Colourable device in building transfer cannot defeat luxury tax where the assessee effectively enjoys the whole property.

A transfer of the first floor of a residential building to the assessee's spouse did not reduce the assessable area for luxury tax under section 5A of the Kerala Building Tax Act, 1975, because the building had already exceeded the statutory limit and continued to be effectively enjoyed as a whole by the assessee. The Court treated the arrangement as a colourable device to evade tax, not legitimate tax planning, and held that such a transfer cannot defeat luxury tax liability. The claim to avoid tax on that basis was rejected.

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Issues: Whether transfer of the first floor of a residential building to the assessee's spouse reduced the assessable area so as to the liability to luxury tax under section 5A of the Kerala Building Tax Act, 1975.

Analysis: The building had originally exceeded the statutory area limit and had already been assessed to luxury tax. The subsequent transfer of a portion of the building to the assessee's wife did not alter the real position that the building continued to be enjoyed as a whole by the assessee. A transaction structured to reduce liability in this manner was treated as a device to evade tax rather than legitimate tax planning. The reasoning rested on the settled principle that colourable devices and tax evasion cannot receive judicial approval, whereas lawful tax planning within the framework of the statute alone is permissible.

Conclusion: The claim to escape luxury tax liability on the basis of the transfer was rejected, and the issue was decided against the assessee.

Ratio Decidendi: A transfer of a portion of a building to a close relative does not defeat luxury tax liability under section 5A where the transaction is a colourable device to evade tax and the building continues to be effectively enjoyed as a whole by the assessee.

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