Purpose of transaction not presumed tax avoidance where objective evidence is lacking; burden lies on revenue, outcome favours taxpayer.

Whether the main purpose of a family-partition and partnership reconstitution was tax avoidance was examined; the Court applied the principle that the revenue bears the burden to prove tax evasion as the dominant objective and that timing or unexplained conduct alone is insufficient. The tribunal must infer evasion from facts or circumstances that reasonably point to that purpose; a plausible innocent explanation shifts the evidential burden back to the department. On the facts, absent direct or inferential material proving avoidance, the Court found no basis to treat the transactions as motivated primarily by Excess Profits Tax avoidance, favouring the taxpayer.

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Issues: Whether there was material to justify the opinion that the main purpose of the transaction (splitting up the family business and reconstituting partnerships) was the avoidance or reduction of Excess Profits Tax liability.

Analysis: The Court examined the facts of the family partition and subsequent reconstitution of partnership firms, the explanations offered by the assessee (age and inactivity of the older partner, sentimental retention of a nominal share, and the practical necessity of splitting the business given changed partner interests), and the absence of direct evidence proving tax-avoidance as the main purpose. The Court applied the principle that the burden of proving an objective of tax evasion rests on the department and that mere timing of an alteration or the assessee's failure to satisfy the tribunal with an explanation does not, by itself, establish that the main purpose was evasion. The Court considered analogous authority on shifting burdens where a plausible innocent explanation is given and emphasised that the tribunal must rely on facts or circumstances that reasonably infer tax evasion rather than infer it from unexplained conduct alone.

Conclusion: There was no material before the Appellate Tribunal to justify the opinion that the main purpose of the transaction was avoidance of Excess Profits Tax; the question is answered in favour of the assessee.

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