TANTIA CONSTRUCTIONS LIMITED vs. THE ASSISTANT COMMISSIONER OF INCOME TAX (TDS) AND ORS.

WPO/2372/2022HC CalcuttaWBCHCO004267202221 September 2022Author: HON'BLE JUSTICE MOUSHUMI BHATTACHARYA4 pages
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What were the facts?

The petitioner, Tantia Constructions Limited, was undergoing Corporate Insolvency Resolution Process (CIRP) after an NCLT order on March 13, 2019. A Resolution Plan was approved on February 24, 2020. The petitioner sought de-freezing of its bank account, which was frozen on the instructions of the Assistant Commissioner of Income Tax (TDS) via a notice dated February 27, 2019. The Income Tax department demanded Rs. 3,87,56,433/- under Section 156 of the Income Tax Act, 1961. The Income Tax authorities filed their claim before the Resolution Professional (RP) on January 31, 2020, which was declined as it was filed after the stipulated deadline. An NCLT order on February 23, 2021, rejecting the Income Tax Department's application for condonation of delay in filing claims, was not challenged by the department.

What did the High Court hold?

The Tribunal held that the claims of the Income Tax Department against the corporate debtor are extinguished upon the approval of the Resolution Plan. This is based on Section 32A of the Insolvency and Bankruptcy Code, 2016, and the Supreme Court's pronouncements in Essar Steel India, Ghanashyam Mishra, and Ruchi Soya Industries. These judgments establish the 'clean slate' principle, meaning that once a Resolution Plan is approved by the Adjudicating Authority, all claims not forming part of the plan stand extinguished. The Income Tax Department's failure to file its claim within the stipulated time frame before the Resolution Professional, and its subsequent failure to challenge the NCLT's order rejecting the condonation of delay, further solidified this position. Consequently, the objections raised by the Income Tax Department and the State Bank of India were rejected. The Court found no impediment to allowing the petitioner's prayer and directed the respondent bank to defreeze the petitioner's account within one week.

What were the issues?

1. Whether the claims of the Income Tax Department against the corporate debtor (petitioner) are extinguished upon the approval of the Resolution Plan, in light of Section 32A of the Insolvency and Bankruptcy Code, 2016 (IBC) and the 'clean slate' principle? Assessee's Contention: The petitioner argued that under Section 32A of the IBC and the Supreme Court's decisions in Essar Steel India, Ghanashyam Mishra, and Ruchi Soya, all liabilities of a corporate debtor for an offence committed prior to the commencement of CIRP cease to exist from the date the Resolution Plan is approved. Therefore, the Income Tax department's claim, filed after the approval of the Resolution Plan, should be extinguished. Revenue's Contention: The judgment notes that the Income Tax Department filed its claim late and an application for condonation of delay was rejected by the NCLT, which was not challenged. The judgment also mentions an objection from the State Bank of India that the approval of the Resolution Plan is under challenge, but this objection was also rejected on the same grounds.

Which sections of the Income-tax Act were involved?

Section 32A,Section 156,Section 14,Section 31(1)

AI-generated summary — verify with the full judgment below

OD-1 ORDER SHEET WPO/2372/2022 IN THE HIGH COURT AT CALCUTTA Constitutional Writ Juri iction ORIGINAL SIDE TANTIA CONSTRUCTIONS LIMITED VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX (TDS) AND ORS. BEFORE: The Hon'ble JUSTICE MOUSHUMI BHATTACHARYA Date : September 21 2022 Appearance: Mr. Swatarup Banerjee, Adv.

Mr. Avishek Guha, Adv.

Sk. Sariful Haque, Adv.

Ms. Akansha Chopra, Adv.

Ms. Debarati Das, Adv. … for the petitioner Ms. Smita Das De, Adv. … for the respondent no.1 Mr. Soumya Roy, Adv.

Mr. Santosh Mahato, Adv.

Mr. Benazir Kazi, Adv. … for the respondent no.2 The Court: The petitioner Tantia Construction was put under CIRP by order dated 13.03.2019 of the NCLT, Kolkata Bench. The Resolution Plan was approved by an order dated 24.02.2020. The petitioner prays for de-freezing of the petitioner’s account which was so done on the instructions of the respondent no.1, the Assistant Commissioner of Income Tax (TDS), by a notice dated 27.02.2019. The respondent no.1 by a letter dated 20.03.2019 demanded a sum of Rs.3,87,56,433/- from the petitioner under Section 156 of the Income Tax Act, 1961. 2 Learned counsel appearing for the petitioner relies on Section 32A

The order continues below.

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