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Dealing with the contention urged on behalf of the Revenue that the contract between its tenant and Reliance is sham.

It is submitted that the finding of the AO was reversed in appeal by the CIT(A). The Revenue did not challenge the same before the Tribunal. Once that was not an issue before the Tribunal it is now not open to the Revenue to raise the questions that the contract was a sham.

Questions "A" and "B" do not arise from the order.

6. We have given our anxious consideration to the matter. Considerable time was spent as to whether there has been a departure from the ratio decidendi in McDowell & Co. Ltd. v. CTO in the case of Union of India and Anr. v. Azadi Bachao Andolan and Anr. (2003) 184 CTR (SC) 450 : (2003) 263 ITR 706 (SC). We may address ourselves to that issue. The judgment in McDowell & Co. (supra) was of a Constitution Bench. The majority judgment insofar as the issue of colourable exercise and tax planning observed as under:

In Azadi Bachao Andolan (supra) the issue arose out of Taxation Treaty between India and Mauritius. A learned Bench considered some observations made by Chinnappa Reddy, J. specially on the applicability of principles set out in Westminster, but after having so said, the Court addressed itself as to what was the ratio in McDowell (supra) and was pleased to observe as under:
The Court nowhere said that every action or inaction on the part of the tax payer which results in reduction of tax liability to which he may be subjected in future, is to be viewed with suspicion and be treated as a device for avoidance of tax irrespective of legitimacy or genuineness of the act; and inference which unfortunately, in our opinion, the Tribunal apparently appears to have drawn from the enunciation made in McDowell & Co. Ltd. v. CTO . The ratio of any decision has to be understood in the context it has been made. The facts and circumstances which lead to McDowell's decision leave us in no doubt that the principle enunciated in the above case has not affected the freedom of the citizen to act in a manner according to his requirements, his wishes in the manner of doing any trade, activity or planning his affairs with circumspection, within the framework of law, unless the same fall in the category of colourable device which may properly be called a device or a dubious method or a subterfuge clothed with apparent dignity.
(emphasis, italicised in print, supplied).
The Supreme Court has thus explained as to how it is understood the law laid down in McDowell (supra). There is, therefore, no departure from the law laid down in McDowell & Co. Ltd. (supra) in Azadi Bachao Andolan (supra). In our opinion, therefore, the ratio of McDowell (supra) as understood by the Supreme Court in Azadi Bachao Andolan (supra), is the law, considering that that is how the Supreme Court understood the ratio decidendi of the judgment in McDowell & Co. Ltd. (supra). In our opinion, therefore, it is not possible to contend that there is departure on the principles laid down in McDowell & Co. Ltd.