Question

A, an assessee, had large income in the form of dividend and interest. In order to reduce his tax liability, he formed four private limited company and transferred his investments to them in exchange of their shares. The income earned by the companies was taken back by him as pretended loan. Can A be regarded as separate from the private limited company he formed​

Answer 1

Answer:

Yes

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Answer 2

Yes, he can be regarded as separate from the private limited company he formed because one of the characteristics of a private company is that it has a separate legal entity.

• Perpetual succession means the company has a separate legal identity from its owners.
• This means a company cannot be dissolved with the death or bankruptcy or insanity origin and membership or an exit of a business owner.
• A company can only be dissolved by mutual consent or through legal action.
• When we see that a company has a separate legal entity it can also sue someone in its own name.
• A company is an artificial legal person.