Dinshaw Maneckjee Petit

Dinshaw Maneckjee Petit

 

Fact of the case

Dinshaw was a rich man having dividend and interest income. He wanted to avoid income-tax. For this purpose, he formed four private companies, in all of which he was the major shareholder. The companies made investments and whenever interest and dividend income were received by the companies, Dinshaw applied to the companies for loans, which were immediately granted and he never repaid.

 

Judgement

The Court decided that the private companies were a sham and the corporate veil was lifted to decide the real owner of the income.



 

Conclusion

When a  company's business is not conducted legally then the shareholders are personally liable for the company's obligations under the legal concept of lifting the corporate veil.




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