Former chief justice of India J S Verma has termed the Supreme Courts judgment in the Vodafone tax case as one of its three judgments which are best forgotten or allowed to pass.
Verma had first criticised the judgment on Saturday when he spoke at the launch of the book My Experience with the office of Additional Solicitor General of India by former ASG Bishwajit Bhattacharyya.
On Thursday, speaking to The Indian Express at his Noida home, the jurist spelt out why he felt the Vodafone judgment delivered on January 20 by a bench headed by then CJI S H Kapadia deserved to be clubbed with the controversial judgments of the apex court in the habeas corpus case during the Emergency often referred to as the lowest point in the history of Indian judiciary and the JMM bribery case.
At the book launch, I said I agreed with the analysis of Bishwajit Bhattacharyya as to why the judgment was incorrect on merits. But, I have some other reasons why I dont think this judgment to be correct or appropriate in law, Verma said. The first reason is that, in my understanding, the three-judge judgment in Vodafone bypasses a five-judge constitution bench judgment in the McDowell matter in 1985. The McDowell judgment in substance said that in this context what you have to see is the substance of the transaction to determine the tax liability and not merely the form of the transaction. But, as far as I understand the Vodafone judgment, the court has said the opposite. They (judges) have gone by the form and not the substance. According to me that is not the correct position, he said.
The Supreme Court, in its landmark judgment in the McDowell case, had said that behind every tax law there was as much moral sanction as behind any other welfare legislation and that it is neither fair nor desirable to expect the legislature to intervene and take care of every device and scheme to avoid taxation.
Asked about the other reasons why he was not convinced with the Vodafone judgment, Verma said, The moral foundation is as much available to tax laws as it is to welfare legislation. It is therefore necessary that while interpreting taxation laws you have to bear that fact in mind. Also, see the implication. While the law permits legitimate avoidance of tax by tax planning, illegitimate tax avoidance by