TaxTMI 
TaxTMI 
2026 (4) TMI 1794
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....ondents-assessees for Assessment Year 2011-12 to 2017-18. 2. The basic question which is involved in these appeals is, as to whether the Assessing Officer (AO) was legally justified in taxing the rental income and capital gain arising out of properties owned by the company in which respondents were the shareholders. 3. Shorn of unwanted details, the facts relevant for the present purposes are that on 02.03.2017, a search was conducted at the residence of the respondents, who are husband and wife. During the course of search, the officers of the Department found certain papers containing details of expenditure incurred for upkeep, sale, purchase, renovation, maintenance furnishing and leasing of the house properties viz. Flat Nos. 53, 63 & 61 Eaton House, 39-40, Upper Grosvenor Street, London Wlk 2NG, owned by Carmichael Capital Limited (hereinafter referred to as 'CCL'), a company incorporated in British Virgin Islands. 4. Since all the shares of said company (CCL) were held by the respondents and their daughters namely, Mr. Pradeep Wig, Mrs. Neera Wig, Ms. Sonu Wig, Mrs. Neela Kothari and Ms. Gauri Wig having 20% shareholding each in the said company, (CCL) the Assessing ....
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....als so far as the taxability of company's income in assessees' hands is concerned. He, however, allowed other grounds and gave some relief to the assessees. 9. Against the above-referred order dated 26.02.2021, the assessees, so also the Department preferred appeals before the Tribunal which were heard and decided by the common judgment and order dated 29.04.2025. The Tribunal allowed the appeals of the respondents for AY 2011-12 to 2017-18, so far as the issue under consideration is concerned. The common order of the Tribunal qua 14 appeals has been challenged by the appellant-Department under Section 260A of the Act of 1961. 10. While passing the order, the Tribunal held that the respondents were not the 'beneficial owners' of the property or assets of CCL and, therefore, neither any income arising from the property of the said company as capital gain nor any other income of the company such as rent or bank interest was assessable in the hands of the respondents-assessees or any of their family members who might have held shares in the said company. 11. Mr. Puneet Rai, learned Senior Standing Counsel for the Department, argued that the AO had pierced the veil and found t....
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....s of the company. 17. Heard learned counsel for the parties. 18. The way the transactions have been portrayed by the AO gives an impression as if, the respondents have adopted a ploy to avoid, if not evade, the tax under the Act of 1961. But if the factual matrix is examined in its entirety and from the lens of a common man or investor, it transpires that the respondents had invested in shares of the company namely CCL, registered under the provisions of law in the British Virgin Islands. The said company having obtained loan from the banks subsequently purchased properties and having earned rental income for three-four years, had sold the properties at a higher value. Hence, it is the company namely, CCL which earned rental income and generated gain for itself on account of appreciation in the value of the property it had purchased. 19. Since the company so also the properties are/were situate within the precincts of the United Kingdom, tax if any, is/was payable under the laws of the United Kingdom. The AO had taken it to be a device, essentially because the respondents happened to hold 100% shares of the said company. Whereas the Tribunal examined the entire material an....
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....rpose of acquiring the properties in UK falls on the face of it as the company CCL, was incorporated on 9th March, 2005 whereas the first property was acquired in London by the said company on 14/02/2008 and both the properties had been sold on 04/08/2014 before even conceptualization of the BMA or the beneficial ownership provisions in the Income-tax Act w.e.f. AY 2016-17. Thus, the Revenue has no case to make any such allegation as at the time of incorporation of the company or acquiring the properties the concept of beneficial holders under the Income-tax Act was absolutely absent rather not concealed of. 47. Then we find that the 3 daughters of the assessee were majors and those shares were registered in their own names only with no beneficial interest of anyone else. No evidence has been brought on record by the AO that the daughters ever tried to exit from their respective interest in their shareholdings in favour of the assessee. It is also seen that Ms. Sonu Wig, one of the daughters of the assessee was an NRI rather became British citizen, holding a British passport since the year 2013 and was residing in the said property overseas off and on That only shows natural course....
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....enue to allege and establish abuse, in the sense of tax avoidance in the creation and/or use of such structure(s). In the application of a judicial anti-avoidance rule, the Revenue may invoke the "substance over form" principle or "piercing the corporate veil" test only after it is able to establish on the basis of the facts and circumstances surrounding the transaction that the impugned transaction is a sham or tax avoidant. To give an example, if a structure is used for circular trading or round tripping or to pay bribes then such transactions, though having a legal form, should be discarded by applying the test of fiscal nullity. Similarly, in a case where the Revenue finds that in a holding structure an entity which has no commercial/business substance has been interposed only to avoid tax then in such cases applying the test of fiscal nullity it would be open to the Revenue to discard such inter positioning of that entity. However, this has to be done at the threshold. xxxx xxxx xxxx xxxx 100. Be that as it may, did HTIL possess a legal right to appoint Directors onto the board of HEL and as such had some "property right" in HEL? If not, the question of such ....
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....ct and to sue and be sued, by the said name. 24. If the facts of the case are tested on above legal position, we find that the Tribunal has dealt with the facts, law and evidence in their correct perspective. We have gone through the findings of the Tribunal and have examined the facts ourselves. We are of the considered view that the respondents' investment in purchase of shares of CCL cannot be said to be in violation of any of the provisions of law, including the Act of 1961, for following reasons: (i) The company (CCL) is registered in British Virgin Islands and the properties were situate in the United Kingdom, tax if any, is payable under the laws of the United Kingdom. (ii) The shares in the company were acquired by the respondents and the amount towards share capital was sent through proper banking channels and remitted under the permitted Liberalised Remittance Scheme (LRS) of the RBI. (iii) As the remittance were permitted under permitted LRS of the RBI, it can safely be presumed that there was a valid approval for acquiring shares in the company. (iv) Apart from its own source, the company took loans from HSBC bank in the United Kin....