Corporate veil can be lifted if Company is used as a means to evade tax

Hc held that opinion that such a huge tax evasion cannot be so lightly permitted on account of any hyper-technicality. The concept of lift or piercing of corporate veil, as sometimes referred to as cracking the corporate shell, is applied by the Courts sparingly.  However, it is recognized that boundaries of such principle have not yet been defined and areas where such principle may have to be applied may expand. However, principally, the concept of corporate body being an independent entity enjoying existence independent of its directors, is a well known principle. However, with ever developing world and expanding economic complexities, the Courts have refused to limit the scope and parameters or areas where corporate veil may have to be lifted. Two situations where such principle is consistently applied are one, where the Statute itself so permits and second, where due to glaring facts established on record, it is found that a complex web has been created only with a view to defraud the revenue interest of the State and if it is found that incorporation of an entity is only to create a smoke screen to defraud the revenue and shield the individual who behind the corporate veil is the real operator of the company and beneficiary of the fraud, the Courts cannot hesitate in ignoring the corporate status and strike at a real beneficiary of such complex design. The background of present fact is such that we are not hesitant in any way to apply this principle and are also in conformity with the decision of revenue in applying such a principle and pass a justified order.