TaxTMI 
TaxTMI 
2014 (2) TMI 1292
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....ertificate of commencement of business as on 17.9.1992. The company was engaged in the business of secondary market operations and project consultancy and, thereafter, started its activity of equipment leasing. The company came out with its public issue of equity shares on 18.6.1996. It is averred that the prospectus of the company provides details of the company. The petitioner resigned from the company on 31.5.2000 due to change in the management. For the assessment year 1996-1997, amount of tax demanded from the company was to the tune of L 53,18,694/. In view of the petitioner being the director of the said company at the relevant point of time, a show cause notice was issued under section 179 on 17.11.2004 proposing to recover such arrears of tax from the petitioner. Vide its reply dated 26.11.2004, it was contended by the petitioner that such notice is not maintainable as the company was a public limited company and provisions of section 179 would not be applicable. The Assessing Officer however, passed an order on 11.1.2005 holding the petitioner jointly and severally liable for such tax demand and a consequent notice was issued on 31.1.2005 to recover said amount. The pet....
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....atus code in column No.8 was shown as 13. Code 13 stands for a domestic company which is not a company in which the public are substantially interested and during the period relevant to the assessment year concerned, the assessee company had not raised any public issue. He therefore, urged that the Court may not interfere as requested for. 6. On thus hearing both the sides, as also considering the pronouncements on the subject we are of the opinion that the petition deserves to be allowed for the reasons to follow hereinafter. 7. As could be noticed from the materials on record, the petitioner herein was the director of the company which was originally incorporated as Ravit Vinimay with the Registrar of Companies, Gujarat on 19.8.1992. It obtained certificate of commencement of business on 17.9.1992. The company changed its name from Ravit Vinimay to Lanzorate Finance (India) Limited and was registered with Registrar of Companies vide certificate dated 14.12.1995. The petitioner also brought on record a certificate issued by the ROC, being the certificate of incorporation as also the certificate of commencement of business and further changed the name to Lanzorate Finance (India)....
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....evenue is not in a position to recover, every person who was a director of the private company, during such relevant previous year would be jointly and severally liable for the payment of such tax, unless he proves that non recovery could not be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. Subsection (2) of section 179 of the Act also provides the situation that where the private company converted into public company and the tax in respect of private company could not be recovered, nothing contained in subsection (1) would be applicable to any person who was a director of such private company in relation to any tax due in respect of any income of such private company assessable for any assessment year commencing before the 1st day of April, 1962. 11. This Court in Special Civil Application NO.1921/2005 (Radhey Mohan Sharma v. Dy. CIT (OSD) (2014) 184 Comp Cas 358 (Guj) referred to some of the decisions and held thus : "4. This Court in the case of Pravinbhai M. Kheni v. Assistant CIT reported in (2013) 353 ITR 585 (Guj) Central Circle 2 and others, reported in 353 ITR 585, had an occasion to deal with the l....
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....ty is only to create a smoke screen to defraud the revenue and shield the individuals who behind the corporate veil are the real operators of the company and beneficiaries of the fraud, the Courts have not hesitated in ignoring the corporate status and striking at the real beneficiaries of such complex design. 17. Section 179 of the Act itself is a statutory creation of piercing of corporate veil. Ordinarily, directors of a company even that of a private company would not be answerable for the tax dues of the company. Under subsection (1) of section 179 of the Act, however, subject to satisfaction of certain conditions, the directors can be held jointly and severally liable to pay the dues of the company. 18. In the present case, however, the Revenue desired to apply the principle of lifting the corporate veil in case of a public company and seeking to resort to provisions contained in section 179 of the Act. In our view if the factors noted by the Assistant Commissioner are duly established, there is no reason why such double application of lifting the corporate veil one statutorily provided and other due to emergent need of the situation, cannot be applied. As noted above, th....
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....aspect and on considering the material on record, the Court did not find any need to permit the said request of lifting the corporate veil by holding thus : "23. From the ratio discussed hereinabove, it needs to be examined whether any of the two situations specified in the said decision exist on the record. Firstly, whether the statute itself so permits or provides for lifting of veil and secondly, whether the facts are so glaringly emerging on record whereby it can be found that with a view to defeat the interest of the Revenue, attempt is made by creating complexity of the facts. In the instant case, therefore, in other words, what needs to be examined is whether with a view to defeat the interest of the State some of the real beneficiaries have created complex design and web and have chosen to hide behind the corporate veil. Section 179 of the Act itself is a creation of the statute whereby the corporate veil can be pierced and original Directors of the Private Limited Company could be held liable for the outstanding tax dues of the Company. The statute, however, has created a situation whereby they can be jointly and severally held liable. In the instant case, the facts are ....
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....dues of the company for the aforesaid years to the tune of L 297 lakh. It is not in dispute that the petitioner ceased to act as a director of the Company from September, 1997. 8. With regard to the outstanding dues of the company for the assessment years 1995-96, 1996-97 and 1997-98, the Company being a Public Limited Company from May 25, 1992 the certificate of incorporation having come, the very issuance of the notice cannot be sustained unless, of course, as provided in the case of Pravinbhai Kheni v. CIT (2013) 353 ITR 585 (Guj)(supra) and followed thereafter, in the case of Sandeep A. Mehta v. ITO (supra) there are glaring facts which would permit the lifting of the corporate veil. In the present case, as could be noticed, those foundational facts are completely missing. It is not even the case of the Revenue that such claim exist warranting lifting of veil. Except non-full fillment of the obligation by the Company of the tax demands that had arisen as a result of the assessment of all these years, nothing comes on record for the Court to permit the piercing of corporate veil. The petitioner being the director of the public limited company, this provision is non applicable.....