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