Question

Judge Learned Hand, stated in the Helvering v. Gregory case, that: “Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury, there is not even a patriotic duty to increase one’s taxes.” Do you agree with this quote? Do you believe there is a gray area between “tax planning” and “tax avoidance”?

Answer 1

Yes, I do agree with the quote as over and over again court have said that there is nothing sinister in so arranging affairs so as to keep taxes as low as possible. Everyone does it rich and poor alike and all do right, nobody owes any public duty to pay more than the law demands.

No, there is a gray area between tax planning and tax avoidance.

Reason :- Tax planning is described as the arrangement of financial activities in a way that the person can avail maximum tax benefits, i.e deductions, exemptions, etc.Tax planning is completely legal because it does not involve taking advantage of the loopholes in the law, and so it is permissible.

On the other hand tax avoidance is a technique of refraining from tax liability, it intends to defeat the fundamental motive of the legislature. Tax avoidance is as evil as evasion and even attracts penalty when discovered. Tax avoidance is accomplished with a malafide motives.