Legitimate Tax Planning upheld where sale and lease transactions were found not to be sham or colourable devices.

Sale and lease transactions were examined to determine whether they were sham arrangements or colourable devices aimed at reducing tax liability. The analysis accepted that consideration was received and lease rentals were paid, and held that mere tax reduction did not, by itself, render the arrangements impermissible. Legitimate tax planning within the law remained permissible, and the principle associated with McDowell applied only where a colourable device or subterfuge was shown. On the facts found by the Tribunal, no material established that the transactions fell outside permissible tax planning, so they were not treated as sham and no substantial question of law arose.

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Issues: Whether the assessee's sale and lease transactions were sham arrangements or colourable devices to reduce tax liability, and whether any substantial question of law arose for interference under section 260A of the Income-tax Act, 1961.

Analysis: The sale consideration was received and lease rentals were paid, and mere reduction of tax liability did not by itself make the arrangement sham. Legitimate tax planning within the framework of law remained permissible, and the later understanding of McDowell reinforced that colourable devices alone could be disregarded. On the facts found by the Tribunal, no material showed that the transactions were outside the permissible limits of tax planning or that any subterfuge was adopted.

Conclusion: The transactions were not shown to be sham or a colourable device, and no substantial question of law arose.

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