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Income Tax Appellate Tribunal, DELHI BENCH ‘E’ NEW DLEHI
Before: SHRI O.P. KANT & SHRI K. NARASIMHA CHARY
PER K. NARASIMHA CHARY, J.M. Challenging the order dated 06.10.2017 in Appeal No. 96/16-17 passed by the Commissioner of Income Tax (Appeals)-6, New Delhi (“ld. CIT(A)”) in the case of Monnet Ispat & Energy Ltd. (“the assessee”) for the assessment year 2013-14, the Revenue preferred this appeal aggrieved by the deletion made by the ld. CIT(A).
At the outset, it is submitted on behalf of the assessee that the assessee defaulted in repayment of outstanding secured loans to various creditors, and on the application of State Bank of India, one of the secured
financial creditors of the company, Hon’ble NCLT admitted the petition u/s. 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), declared moratorium and finally passed final order u/s. 31 of the IBC on 24.07.2018, approving the resolution plan filed by the successful resolution applicant. In that process, the NCLT observed that the Resolution Professional determined the liquidation value of the company as Rs.23,56,35,25,186/- whereas the total amount of admitted secured financial creditors is Rs.9772 crores and the admitted claims of the unsecured financial creditors is Rs.1243 crores, put together Rs.1,14,78,09,50,325/-, and by this difference, the liquidation value of the assets of the assessee is not even sufficient to satisfy the admitted claim of the secured financial creditors in full and, therefore, the liquidation value due to the unsecured financial creditors, operational creditors and other creditors of the assessee as per waterfall mechanism mentioned under section 53 of the Code is nil. It was further observed that in respect of the treatment of other creditors, this approved resolution plan discloses that all other liabilities and obligations of the assessee are being extinguished in full and all litigations and proceedings in respect to debts pending against the assessee prior to commencement of CIRP shall stand abated as the liquidation value due to those creditors, as per the waterfall mechanism in section 53 of the Code is Nil.
Learned AR further submitted that as per section 5(21) of the IBC, the dues to the Central Government also fall within the definition of operational debts and the Income-tax Department also filed claims before the Insolvency Resolution Professional appointed by NCLT and by Entry No. 47 of the list B, such a debt is reflected in the CIRP.
Learned DR admits this factual and legal position, but submits that in view of Note-5, appended to Schedule-B as on the commencement of insolvency proceedings, the matter is pending before the Hon’ble High Court and other adjudication authorities.
We have gone through the record in the light of submissions made on either side. Dues to the Income-tax Department are reflected in list – B appended to the order dated 24.07.2018 passed by the NCLT. By such order, NCLT observed that there is a huge difference in the total amount of admitted secured financial creditors which is to the tune of Rs.1,14,78,09,50,325/- and the liquidation value of the company to the tune of Rs.23,56,35,25,186/- and therefore, by application of the waterfall mechanism mentioned in section 53 of the Code, the liquidation value due to unsecured financial creditors, operational creditors and other creditors of the assessee becomes nil. It is clear that in terms of the resolution plan as approved by the NCLT, all claims or demands or liabilities or obligations owed or payable to or assessed by or assessable by the Central Government/State Government in relation to any period prior to the acquisition, will be written off in full and will be deemed to be permanently extinguished. This position of law is clear in view of the decision of Hon’ble Supreme Court in the case of Ghanashyam Mishara and Sons vs. Edleweiss Assets Reconstruction Company Ltd. (Civil appeal No.8129/2019 – Order dated 13/04/2021).
In these circumstances, we are of the considered opinion that the dues to the Income-tax Department for the assessment year 2013-14, which are reflected in the list-B appended to NCLT order stood fully extinguished and no useful purpose would be served by adjudicating this
matter. With this view of the matter, we dismiss the appeal of the Revenue.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on conclusion of Virtual hearing on this the 16th day of August, 2021. Sd/- Sd/- (O.P. KANT) (K. NARSIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 16/08/2021 ‘aks’