Myth and reality of the imbricating ideas of assessment evasion and avoidance
Keywords:
Tax Avoidance, tax evasion, legality, human nature, tax avoidance v. tax evasion, tax planning, judicial interpretation, direct tax code-India (DTC-India), objectivity, general anti-avoidance rule (GAAR)Abstract
The difference between tax avoidance and tax evasion is the thickness of a prison wall. “Human beings are
greedy by nature and they want to extract the maximum out of what is potentially available to them, but
there are ways of this extraction. Every way need not be wrong, though most of them are.” The difference
between tax avoidance and tax evasion is that tax avoidance is legally permissible by law while tax evasion
is not. Judicial pronouncements within India and outside India have always marked out this distinction
between the two. The predominant feature in deciding the nature of any transaction is not the underlying
motive but the legality of such transaction. In India till now, the difference between tax avoidance and
evasion was very clear. In India, the law is settled that tax avoidance is legal and evasion is not. A taxpayer
may create a device to arrange his commercial affairs to minimize his tax liability and its acceptance is
based on operation of law. But the new proposed code has blurred distinction to a great extent. This Article
tries to analyze this difference and the change in the scenario as would be brought by the proposed code.
