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All questions of Tax Law for UPSC CSE Exam
What principle was reinforced in the case of Union of India v. Azadi Save Tax (2006) regarding tax deductions?- a)All deductions can be denied if they are seen as tax avoidance.
- b)Deductions must always be pre-approved by tax authorities.
- c)Taxpayers must provide proof of intent to avoid tax for deductions to be valid.
- d)Genuine transactions within the law are permissible for deductions, while sham transactions are not.
Correct answer is option 'D'. Can you explain this answer?
What principle was reinforced in the case of Union of India v. Azadi Save Tax (2006) regarding tax deductions?
a)
All deductions can be denied if they are seen as tax avoidance.
b)
Deductions must always be pre-approved by tax authorities.
c)
Taxpayers must provide proof of intent to avoid tax for deductions to be valid.
d)
Genuine transactions within the law are permissible for deductions, while sham transactions are not.
 | Glance Learning Institute answered |
The Supreme Court reiterated that while legitimate tax planning is allowed, deductions can be denied for sham transactions designed to evade taxes. This ruling emphasizes the importance of genuine business activities in claiming tax benefits, distinguishing between valid tax strategies and those intended merely to circumvent tax obligations.
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