DCIT, NUNGAMBAKKAM vs. ORCHID PHARMA LIMITED, CHENGALPATTU

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ITTPA 36/CHNY/2025Status: DisposedITAT Chennai11 May 2026AY 2015-167 pages
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What did the Tribunal hold?

The Tribunal held that the NCLT order approving the resolution plan, passed on 27.06.2019, had an overriding effect. The resolution plan stipulated that all claims pertaining to the period on or before the Effective Date (31.03.2020) would be irrevocably settled, discharged, and extinguished. Since the final assessment order for AY 2015-16 was passed on 18.02.2019, prior to the NCLT order, and it was submitted that no income tax dues were placed before the NCLT or included in the resolution plan, the Tribunal found merit in the assessee's contention that any demand arising from additions sustained by the CIT(A) could not be raised. Regarding the Revenue's contention on carry forward of losses, the Tribunal, following the Bombay High Court's decision in Amns Gandhidham Ltd. vs. ACIT, held that since the Revenue had not made any submissions before the NCLT, the carry forward of losses could not be denied. The Tribunal concluded that the additions made by the AO did not survive, rendering the grounds in both the assessee's and Revenue's appeals academic. The appeal of the assessee was partly allowed, and the Revenue's appeal was dismissed.

What were the facts?

The assessee, Orchid Pharma Ltd., is in appeal against the order of the CIT(A) for Assessment Year 2015-16. The assessment proceedings were initiated under Section 153C of the Income Tax Act, 1961, following a search operation. The Assessing Officer (AO) made a reference to the Transfer Pricing Officer (TPO) for international transactions, who proposed an adjustment of Rs. 9,26,43,358/-. The AO passed a draft assessment order incorporating this adjustment and other additions. The assessee contended before the CIT(A) that a National Company Law Tribunal (NCLT) order dated 27.10.2017, which was later restored by the Supreme Court on 28.02.2020, had an overriding effect. This NCLT order approved a resolution plan, and the assessee argued that all demands prior to the NCLT order were extinguished. The CIT(A) adjudicated the issues on merits, granting partial relief. Both the assessee and the Revenue have filed appeals against the CIT(A)'s order.

What were the issues?

1. Whether all claims, demands, and statutory dues of the revenue prior to 31.03.2020 stand extinguished and nullified in light of the NCLT order approving the resolution plan, thereby rendering the rest of the grounds academic? (Question of law, turning on the interpretation of Section 238 of the IB Code 2018 and the NCLT resolution plan). Assessee's Contention: The assessee argued that the NCLT order, as restored by the Supreme Court, has an overriding effect, and the resolution plan explicitly states that all claims pertaining to the period on or before the Effective Date (31.03.2020) shall stand irrevocably settled, discharged, and extinguished. They relied on the resolution plan's clause 8.2 and a coordinate bench decision in their own case for AY 2013-14 & 2014-15 regarding penalty deletion. Revenue's Contention: The Revenue relied on the orders of the TPO/AO. Additionally, the Revenue contended that if the assessee is provided with a "clean slate" by the NCLT order, then the unabsorbed losses of the assessee cannot be allowed to be carried forward, as this would amount to a double benefit.

Which sections of the Income-tax Act were involved?

Section 153C,Section 250,Section 143(3),Section 144C,Section 271(1)(c),Section 238,Section 79(2)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & MS. PADMAVATHY.S

For Respondent: Mr. V.Justin, CIT

PER PADMAVATHY.S, A.M:

These cross appeals by the assessee and the Revenue are against the order of the Commissioner of Income Tax (Appeals), Chennai-18 (in short "CIT(A)") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") dated 28.10.2025 for Assessment Year (AY) 2015-16.

2.

The assessee is a company and filed the return of income for AY 2015- 16 on 30.11.2015 admitting total income at Nil. There was a search and seizure operation u/s. 132 of the Act carried in the case of M/s. Shri Rama Chandra University Trust Group on 23.11.2015. The A.O of the searched party has sent satisfaction notice u/s. 153C of the Act stating that certain seized materials belongs to the assessee and accordingly the A.O after recording satisfaction issued a notice u/s. 153C of the Act. The assessee in response filed the return declaring total income at Nil. Since the assessee had international transactions, the A.O made a reference to the Transfer Pricing Officer (TPO) to complete the Arm's Length Price (ALP) of the international transactions. The TPO proposed a transfer pricing adjustment to the tune of Rs.9,26,43,358/-. The A.O passed the draft assessment order incorporating the TP adjustment. The A.O also made various additions/disallowances. Since the assessee preferred further remedy through CIT(A), the A.O passed the final assessment order against which the assessee filed an appeal before the CIT(A). Before the CIT(A), the assessee brought to notice that the National Company Law Tribunal (NCLT) has passed an order in assessee's case on 27.10.2017 which was agitated by some creditors before the National Company Law Appellate Tribunal (NCALT) which set aside vide order dated

ITA No.4079/Chny/2025 & IT(TP)A No36/Chny/2025 Orchid Pharma Ltd. :- 3 -: 13.11.2019 the order of the NCLT. The assessee further brought to the attention of the CIT(A) that the NCALT order was challenged before the Hon'ble Supreme Court and the Supreme Court vide order dated 28.02.2020 restored the order of the NCLT. The assessee accordingly submitted that as per the provisions of Section 238 of the IB Code 2018 which has an overriding effect on all other laws and therefore any demand arising out of any proceedings prior to the order of the NCLT would become Nil. The CIT(A) however proceeded to adjudicate the issues on merits stating that the adjudication of the appeal before him is not going to result in any enhancement or reduction of demand since only loses claimed are brought forward will be adjusted. The CIT(A) on merits gave partial relief to the assessee. Both the assessee and the Revenue are in appeal against the order of the CIT(A).

3.

The Ld. Authorized Representative (AR) of the assessee submitted that Ground No.5 in assessee's appeal pertains to the legal contention that all claims, demands and statutory dues of the revenue prior to 31.03.2020 i.e. effective date stands extinguished and nullified. The ld AR further submitted that if the said ground is considered and allowed, the rest of the grounds of the assessee and also the grounds of the revenue would become academic. Accordingly we will first consider Ground No.5 in assessee's appeal.

4.

The ld AR reiterated the facts as submitted before the lower authorities. The Ld. AR submitted that the NCLT order approving the resolution plan was passed don 27.06.2019 whereas the final assessment order u/s. 143(3) r.w.s. 144C r.w.s 153C of the Act for the impugned year was passed on 18.02.2019 i.e., prior to the date of approval of resolution plan. The Ld. AR drew our

ITA No.4079/Chny/2025 & IT(TP)A No36/Chny/2025 Orchid Pharma Ltd. :- 4 -: attention to the approved resolution plan whereby any claims pertaining to the period up to the effective date i.e., 31.03.2020 would get extinguished. The relevant part of the resolution plan is extracted hereunder: “8.2. All claims, liabilities, damages, penalties, cause of actions, deficiencies, assessments, demands or losses of any nature whatsoever (whether admitted/verified/submitted or not, due or contingent, asserted or unasserted, crystallised or uncrystallised, known or unknown, disputed or undisputed, present or future or whether or not set out in the balance sheet or profit & loss account of the Corporate Debtor or the list of the creditors) shall be dealt with only as envisaged in this Resolution Plan and all other claims (including whether pending before any court or authority, arbitrator or otherwise) or demands made by or liabilities or obligations owed or payable to any Person (including any demand for any losses or damages, principal, interest, compound interest, penal interest, notional or crystallized mark to market losses on derivatives and other charges already accrued/accruing or in connection with any third-party claims) to which the Corporate Debtor is or may be subject to and which pertains to the period on or before the Effective Date, shall stand irrevocably and unconditionally settled, discharged and extinguished in perpetuity.”

5.

The Ld. AR also drew our attention to the decision of the Coordinate Bench of the Tribunal in assessee's own case for AY 2013-14 & 2014-15 with regard to levy of penalty where the Coordinate Bench has deleted the penalty considering the resolution plan of the NCLT. The relevant observations of the Coordinate Bench in this regard are extracted below:

“14. Having heard both the parties and on perusal of the sequence of events as filed by the Id. AR vide letter dated 28.08.2024, which is not disputed by the Id. DR, we find from the decision dated 28.02.2020 passed by the Hon'ble Supreme Court in the case filed by the State Bank of India against one of the "Resolution Applicants" M/s. Accord Life Spec Private Limited by setting aside the order of the NCLAT, confirmed the order of the NCLT approving the "Resolution Plan approved by the CoC in compliance of section 30(2) of the Code settling the operational creditors including the income-tax at NIL value. Therefore, in our opinion, the penalty imposed under section 271(1)(c) of the Act does not survive and it is deleted. Thus, the grounds raised in the both the appeals are allowed.”

ITA No.4079/Chny/2025 & IT(TP)A No36/Chny/2025 Orchid Pharma Ltd. :- 5 -: 6. The Ld. AR without prejudice submitted that the addition sustained by the CIT(A) with regard to the TP adjustment towards management fee is not arisen out of incriminating material found during the course of search. The Ld. AR submitted that the year under consideration is an unabated assessment and therefore the A.O cannot make any addition without any incriminating material. The Ld. AR in this regard relied on the decision of the Hon'ble Supreme Court in the case of PCIT vs. Abhisar Buildwell (P.) Ltd. reported in 149 taxmann.com 399 (SC). With regard to the additions deleted by the CIT(A), The Ld. AR submitted that the issues were covered by the decision of the Coordinate Bench in assessee's own case and the CIT(A) has correctly followed the binding precedence to allow the issues in favour of the assessee.

7.

The Ld. Departmental Representative (DR), on the other hand, relied on the orders of the TPO/A.O.

8.

We have heard the parties, and perused the material available on record. The final assessment order u/s. 143(3) r.w.s.144C r.w.s.153C in assessee's case is passed on 18.02.2019 and the NCLT order approving the resolution plan is passed on 27.06.2019. From the perusal of the order of NCLT we notice that all pending claims that are not part of the resolution plan which pertain to the period on or before the Effective Date i.e. 31.03.2020, shall stand irrevocably and unconditionally settled, discharged and extinguished in perpetuity. During the course of hearing it is submitted before us that no demand or claim towards income tax dues have been placed before the NCLT and that the same is not part of the approved resolution plan. Therefore we see merit in the contention of the ld AR that the any demand

ITA No.4079/Chny/2025 & IT(TP)A No36/Chny/2025 Orchid Pharma Ltd. :- 6 -: towards the additions sustained by the CIT(A) can be raised against the assessee since the same pertain to period prior to the effective date.

9.

The ld DR raised a contention that if the assessee's contention of being provided with a "clean slate" by the order of the NCLT is to be accepted then the unabsorbed losses of the assessee cannot also be allowed to be carried forward. The ld DR argued that if the losses are allowed to be carried forward then the same would amount to allowing double benefit of no demand against the assessee as well as losses being allowed to be set off against future profit. In this regard we notice that the Hon'ble Bombay High Court while considering an identical issue in the case of Amns Gandhidham Ltd. vs. ACIT [(2025) 180 taxmann.com 43 (Bombay)] has held that –

14.

As regards to the Revenue's contention that allowability of losses can be examined by the Respondents, we find that this would not be permissible in the facts of the present case because notice to the Principal Commissioner under Section 79 (2) (c) of the I. T. Act was served on the Principal Commissioner on 28th June 2022 and the Principal Commissioner did not make any submissions at the time when the Resolution Plan was approved by the NCLT or any time prior thereto. Once this is the case, denial of carry forward of losses cannot be denied to the Petitioner. We say this also because we find merits in the Petitioner's contention that availability of such losses would be one of the factors that would have been taken into account by the Resolution Applicant when submitting its proposal to take over the Corporate Debtor (namely, the Petitioner).

10.

The ld AR during the course of hearing submitted that in assessee's case also the revenue has not made any submission before the NCLT and this fact is not controverted by the ld DR during the course of hearing. Accordingly we are unable to appreciate the contention the "clean slate" provided by the order of the NCLT is to be applied to the brought forward losses of the assessee company. In view of these discussions we hold that

ITA No.4079/Chny/2025 & IT(TP)A No36/Chny/2025 Orchid Pharma Ltd. :- 7 -: additions made by the AO do not survive. Accordingly the grounds in assessee's appeal on merits and the grounds in revenue's appeal have become academic.

11.

In result the appeal of the assessee is partly allowed and the revenue's appeal is dismissed. Order pronounced on 11th day of May, 2026 at Chennai.

Sd/- Sd/- (एबी टी. वक�) (पदमावती यस) (ABY. T. Varkey) (Padmavathy.S) लेखा सद�य सद�य सद�य /Accountant Member सद�य लेखा लेखा लेखा �याियक �याियक सद�य �याियक �याियक सद�य सद�य / Judicial Member सद�य चे�नई/Chennai, �दनांक/Dated: 11th May, 2026. EDN, Sr. P.S आदेश क� �ितिल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकर आयु!/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF EJTADA Digitally signed by EJTADA DURGA DURGA NARESH Date: 2026.05.13 NARESH 11:33:08 +05'30'

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