High Court of Delhi · Judgments and reasoned final orders
Principal Commissioner of Income Tax, Central-1, Delhi v. Pradeep Wig & Neera Wig (Batch of 14 Appeals)
ITA Nos. 681, 697, 698, 700, 701, 702, 703, 708, 709, 710, 712, 725, 726 & 727 of 2025 ·
Impermissibility of piercing the corporate veil or invoking 'substance over form' in a Section 153A assessment (AYs 2011-12 to 2017-18) to tax rental income and capital gains from London residential flats owned by a BVI/UK company (Carmichael Capital Ltd.) in the personal hands of its Indian resident shareholders where equity remittances were made lawfully under the RBI Liberalised Remittance Scheme (LRS) and no dividend was distributed.
1. FACTS OF THE CASE
During a search on 02.03.2017 at the residence of Pradeep Wig and Neera Wig (husband and wife), documents were found relating to three London flats (Flats 53, 61 & 63, Eaton House, Upper Grosvenor Street, London) owned by Carmichael Capital Ltd., a foreign company in which the respondents were shareholders and whose share capital had been remitted from India through banking channels under the RBI's Liberalised Remittance Scheme (LRS) supplemented by UK bank loans. For AYs 2011-12 to 2017-18, the AO pierced the corporate veil and taxed the rental income and capital gains earned by Carmichael Capital Ltd. directly in the personal hands of the two individual shareholders. The ITAT by common order dated 29.04.2025 allowed all 14 appeals of the assessees.
2. DISCUSSION BY THE COURT
In a comprehensive 13-page judgment, the Division Bench held that: (1) A company is a distinct juristic entity separate from its shareholders, and the properties in London were legally owned, mortgaged, leased, and sold by Carmichael Capital Ltd., which had been capitalized openly through RBI-approved LRS remittances disclosed in the assessees' balance sheets; (2) A shareholder has no legal right to the income or assets of a company unless and until dividend is declared or assets are distributed upon liquidation; (3) The AO's attempt to invoke 'substance over form' or pierce the corporate veil was wholly misconceived, as investing abroad through a corporate vehicle to limit personal mortgage liability in the UK is legitimate commercial structuring and neither tax evasion nor a sham; and (4) Tax under a fiscal statute cannot be levied by importing a Controlled Foreign Corporation (CFC) deeming fiction not enacted by Parliament in the Income-tax Act, 1961.
3. JUDICIAL DECISION
Dismissing all 14 Revenue appeals (ITA 681/2025 & connected appeals), the High Court affirmed the ITAT's common order dated 29.04.2025.
4. OUTCOME
Assessee - All 14 Revenue appeals dismissed; foreign company's UK rental income and capital gains held non-taxable in individual shareholders' hands.
5. AKHB REVIEW POINT
Where Indian residents incorporate a foreign company using RBI-approved LRS remittances and foreign bank borrowings to acquire and lease overseas real estate, the rental and capital gains income belongs exclusively to the foreign company and cannot be taxed in the shareholders' hands in the absence of dividend distribution or a statutory CFC provision.
Source and verification
13-page official High Court of Delhi judgment PDF (DLHC010971582025_1_2026-04-24.pdf, 705,155 bytes).
Original PDF: 13 pages · SHA-256: 2fce54da045de1f3e6b8df5550833e22b70bdd0e61bb95f6bbd215b60a3c07bc
Supplied source-reviewed note retained; original bytes and identity validation checked in this release. Substantive re-review is not claimed for this record.
Applies Sections 5, 6(3), 22, 45, and 153A of the Income-tax Act, 1961 for AYs 2011-12 to 2017-18. Income-tax Act, 2025 equivalence is not verified.
Full 13-page primary judgment PDF text read and verified page-by-page. Landmark 13-page judgment on separate corporate personality of offshore investment companies funded through RBI-approved LRS remittances and absence of Controlled Foreign Corporation (CFC) deeming rules in the Income-tax Act, 1961.
AI disclosure and professional disclaimer
AI-assisted source review. Independent human approval is not represented.
General research only. Read the complete judgment and verify applicable law and subsequent treatment before reliance.