Case Law Details
Richter Holding Ltd Vs. ADIT, DDIT and Union of India (Karnataka High Court), Writ Petition No. 7716/ 2011
The Vodafone controversy continues – To determine tax ability of acquisition of shares of a non-resident company holding majority shares in an Indian company by another non-resident, it may be necessary for the fact finding authority to lift the corporate veil to look into the real nature of transaction to ascertain virtual facts.
Facts:
Richter Holding Ltd (the assessee), a company incorporated in Cyprus, purchased 60% of shares in Finsider International Company Ltd (FICL) register in UK from another UK company called Early Guard Limited (EGL). FICL was holding 51% shares of Sesa Goa Ltd (SGL), an Indian Company. The assessee and West Globe Ltd., a company incorporated in Mauritius, had entered into an agreement for purchase and acquisition of all the shares of FICL on 23.04.2007 from EGL for a consideration of US $ 981 million.
On 13.3.2009, a writ petition was filed by SGL against notice issued by the Revenue to treat it as an Agent under section 163 of the Income Tax Act (the Act) proposing to tax the sale proceeds realized on sale of shares of FICL by EGL to the assessee and WGL under the head ‘Income from Capital Gains’. Since the Revenue intended to withdraw the notice issued against SGL, the High Court disposed off the said writ petition as withdrawn.
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Keeping in mind the historical background, rather its origin, one feels that, neither Vodafone, being the first court case of its kind, nor any of the other Indian tax cases which have come to be widely discussed with reference to the Vodafone case, can be strictly regarded to have been considered by invoking the principle of – ‘lifting the corporate veil’ (in fact, the term often more appropriately used is – ‘piercing the corporate veil’). To put it differently, in most of these court cases of recent origin, the issue might be said to be rested on the controversy – whether or not the true nature of the given transaction(s) should be ascertained wholly and necessarily having regard to the actual / factual terms of the related contract agreement (s). Thus, the real ‘battle of wits’ is one of – Form vs Substance.
For an analytical study, and an appreciation of the above comment, the following material in public domain may be of help:
Lifting the corporate veil definition
Articles piercing the corporate veil
Fdcc quarterly piercing the corporate veil
Fdcc quarterly separate corporate personality piercing
Separate corporate personality articles