Pr. Commissioner Of Income Tax, Central-1, Delhi vs Neera Wig

$~2 to 15
IN THE HIGH COURT OF DELHI AT NEW DELHI *
th
Decided on: 24 April, 2026
+ ITA 681/2025
+ ITA 725/2025
+ ITA 726/2025
+ ITA 727/2025
+ ITA 697/2025
+ ITA 698/2025
+ ITA 700/2025
+ ITA 701/2025
+ ITA 702/2025
+ ITA 703/2025
+ ITA 708/2025
+ ITA 709/2025
+ ITA 710/2025
+ ITA 712/2025
PR. COMMISSIONER OF INCOME TAX, CENTRAL-1, DELHI
.....Appellant
Through: Mr. Puneet Rai, SSC with Mr.
Ashvini Kr. & Mr. Rishabh Nangia,
JSCs & Mr. Nikhil Jain, Adv.
versus
PRADEEP WIG
NEERA WIG .....Respondents
Through: Mr. Sachit Jolly, Sr. Adv. with Ms.
Shreya Jain, Mr. Gaurav Tanwar &
Mr. Abhyudaya Shankar Bajpai, Mr.
Sohum Dua, Advs
CORAM:
HON'BLE MR. JUSTICE DINESH MEHTA
HON'BLE MR. JUSTICE VINOD KUMAR
J U D G M E N T
Per DINESH MEHTA, J. (ORAL)
1. The captioned appeals have been filed by the Principal Commissioner
of Income Tax, Central-1, against a common judgment and order dated
Signature Not Verified
Digitally Signed
By:NAVEEN KUMAR
Signing Date:28.04.2026
11:43:27
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29.04.2025 passed by the Income Tax Appellate Tribunal, Delhi, Bench-„E‟,
New Delhi (hereinafter referred to as the „Tribunal‟) with respect to 14
appeals decided by the Tribunal, which were filed by the respondents-
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 Officer added
not only the income from house property amounting to Rs.1,08,12,485/- but
also the income from capital gains arising out of sale of the property to the
tune of Rs.5,91,25,912/-; the same was however rectified to Rs.
3,70,84,034/-.
Signature Not Verified
Digitally Signed
By:NAVEEN KUMAR
Signing Date:28.04.2026
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5. While framing the assessment for different years, the Assessing
Officer recorded that the entire investment in the said company (CCL) was
made by the respondents, who are residents of India. Though he found that
the payments were made from their declared sources and under permitted
Liberalized Remittance Scheme ( hereinafter referred to as „LRS‟ ) of the
Reserve Bank of India ( hereinafter referred to as „ RBI‟ ) from time to time,
he concluded that the respondents-assessees were the real beneficial owner
of the company‟s assets and thus liable to pay tax under the Income Tax Act,
1961 (hereinafter referred to as the „Act of 1961‟).
6. The assessees‟ stand was that earlier there were five shareholders in
the company holding equal shares at 20% each, namely, Mr. Pradeep Wig
and Mrs. Neera Wig, and their daughters, Ms. Sonu Wig, Mrs. Neela Kothari
and Ms. Gauri Wig. So far as Ms. Sonu Wig is concerned, she was an NRI
during relevant period prior to becoming a British citizen and did not have
any income in India and thus was not obliged to file any return of income in
India.
7. The AO invoked Explanation 4 to Section 139(1) of the Act of 1961
and took into account the information received from the competent
authorities of Singapore. He has taken a view that there is no difference in
ownership of the company (CCL) and the ownership of properties of the
company, having been proved by the data seized during the search. He
further observed that the properties were owned by the assessees using the
company-CCL only as a cover.
8. The assessees preferred an appeal before the Commissioner Income
Tax (Appeals) (hereinafter referred to as the „CIT(A)‟) , challenging the basic
issue of assessing the company‟s income in their hands. Alternative grounds
Signature Not Verified
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By:NAVEEN KUMAR
Signing Date:28.04.2026
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with respect to calculation of capital gain and other grounds too were raised.
The CIT(A) vide his order dated 26.02.2021, observed that the assessees had
active involvement in connection with the purchase/sale of the properties
and they had appointed nominee directors in CCL who had no say in the
management of the estate of the company and thus rejected the assessees‟
appeals 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 that the respondents were
the true and real owners and beneficiaries of the income and assets of CCL
and the doctrine of „substance over form‟ should be applied in order to
demolish the device adopted by the respondents to avoid tax in India.
Signature Not Verified
Digitally Signed
By:NAVEEN KUMAR
Signing Date:28.04.2026
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12. He argued that the expression “beneficial owner”, as given in
Explanation 4 to Section 139(1) of the Act of 1961 clearly brings within its
fold the transactions carried out by the respondents. He also argued that
since the respondents were beneficial rather true owners, the income from
house property so also the capital gains on sale of property and other income
earned by CCL at United Kingdom, is liable to be taxed in the hands of the
respondents-assessees, who are indisputably the residents of India, more
particularly when the money or investment in the shares of the company was
originated and rather transmitted from India.
13. Mr. Sachit Jolly, learned Senior Counsel for the respondents on the
other hand argued that the AO has introduced his own concept „substance
over form‟ and has made addition in the hands of the respondents, without
there being any basis. While admitting that the shares in company (CCL)
were held by the respondents, he pointed out that the amount towards share
capital was sent through banking channels and remitted from India under
permitted LRS of the RBI, and each remittance was approved by RBI.
14. Mr. Jolly added that said company took further loan from the banks in
the United Kingdom and the purchased flat(s) and rental income was earned
by the said company and the respondents-assessees had neither received
rentals directly nor have they received any dividend.
15. He argued that the AO has failed to understand the basic concept of
corporate existence, that a company is a separate legal entity from its
shareholders. He argued that company‟s income can by no stretch of
imagination be treated to be the income of its shareholders. He emphasised
that so far as CCL is concerned, it had offered the rental income for tax and
Signature Not Verified
Digitally Signed
By:NAVEEN KUMAR
Signing Date:28.04.2026
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had paid the applicable tax at each event, including any tax payable at the
time of or after the sale of house property.
16. He argued that there is no provision under the Act of 1961 under
which the rental income and income from capital gains earned by CCL can
be taxed in the hands of the respondents-assessees, simply because they
happened to be the shareholders 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 and has given detailed
reasons in paragraph 45 to 48 of its order, which we deem it apt to reproduce
hereunder:
“45. It can be further seen that the entire information about
the investment in the overseas companies holding of properties
Signature Not Verified
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By:NAVEEN KUMAR
Signing Date:28.04.2026
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by the overseas company in UK, purchased from its own
capital received from the assessee and his family and bank
loan borrowed from the HSBC Bank in UK and other relevant
factors were well-known to the Revenue much before the date
of search on 02/03/2017 as the statements u/s 131(1A) of the
Act of the assessee and his family members were recorded by
the Investigation Unit besides even prosecution notice dated
27/10/2015 had been issued by the Revenue alleging non-
disclosure of the same in the returns. Thus actually no
information at all was found during the course of search as to
substantiate any addition in respect of the said information by
relying on PCIT vs Abhisar Buildwell (P) Ltd [2023] 149
taxmann.com 399 (SC) dated 24/04/2023. The evidence relied
by the Revenue by way of date sheet does not show the
calendar events as mentioned in the assessment order do not
contain any incriminating information to sustain additions
because the calendar events just explain as to what the
assessee did there or wished to be done there with no financial
implications corroborated from any material found otherwise
in search or post search enquiry. We find no substance in
drawing a inference of incriminating material for the reasons
assessee family was living for a few days in the property of the
company Rather the ATED paid by the company is only for the
reasons of keeping the dwelling vacant. Thus, in no manner the
same can be considered as incriminating so as to initiate
action against the directions of the Hon'ble Supreme Court in
the case of Abhisar Buildwell (supra).

46. There is substance also in the contention of
appellants/assessee that the Revenue did not find any single
amount having being invested in those companies by anyone
from undisclosed sources much less by the appellants/assessee.
Thus, there was no purpose to impugn that the company was
incorporated with an intention to avoid assessment of income
of the properties overseas in the hands of the
appellants/assessee. At the same time there is substance in the
contention that the allegation of the Revenue, that the
company was incorporated only for the purpose of acquiring
the properties in UK falls on the face of it as the company
Signature Not Verified
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By:NAVEEN KUMAR
Signing Date:28.04.2026
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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 of events and
nothing incriminating

48. We are thus inclined to hold that the assessee/appellants
were not the beneficial owner of any property or asset of CCL
and therefore neither any income arising from the property of
the said company as rent nor as capital gains and also the
bank interest nor any other income of the company form any
source, was assessable in the hands of the assessee or any
family member who had never had any beneficial ownership or
holding any beneficial interest in the assets of the company.
Thus, the action of the both the authorities in considering the
assessee Mr. Neeraj Wig and his spouse as the beneficial
owners in equal proportions of the assets of the BVI company
CCL. and then assessing all income from those assets of the
said company from any source is illegal ab initio and is
quashed in toto. All the amounts, assessed as income under the
two respective Acts from any source or under any head,
allegedly germinating from any of the properties/bank
Signature Not Verified
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By:NAVEEN KUMAR
Signing Date:28.04.2026
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accounts of and from the company are deleted in the hands of
the assessee and his spouse as they are held to be not the
beneficial owner of the assets of the company CCL at all In
conclusion, this issue no. 1 is decided in favour of
appellants/assessee and all the grounds of appeal of the
assessee in this regard are allowed and all the grounds of
appeal of the Department in this regard are dismissed.”
20. We note that right since the judgment in the case of McDowell & Co.
Ltd. v. CTO, reported in (1985) 3 SCC 230; Union of India & Anr. v. Azadi
Bachao Andolan & Anr. , reported in (2004) 10 SCC 1 upto Vodafone
International Holdings BV v. Union of India & Anr., reported in (2012) 6
SCC 613, there has been a consistent view of Hon‟ble the Supreme Court
that the Revenue cannot tax a subject without a statute to support and that
every tax payer is entitled to arrange his affairs so that his taxes are as low
as possible and he cannot be compelled to choose that pattern which will
replenish the treasury.
21. What is tax evasion, tax avoidance and when the corporate veil can be
lifted has been elucidated by Hon‟ble the Supreme Court in the case of
Vodafone International Holdings BV (supra). Recapitulation of relevant
paragraphs of said judgment shall not be out of context:
“79. When it comes to taxation of a holding structure, at the
threshold, the burden is on the Revenue 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
Signature Not Verified
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By:NAVEEN KUMAR
Signing Date:28.04.2026
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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
interpositioning 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 a
right getting “extinguished” will not arise. A legal right is
an enforceable right. Enforceable by a legal process. The
question is what is the nature of the “control” that a parent
company has over its subsidiary. It is not suggested that a
parent company never has control over the subsidiary. For
example, in a proper case of “lifting of corporate veil”, it
would be proper to say that the parent company and the
subsidiary form one entity. But barring such cases, the legal
position of any company incorporated abroad is that its
powers, functions and responsibilities are governed by the
law of its incorporation. No multinational company can
operate in a foreign jurisdiction save by operating
independently as a “good local citizen”.
xxxx xxxx xxxx xxxx
A. Lifting the veil — Tax laws
277. Lifting the corporate veil doctrine is readily applied in
the cases coming within the company law, law of contract,
law of taxation. Once the transaction is shown to be
fraudulent, sham, circuitous or a device designed to defeat
the interests of the shareholders, investors, parties to the
contract and also for tax evasion, the court can always lift
the corporate veil and examine the substance of the
transaction.

22. Though after the judgment in the case of Vodafone International
Holdings B.V. (supra) was delivered, the Finance Act, 2012 has brought in
amendments in the Act of 1961 including Section 9 of the Act and
Signature Not Verified
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By:NAVEEN KUMAR
Signing Date:28.04.2026
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introduced General Anti Avoidance Rule (GAAR) but to our mind, neither
the provisions of GAAR nor any other provisions introduced in Section 9 of
the Act of 1961 are enough to sustain the tax which has been levied in the
instant case.
23. “Company is a juristic person and a separate legal entity from its
members”. Section 9 of the Companies Act, 2013 encompasses this legal
position in the following manner:
Effect of registration.
9. From the date of incorporation mentioned in the certificate
of incorporation, such subscribers to the memorandum and all
other persons, as may, from time to time, become members of
the company, shall be a body corporate by the name contained
in the memorandum, capable of exercising all the functions of
an incorporated company under this Act and having perpetual
succession with power to acquire, hold and dispose of property,
both movable and immovable, tangible and intangible, to
contract 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
Signature Not Verified
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Signing Date:28.04.2026
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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 Kingdom in order to purchase flats and thereby derive
rental income.

(v) There is no gainsaying the fact that the applicable tax under the laws
of the United Kingdom had been paid and there is no denial to such
fact.
(vi) The documents which the AO had recovered during search relate to
various expenditure carried out by the company, which the
respondents-assessees even as shareholders can ask and have.
25. Legally speaking, the respondents being shareholders of the company,
even if holding all the shares (100%), are only owners of the shares of the
company and not the owners of the property as such and similarly the
income which that company has earned cannot ipso-facto be treated to be an
income of the assessees, who are residents of India. It is a different matter
that as and when dividend is received by the respondents (in India or in the
United Kingdom), such dividend may be exigible to tax. Hence, it is only
the dividend income qua the shares of the company, which can be taxed and
not the income of the company itself.
26. The AO‟s endeavour to bring in doctrine of „substance over form‟ is
an attempt in anxiety of enriching the exchequer, which is not backed by the
statutory framework - it is apparently unknown to the Act of 1961.
Signature Not Verified
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Signing Date:28.04.2026
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27. We hasten to add that tax under the Act of 1961, being a fiscal statute,
can be levied only if a transaction falls within the sweep of statutory
provisions, it cannot be taxed by introducing some deeming fiction or
concept not married to the Act of 1961. It is a settled position of law that
fiscal liability and provisions imposing tax are required to be interpreted
strictly. As of today, there is no provision of the Act of 1961 under which the
set of transactions in hand can be subjected to tax. The AO‟s attempt to lift
or pierce the corporate veil is simply misplaced if not misconceived, as it is
not even a case of tax avoidance much less tax evasion. An assessee cannot
be dissuaded, rather penalised for earning an income through legally
permissible methods and sources and get optimum return on his investment.
If that is to be done, the same can only be done by the legislature by
enacting a valid law in this regard. But until then...., the matter has to rest.
28. The present appeals are thus, dismissed and consigned to record.


DINESH MEHTA
(JUDGE)

VINOD KUMAR
(JUDGE)
APRIL 24, 2026/ck
Signature Not Verified
Digitally Signed
By:NAVEEN KUMAR
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