Piercing the Veil in Taxation Matters

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Piercing the veil is one of the most discussed and litigated doctrines in all of corporate law. A company has a corporate personality distinct from its members. From the juristic point of view, it is a legal person distinct from its members. This is the principal laid down in Salomon v. Salomon & co. ltd., (1897) A.C. 22].The courts did this to in relation to a one person member company. The principal is commonly referred as “veil of incorporation” The courts were bound by these principals but they realised exceptions to the rule. This happened due to human inventiveness which started using the veil of corporate personality deliberately for fraud and improper conduct. The courts started to lift the fictional veil between the company…show more content…
These categories are probably not exhaustive. Under Indian Law,The Companies Act 1956 itself provides provisions for the lifting of corporate veil.These generally are exceptions for the companies to be regarded as a separate legal entity. The concept of limited liability ceases to exist and the individual members/directors will be made liable for certain transactions. The statutory provisions are as follows: 1. Reduction of membership below statutory minimum (Section 45): This section provides that if the number of member of a company is reduced below 7 in the case of public company or below 2 in the case of private company and the company continues to carry on the business for more than 6 months, while the number is so reduced, every person who knows this fact and is a member of the company is severally liable for the debts of the company contracted during that time. 2. Improper use of name (Section 147): Under sub-section (4) of this section, an officer of a company who signs any bill of exchange, hundi, promissory note, cheque wherein the name of the company is not mentioned in the prescribed manner, such officer can be held personally liable to the holder of the bill of exchange, hundi
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