# Mc DOWELL & COMPANY LIMITED v. THE COMMERCIAL TAX OFFICER - **Citation:** [1985] 3 S.C.R. 791 - **Court:** Supreme Court of India - **Decided:** 1985-04-17 - **Case number:** Civil Appeal No. 570 of 1983 - **Bench:** Y.V. Chandrachud, D.A. Desai, 0. CttiNNAPPA REDDY E..S. VENKATARAMIAH, Ranganath Misra - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mc-dowell-company-limited-v-the-commercial-tax-officer-8998 - **Pages:** 34 ## Headnote Concept! of Tax Evasio11 and Tax Avoidance, difference in-Tax Planning -Colourable device within the framework of law cannot be allowed to be a part of Tax Planning. New plea-Constitution of India, 1950-Appea/ by Special Leave under Article 136-Supreme Court cannot entertain a plea not taken in the High Court. Andhro Pradesh General Sales Tax Act, 1947-"Turn over", scope ofTest for determining whether an excise duty is a part ofuturn over," under the Sales Tax Act-The Incidence of excise duty being directly relatable to manufac· ture, validity of the decision in McDowell's case reported in (1977} 1 SCR 914 reconsidered: "Excise duty" as defined in section 2(10) or the A.P. Excise Act, 1968 is l~viable on the manufacture of.liquor and the manufacturer cannot remove the same from the distillery unless the duty imposed under the Excise Act has been paid. Buyers of Indian liquor from the appellant's distillery obtain distillery passes for release of liquor after making payment of exci~e duty 8.nd present the" same at the distillery thereupon the bilJ of sale or invoice is prepared by , the distillery showing the price of liquor but excluding excise duty. The appeJ. lant's books or account also did not contain any reference to excise duty paid by the purchaser. The appellan~. tbereforo, paid sales tax under the Andhra Pradesh General Sales Tax Act, 1957 on tho basis of turnover which excluded .excise duty. This position w~s not accepted by the Sales Tax Authorities ~and the matter was contested right upto the Supreme Court. The Supreme Coor~ in Mc Dowell & Company Ltd. etc, v. Commercial Tax Officer Vllth Circle, Hyderabad, etc. reported in [1?77] 1 SCR 914 held that the Sales Tax Autho· rities were not competent to include fn the "turnover'' of the appellant, the excise dutr which was not char$ed by it b.ut was paid directly to the Excise A 's c D E F G ff A 8 0 D E F 792 SUPRBME COURT REPORTS · (1985] 3 S.C.R. Authorities by the buyers of the liquor, inasmuch as the excise duty did not go into the common till of the appellant and did not become a part of the cir· culating capital. After the judgment of the Supreme Court Rules 76 and 79(1) of the A.P. Distillery Rules were suitably amended with effect from August 4, 1981. Amended Rule 76(a) provides that "No spirit of liquor" manufactured or stored shall be removed unless the excise duty specified in rule 6 has been paid by a holder of 0 .. 2 licence before such removal and the amended ruli' 79(1) provides that on payment of the excise duty by the bolder of D·2 licence a distillery pass for the removal of spirit fit for human compensation may be granted in favour of any of the named persons therein. The appellant, being a D-2 licerice holder was served with a·notice, on the basis of the amended provisions, by the respondent proposing to include a sum of Rs. 4,49,09,532.40 representing the excis~ duty paid. directly by buyers of appellants' liquor in the appellants, t~rnover for a part of the year 1982·83, Thereupon, the appellant again moved the High Court Tor quashing the said notice. The High Court considered the effect of the amended Rules and held that the prlmary liability to pay excise duty was indisputably of the holder of the D-2 licence. The High Court dismissed the writ p.:tition on the fin(lings (a) that the turnover related to liquor; and (b) that the excise duty which was payable by the appellant but had by amicable arrangement been paid by the buyer was actually a part of the turnover of the appellant and was, therefore, liable to be soJncluded for determining liability for sales tax. When leave was granted by a Division Bench of the Supreme Court to appeal against the judgment of the High Court, the correctness of the decision in appellants' case reported in [1977) I SCR 914, was doubted and the matter was referred to a larger Bench. Dismissing the appeal, the Court, HELD: (Per Chinnappa Reddy, J. (concurring) I.I Much legal sophistry and Judicial exposition both i ## Text _Characters 0–39,981 of 75,159. This is a partial read: ask again with offset=39981 for what follows._ • • 791 Mc DOWELL & COMPANY LIMITED v. THE COMMERCIAL TAX OFFICER April 17, 1985 [Y.V. CHANDRACHUD, C.J., D.A. DESAI, 0. CttiNNAPPA REDDY E..S. VENKATARAMIAH AND RANGANATH MISRA, JJ.J Concept! of Tax Evasio11 and Tax Avoidance, difference in-Tax Planning -Colourable device within the framework of law cannot be allowed to be a part of Tax Planning. New plea-Constitution of India, 1950-Appea/ by Special Leave under Article 136-Supreme Court cannot entertain a plea not taken in the High Court. Andhro Pradesh General Sales Tax Act, 1947-"Turn over", scope ofTest for determining whether an excise duty is a part ofuturn over," under the Sales Tax Act-The Incidence of excise duty being directly relatable to manufac· ture, validity of the decision in McDowell's case reported in (1977} 1 SCR 914 reconsidered: "Excise duty" as defined in section 2(10) or the A.P. Excise Act, 1968 is l~viable on the manufacture of.liquor and the manufacturer cannot remove the same from the distillery unless the duty imposed under the Excise Act has been paid. Buyers of Indian liquor from the appellant's distillery obtain distillery passes for release of liquor after making payment of exci~e duty 8.nd present the" same at the distillery thereupon the bilJ of sale or invoice is prepared by , the distillery showing the price of liquor but excluding excise duty. The appeJ. lant's books or account also did not contain any reference to excise duty paid by the purchaser. The appellan~. tbereforo, paid sales tax under the Andhra Pradesh General Sales Tax Act, 1957 on tho basis of turnover which excluded .excise duty. This position w~s not accepted by the Sales Tax Authorities ~and the matter was contested right upto the Supreme Court. The Supreme Coor~ in Mc Dowell & Company Ltd. etc, v. Commercial Tax Officer Vllth Circle, Hyderabad, etc. reported in [1?77] 1 SCR 914 held that the Sales Tax Autho· rities were not competent to include fn the "turnover'' of the appellant, the excise dutr which was not char$ed by it b.ut was paid directly to the Excise A 's c D E F G ff A 8 0 D E F 792 SUPRBME COURT REPORTS · (1985] 3 S.C.R. Authorities by the buyers of the liquor, inasmuch as the excise duty did not go into the common till of the appellant and did not become a part of the cir· culating capital. After the judgment of the Supreme Court Rules 76 and 79(1) of the A.P. Distillery Rules were suitably amended with effect from August 4, 1981. Amended Rule 76(a) provides that "No spirit of liquor" manufactured or stored shall be removed unless the excise duty specified in rule 6 has been paid by a holder of 0 .. 2 licence before such removal and the amended ruli' 79(1) provides that on payment of the excise duty by the bolder of D·2 licence a distillery pass for the removal of spirit fit for human compensation may be granted in favour of any of the named persons therein. The appellant, being a D-2 licerice holder was served with a·notice, on the basis of the amended provisions, by the respondent proposing to include a sum of Rs. 4,49,09,532.40 representing the excis~ duty paid. directly by buyers of appellants' liquor in the appellants, t~rnover for a part of the year 1982·83, Thereupon, the appellant again moved the High Court Tor quashing the said notice. The High Court considered the effect of the amended Rules and held that the prlmary liability to pay excise duty was indisputably of the holder of the D-2 licence. The High Court dismissed the writ p.:tition on the fin(lings (a) that the turnover related to liquor; and (b) that the excise duty which was payable by the appellant but had by amicable arrangement been paid by the buyer was actually a part of the turnover of the appellant and was, therefore, liable to be soJncluded for determining liability for sales tax. When leave was granted by a Division Bench of the Supreme Court to appeal against the judgment of the High Court, the correctness of the decision in appellants' case reported in [1977) I SCR 914, was doubted and the matter was referred to a larger Bench. Dismissing the appeal, the Court, HELD: (Per Chinnappa Reddy, J. (concurring) I.I Much legal sophistry and Judicial exposition both in England and India have gone into the attempt to.differentiate the concepts of tax evasion and tax avoidance and to discover the invisible line ~apposed to exist :wliicb distinguishes one from the other. Tax avoidance, it seems, is legal; tax evasion is illegal. Though initially the law was, and law still is, "there is no equity about a tax. There is no presumption as to a tax. Nothing is to be re3.d in, G nothing is to be implied", during; the period between the two world wars the theory came to be propounded and developed that it was perfectly open for persons to evade (avoid) income tax if they could do so legally. In the wake of. World War II huge profiteering and racketeering becarae the order of the day. something which persists till today but on a much larger scale. Therefore, the attitude of the entire English Courts towards avoidance of tax perceptibly chanH ged and hardened. The march of the law against tax avoidance schemes des .. MC. DOWELL & CO. V. COMMERCIAL TAX OFFICER 793 cribed as magic performance by lawyer turned magician continued and then A came a significant departure from the West-minister and the Fisher Executors principle in 1982 and finally "the ghost of West-ministe~" has been exercised in England. Thus, in the very country of its birth, the principle of West-minister has been given a decent burial and in that very country where the phrase "tax avoidance" originated the judicial attitude towar'ds tax avoidance has changed and the smile, cynical or even atfectionate though it migh.t have been at one B time, has now frozen into a deep frown. The courts are concerning themselves not merely with the g~nuineness of a transaction, but with the intended effect of it for fiscal purposes. No man now can get away with a tax avoidance project with the mere statement that there is nothing illegal about it. [797 G-H, 798 F, 80I C, 807 A-DJ Inland Revenue Cornmissioners v. Fishers Executors, [1_926] AC 395; Inland Revenue Commissioners v. Duke of West-minister, (1936] AC l; Lord Howard De Waidan v. Inland Revenue Commissioners, [194211 KB 389; Latilla v. Inland Revenue Commissioners, (1943] AC 377: Griffiths v. J.P. Harrizan Ltd. [1963] AC 1; Morgan v. Inland Revenue Commissioners, (1963] Chancery 438 ; Pt1b/ic TrusteeJ v. Inland Revenue Commissioners, [1965] Chancery 286; Campbel/ v. ln!and Revenue Commissioners, [1967] Chancery 651 ; Greenberg v. Inland Revenue Commissioners, [1971] 3 All E.R. 136 ; W.T. Ramsay v. Inland Revenue Commissioners, [1982] AC 300: Inland Revenue Commissioners v. Burmah Oil Company Ltd., 1982 STC 30 ; Furniss v; Dawson, [1984] I All E.R. 530 ; Commissioner oi Income tax, Gujarat v. A. Raman & Co., [1968] 1 SCR 10 ; Commissioner ~I Income tax. Gujarat v. Kharwar, 12 ITR 603 referred to. 2. The evil consequence of tax avoidance are manifold : (i) there iS substantial loss of much needed public revenue particularly in a welfare State Hke c D ours ; (ii) there is the serious disturhfl,.nce caused to the economy of the E country by the piling up of mountain.s of blackmoney directly causing inflation ; (iii) there is "the large hidden J6ss" to the community by some of the best brains in the country being involved in the perpetual war waged between the taxavoider and his eicpert team of advisers, lawyers and accountants on the side and the tax-gathered and his perhaps not so skillful, advisers on the other side; (iv) there is the ''sense of injustice and inequalitY which tax avoidance arouses in the breasts of those who are unwilling or unable to profit by it"; and (v) last F but not least is the ethics (to be precise, the lack of it) of trans I erring the burden of tax liability to the shoulders of the guideless, good citizens from those of the "artful doggers". [808 H, 8C9 A-CJ 3. 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 prohibiG ted by the statute, but whether the trans·action is a device to avoid tax, and whether the transaction is such that the' judicial process may accord its approval to it. [809 E-F] Wood Polymer Ltd. v. Bengal Hotels Limited, 40 Company Cases 597 fl:ferred to. H A B c D E F G 794 . SUPREME COURT REPORTS (1985] 3 s.c.R. 4. It is neither fair nor desirable to expect the legislature to intervene. and take care of every device and scheme to avoid taxation. It is upto the Court to take stock to determine tbe nature of the new and sophi!ticated legal devices to avoid tax and consider whether the situation created by the devices could be related to the existing legislation with the aid of 'emerging' techniques of intere pretation, to expose the devices for what they really are and Jo refuse to give judicial benediction. (809 G-H 810 Al W.T. Ram•ay v. Inland Revenue Commissioners, [1982] AC 300 ; Inland Revenue Commi1sioners v. Burmah Oil Company Ltd, 1982 STC 30 ; Furniss v. Dawson, [1984] 1 All B.R. 530 quoted with approval, HELD.: (Per Ranganath Misra, J.) 1. Tax planning may be legitimate provided It is within the framework of Jaw, Colourable devices cannot be part of tax planning and it is wrong to en· courage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resortin.a to subterfuges. (823 G-H, 824 A] Commissioner of Income tax v. A. Raman & Co. (1968) 67 !TR II SC; Commissioner of Income-tax, Gujarat II v. B.M. Kharwar, (1969) 72 !TR 603 SC; Bank ofChettinad Ltd, v. Commi,.Joner of Income-tax, (1940) 8 !TR 522 {PC); Jiyajeerao Cotton Mills Ltd. v. Commissioner of Income Tax and Excess fro./its Tax, Bombay, (1958) 34 !TR 388 (SC) Commissioner of Income Tax v. Silkar/a/ Balabhal (1972) 86 !TR 2 (SC) referred to. Lat/Ila v. I.R. 25 T.C. 107 quOted with approval. 2.1 The incidence of excise duty is directly relatable to manufacture but its collection can be deferred to a Jater stage as a measure of convenience or expediency. [815 A-BJ The Province of Madra• v. M/J. Boddu Paidanna & Sons [1942] ECR 90 ; R.C. Jal/ v. Union of India, [1962] Suppl. 3 SCR 4J;6 : Re. Sea Cnstoins Act, [1964) 3 SCR 787 ; M/s. Guruswamy &: Co. etc. v •. State of Mysore & Ors., (1967] 1 SCR 548: Ju//undur Rubber Goods Manufacturers• Association v. Union o/lndia & Anr. [1970] 2 SCR 68 ; A.B. Abdul Kadir & Anr. v. State of'Kera/a, [1976] 3 SCR 219 referred to. 2.2 On an examination of the prov1s1ons of the A .P. Excise Act, the Rules were framed thereunder and the pronouncement·; of the Supreme. Court, it is clear, that the conclusion of the Court in Mc Dowells & Company Ltd. etc. v. Commmia/ Tax Officer, Vllth Circle, Hyderabad <'!C., [1977] 1 SCll. 914 at page 921 of [1973] 1 SCR, that intending purchasers of the Indian liquors who seek to obtain distillery passes are also legally responsible for payment of the H excise duty is too broadly stated. The "duty was primarily a burden which the r .. Mc. DOWELL & CO. V. COMMERCIAL TAX OFFICER 795 manufacturer.had to bear and even if the purchasers paid the same under the Distillery Rules, the provisions were merely enabling and did. not give rise to any legal responsibility or obli~ation for meeting the burden. [815 B-Dl The change in Rule 76 of the AP Distillery Rules has clearly affirmed the position that liability for payment of excise duty is of the manufacturer and the provisions of rules 80 to 84 do not militate against it. These iules do not detract from the position that payment of excise duty is the primary and exclusive obligation of the manufacturer and if payment be made under a contraCt or arrangement by any other person it would amouat to meeting of the obligation of the manufacturer and nothing more. [815 D~F] 2.3 The definition of"turnover". in section 2(s) of the A.P. General Sales Tax Act, which is to the effect. namely 'the total amount set _out in the bill of sale (or if there is no bill of sale, the total amount charged) as the consideration for the sale or purchase of goods (whether such consideration be cash, deferred payment or any 'other thing or value) including any sums charged by the dealer for anything dolle in respect of goods sold at the time of or before the delivery of the goods and any other sums charged by the dealer. whatever be the des· ctiptioo. name or object thereof" clearly indicates that the total amount charged as the consideration for the sale is to be taken into account for determining the turnover. Where a bill of sale is issued (and obviously the bill has to state the total amount charged as consideration), the total amount set out therein is to be taken into account. In every transaction of sale, there is bound to be a seller at one end and a buyer at the other and transfer of title in the goods takes Place for a considt'ration. (815 H,816 A~C] 2.4 Excise duty though paid by the purchaser to meet the liability of the appellant, is a part of the consideration for th~ sale and is in'cludible in the . turnover of the appellant. The purchaser has paid the tax becau)e the Jaw asks him to pay it on behalf of the manufacturer. Here, admittedly, the bills issued by the appellant did not include the excise duty; Pay1nent of ~xcise dUty is a legal liability of the manufacture, its payment is a condition precedent to the removal of the liquor from the distillery and payment by the purchaser is on account of the manufacturer. According to normal commercial practice:,. excise duty should have been reflected in the bill either as merged in price or being shown separately. As a fact, in the hands of the buyer the cost of liquor is what is charged by the appellant under its hill together with excise duty which the buyer has directly paid on seller's account. The consideration for· the sale iS thus the total amount not what is reflected in the bill. [818 C.F] 2.5 True, the excise duty component of the price would not be an addition to the coffers of the dealer, as it would go to reimburse him in respect of the excise duty already paid by him on the manufacture of the goods. But even sO, it would be part of the sale price·because it forms a component of the consideration for the sale of the goods that the amount representing excise duty would be·payable by the purchaser, There is no other manner of liability, statutory or A B c D E F G H • A B c si:n>REME coullt REPORTS [t98SJ ~ s.c.ft. otherwise, under which the purchaser would be liable to pay the amount of excise duty to the dealer. And on this reasoning, it would make no difference whether the amount of excise duty is included in the price charged by the dealer or is shown as a separate item in the bill, The po5ition is ont different when under a prior agreement, the legal liability of the manufacturer dealer for paym1>nt of excise duty is satisfied by the purchaser by direct payment to the excise authorities or to the State exchequer. {816 G-H, 817 A-DJ 2.6 The conclusion reached in the appellants' case in [19'17] 1 SCR 914 on the second aspect of the matter namely, when the excise duty does not go into the common till of the assessee and it does not become a part of the circulating capital, it does not constitute turnover, is not the decisive test for determining whether such duty wollld constitute "turnover". The relevant conSid~ra tion is not whether the law permits the incidence of the duty to be passed oq to the purchaser but whether there is a prohibition against passing of it. If there . is no bar, the incidence would be passed on to the purchaser in accordance "'ith normal commercial practice. (819 A-C ' 821 B·C] The Province of Madras v. M/s. Boddu Paidanna &: Sons, [1942] FCR 90; RC Jail v. Union of India, (1962] Suppl. 3 SCR 436 ; Re. Sea Customs Act, [1964] D 3 SCR 787 ; M/s, Guruswamy & Co. etc. v. State of Mysore & Ors., (1967] 1 SCR 548 ; Jullundur Rubber Goods Manufacturers' Association v. [Jn/on of India & Anr. [1970] 2 SCR 68 ; A.B. Abbul Kadir & Ors. v. Stare of Kl!ra/a, [1976] 3 SCR 219; referred to. E F G H Hindustan Sugar Mills v. Rafasthan State, (1979] l SCR 276 applied. Paprika Ltd. & Anr. v, Boar Greene, M.R., dealing witll the construction of an anti-avoidance section said : "For years a battle of manoeuvre has been waged between the legislature and those who are minded to throw the (I) [1926] A.C. 39S. (2) (1936] A.C. 1. H (3) [1942] I,KB 389. -·· .. !.ic. boWELL & co. v. coMMERclAL 'tAX 0FF1CER (C. Reddy, ).) 799 burden of taxation off their own shoulders on to those of their fellow subjects. In that battle the legislature has been worsted by the skill, determination and resourcefulness of its opponents of whom the present appellant has not been the least successful. It would nol shock us in the least to find that the legislature has determined to put an and to the struggle by imposing the severest penalities. It scarcely lies in the mouth of the tax payer who plays with fire to complain of burnt fingers.'.' Expressing the same sentiment and dissertating on the moral aspects of tax avoidance Lord Siinon in 'Latilla v~ Inland Revenue Corn1nissioners(1) said, "My Lords, of recent years much ingenuity has been expended in certain quarters in attempting to devise methods of· disposition of income by which those who were prepared to adopf them might enjoy the benefits of residents in this country while receiving the equivalent of such · income without sharing in the appropriate burden of British ·taxation. Judicial dicta may be cited which point out that, however, elaborate and artificial such methods may be, those who adopt them are 'entitled' to do so. There is, of cours.e, no doubt that. they are within their legal rights but that is no reason why their efforts, or those of the professional gentlemen .who assist them in the matter, should be regarded as a commendable exercise of ingenuity or as a discharge of the duties of good citizenship. On the contrary, one result of such methods, if they succeed, is of course to increase pro tanto the load of tax oti the shoul- 'ders of the great body of good citizens who do not desire or do not know how, to adopt these manoeuvres." Jn several cases, Griffiths v. JP Harrizan Ltd.('), Morgan v. Inland A c D E F Revenue Commissioners'(3) Public Trustee v. Inland Revenue CommlsG sloners('), Lord Denning repeatedly ~eferred to tax avoidance schemes (1) [1943] A.C. 377. (2) [1963] A.C. 1. (3) [1963] Chancery 438. (4) U96Sl Chancery 286H A • aoo SUPREME COURT RFPOllTS b9n5J 3 s.c.it. and described them as magic performance by fawyer-turned-magicians. Lord Harman, almost in the same words as Lord Denning described a tax avoidance scheme as one ''which smells a little of the I.mp" and said ''it is a splendid scheme ...... it is almost too good to be true. In law quite too good to be true. It won't do." (Campbe/l v. Inland Revenue Commissioners(l), Stamp J. In re Westem's B Settlements observedc D E .G.,-, " ... There must be some limit to the devices which this Court ought to countenance in order to defeat the fiscal intentions of the legislature. In my judgment these proposals overstep that limit ... ! am not pursuaded with this application represents more than a cheap exercise in tax avoidance which I ought not to sanction as distinct from a legitimate avoidance of liability to taxation." In Greenberg v. Inland Revenue Commissiuners(2), Lord Reid dealing with a scheme for tax avoidance by forward dividend sttipping observed, " .... We seem to have travelled a long way from the general and salutary rule that the subject is not be taxed except by plain words. But I \1'USt recognise that plain words are seldom adequate to anticipate and forestall the multiplicity of ingenious schemes which are constantly being devised to evade taxation. Parliament is very pro-. perly determined to prevent this kind of tax evasion and, if the courts find it impossible to give very wide meanings to general phrases, the only alternative may be for Parliament to do as some other countries have done and introduce legislation of a more sweeping character which will put the ordinary well-intentioned person at much greater risk than is created by a wide interpretation of such provi· sions as those which we are now considering." ........................ (1) [!9671 Chancery, 651. H (2) 1971(3) All ER. 135. ' - .. .. iJc. DOWELL & CO. v. COMr-iERClA.t TA.Ji OFFIC~R. (C. Reddy," J.) SOi "I am inclined to think that the real explanation of A these verbal difficulties may be that, in legislation of such extreme complexity as we have here, it is not humanly possible for a draftsman to preserve that consistency in the nse of language which we generally look for. Indeed, I some· times suspect that our normal meticulous methods of statutory construction tend to lead u' astray by concentrating too much II on verbal niceties and paying too little attention to the provisions read as a whole.'" The march of the law against tax avoidance schemes continned and cam; a significant departure from the West-minister and the f'isha Executors principle. In W.l. Ramsay v. Inland Revenue Commissioners(1), the House of Lords had to consider a scheme of tax avoidance which consisted of a series or a combination of transactions each of which was individually genuine but the result of all of which was· an avoidance of tax. Lord Wilberforce, with great force, observed, "Given that a document or transaction is genuine, the court cannot go behind it to some supposed underlying substance. This is the well-known principle of Inland Revenue Commissioners v. Duke of . Westminister. This is a cardinal principle but it must not be overstated or overextended. While obliging the court to accept documents or transactions, found to be genuine, as such, it does not compel the court to look at a document or a transaction in blinkers, isolated from any context to which it properly belongs. If it can be seen that a document or transaction was intended to have effect as part of a nexus or series of transactions, or as an ingredient of a wider transaction intended as a whole, there is nothing i~ the doctrine to prevent it being so regarded : to do so is not to prefer form to substance, or substance to form. ft is the task of the court to ascertain the legal nature of any transaction to which it is sought to attach a tax or a tax consequence and if that emerges from a series or combination of transactions, intended to operate as such, it is that series or combination which may be regarded. For this there is authority in the (I) (1982] AB 300. c D E F G H A B c D E ' F G H 802 SUPREME COURT RBPORts f19SSJ 3 S.C.R. law relating to income tax and capital gains tax : See Chinn v. Hochstrasser [1981] A.C. 533 and Inland Revenue Commissioners v. Plummer (1980] A.C. 896." "For the commissioners considering a particular case it is wrong and an unnecessary self limitation, to regard themselves as precluded by their own finding that documents or transactions are not "shams", from considering what, as evidenced by the documents themselves or by the manifested intentions of the parties, the relevant transaction is. They are not, under the Wes/minister doctrine or any other authority, bound to consider individually each separate step in a composite transaction intended to be carried through as a whole." Later again he observed, "··· ... For the taxpayers it was said that to accept the revenue's wide contention involved a rejection of accepted· and established canons and that, if so general an attack upon schemes for tax avoidance as the revenue suggest is· to be validated, that is a matter for Parliament. The func- ·tion of the courts is to apply strictly and correctly the legis-. lation which Parliament has enacted : if the taxpayer escapes the charge, it is for Parliament, if it disapproves of the result, to close the gap. General principles against' tax avoidance are, it was claimed, for Pnliament to lay down. We were referred, at our request, in this connec-· tion to the various enactments by which Parliament bas from time to time tried to 9ounter ta~ avoidance by some general prescription. The most extensive of these is Income and Corporation Taxes Act 1970, sections 460 et seq. We were referred also t