9911796707
TMI Blog2002 (11) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... to appreciate the controversy involved, we shall briefly notice the material facts, which are as follows : The first petitioner is a company incorporated on March 9, 1998 with the main object of carrying on the business of collection, processing and disposal of solid municipal waste, etc. The second petitioner is one of the directors of the company. On September 28, 2000 the petitioner received a copy of the notice under section 139 of the Land Reforms Act, addressed to the Administrator, Greater Noida Authority, whereby the amounts due to the petitioner from the authority were attached for the dues of Byford. The said warrant of attachment was challenged by the petitioner in Civil Writ Petition No. 6434 of 2000 before this court. However, during the course of hearing, it was stated by counsel for the sales tax authorities that the said warrant of attachment would not operate against the petitioner. Upon this statement, the writ petition was disposed of vide order dated January 24, 2001. On January 25, 2001, the petitioner was served with a fresh notice, dated January 24, 2001, addressed to the District Collector, Noida, Chairman of Greater Noida, requiring them to remit all amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pposition, it is stated that petitioner No. 1 is one of the companies forming part of Byford group and is owned and controlled by one Shri B. K. Sahni, his family members, including petitioner No. 2 ; the family either directly or through companies controlled by them owned about 99 per cent, of the shareholdings of the petitioner-company ; Byford group consists of six companies including M/s. Byford Motors Limited, Byford Leasing Limited and the petitioner. It is pointed out that for the purpose of raising capital of the petitioner-company, Byford Motors, by a book entry transferred 8,44,500 shares of Byford Leasing to the petitioner and the petitioner, in turn, transferred its 8,44,500 shares to Byford Motors ; the said B. K. Sahni, father of petitioner No. 2 and his family members are the directors in all the group companies owned and controlled by him and other shareholders, besides having very marginal and nominal shareholding in the companies forming part of Byford group are also persons related and associated with them ; the said B. K. Sahni and his family controlled companies have withdrawn more than Rs. 1 crore from Byford under the head "Advance recoverable" and are using ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attachment was issued against Byford on February 1, 2000, learned counsel for the respondents has invited our attention to various documents placed on record. In support of his plea that the corporate veil could be lifted even in the absence of any statutory provision, learned counsel has placed reliance on PNB Finance Limited v. Shri Shital Prasad Jain [1983] 54 Comp. Cas. 66 (Delhi), Ravi Kant v. National Consumer Disputes Redressal Commission [1997] 89 Comp. Cas. 471 (Delhi); [1997] 40 DRJ 775, Commissioner of Income-tax, Calcutta v. Associated Clothiers Ltd., Calcutta, AIR 1963 Cal 629, Commissioner of Income-tax, Madras v. Sri Meenakshi Mills Ltd. [1967] 63 ITR 609 ; AIR 1967 SC 819, Juggiltd Kamlapat v. Commissioner of Income-tax, U. P. [1969] 73 ITR 702; AIR 1969 SC 932, State of U.P. v. Renusagar Power Co. AIR 1988 SC 1737 ; [1991] 70 Comp. Cas. 127 and Life Insurance Corporation of India v. Escorts Ltd. [1986] 59 Comp. Cas. 548 ; AIR 1986 SC 1370. Lastly, it was submitted that the scope of judicial review being very limited, on the facts of the case, particularly in view of the conduct of the petitioner in trying to hoodwink the department, this court may not interfere wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses an additional liability on the transferee. It is evident from the language of the section that it is in a way supplementary to section 3 of the Act, which is the charging section, because it imposes an additional liability on the transferee while reserving the liability of the transferor to discharge the same. In our view, the tax liability of the dealer, which can be fastened on the transferee is the tax which remains unpaid in respect of the business transferred. Thus, what the section postulates is that if a transferor-dealer, at the time of the transfer, has failed to discharge any obligation in respect of the business transferred by him, the transferee-dealer would also be liable to discharge that obligation in the same manner and to the same extent as if he were the transferor-dealer himself. In other words, transferee-dealer's liability is co-extensive with the liability of the transferor-dealer to pay tax in respect of the business transferred. Alternatively put, if the transferor-dealer had no liability to pay tax in respect of such business, there would not be any liability on the transferee. Therefore, in our view, the scope of the section cannot be enlarged to inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We will notice a few decisions which are directly on the point. In Meenakshi Mills' case [1967] 63 ITR 609 ; AIR 1967 SC 819, while dealing with a situation arising under the Income-tax Act, which does not contain any specific provision regarding lifting of corporate mask, their Lordships of the Supreme Court observed that: "It is well-established that in a matter of this description the income-tax authorities are entitled to pierce the veil of corporate entity and to look at the reality of the transaction. It is true that from the juristic point of view the company is a legal personality entirely distinct from its members and the company is capable of enjoying rights and being subjected to duties which are not the same as those enjoyed or borne by its members. But, in certain exceptional cases, the court is entitled to lift the veil of corporate entity and to pay regard to the economic realities behind the legal facade". In State of U. P. v. Renusagar Power Co., AIR 1988 SC 1737; [1991] 70 Comp. Cas. 127, the apex Court observed as follows : "It is high time to reiterate that in the expanding of horizon of modern jurisprudence, lifting of corporate veil is permissible. Its fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional cases, which would embrace those cases where the corporate entity is used for tax evasion or to circumvent tax obligation, the court is entitled to lift the corporate veil and to pay regard to the economic realities behind the legal facade. If the situation so demands and for the ends of justice the corporate personality itself may be disregarded. It is thus, well-settled that the corporate veil can be cracked open even in the absence of a statutory provision, when it is felt that the corporate entity is being used as a device or cloak to circumvent tax obligations or as an instrument of fraud. Coming to the facts in hand, we are of the view that the finding of the Collector that the business of solid waste management was transferred by Byford to the petitioner with a view to evade payment of outstanding sales tax dues and, further, the business of the said two companies is so enmeshed and intermingled that these two companies can be considered to be one and the same entity, operating through its "head and brain" B. K. Sahni, is well-founded. As noted above, the petitioner is shareholder of Byford and the 84,45,000 shares held by it have not been purchased but acquired by e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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