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Facts
The Revenue has appealed against the order of the CIT(A) that partly allowed the assessee's appeal against the assessment order. The Assessing Officer had added INR 1,82,09,39,092/- as deemed dividend under Section 2(22)(a) of the Income Tax Act, 1961. However, during the pendency of the appeal before the Tribunal, insolvency proceedings were initiated against the assessee, and a moratorium came into effect.
Held
The Tribunal noted that due to the moratorium under the Insolvency and Bankruptcy Code, 2016 (IBC), further proceedings in the appeal could not continue. Relying on previous judgments, it was held that the IBC provisions override other laws, and therefore, the appeal could not be adjudicated.
Key Issues
Whether the appeal proceedings can continue in light of the moratorium imposed due to insolvency proceedings against the assessee.
Sections Cited
143(3), 2(22)(a), 2(22)(e), 115-0, Section 7 of the IBC, Section 14(1) of IBC, Section 238 of IBC, Section 31 of IBC
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Income Tax Appellate Tribunal, G BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL "G" BENCH, MUMBAI SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 1973/MUM/2023 (Assessment Year: 2017-18) Deputy Commissioner of Income Tax 3(2)(1), Mumbai, Room No. 608, 6th Floor, Aayakar Bhavan, M.K. Road, Mumbai - 400020 …………… Appellant Star Line Leasing Limited, Vs S/2 Navrang Building, Near Swastik Char Rasta, Navrangpura – 380009, Gujarat ……………. Respondent [PAN: AAACS7851A] Appearance For the Appellant/Department : Shri Dr. Kishor Dhule For the Respondent/Assessee : None Date Conclusion of hearing : 07.12.2023 Pronouncement of order : 29.01.2024
O R D E R Per Rahul Chaudhary, Judicial Member: By way of the present appeal the Revenue has challenged the order, 1. dated 28/03/2023, passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘the CIT(A)’] for the Assessment Year 2017-18, whereby the Ld. CIT(A) had partly allowed the appeal of the Assessee against the Assessment Order, dated 26/12/2019, passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
ITA No. 1973/Mum/2023 (Assessment Year: 2017-18) The Revenue has raised following grounds of appeal: 2.
“1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT erred in holding that assessee's transfer of investment in shares to KLP Tradelink LLP without consideration to the extent of accumulated profit amounting to Rs. 182,09,39,092/-does not attract tax u/s 115-0 without appreciating that since the assessee being 99.90% partner in said LLP, shareholders of the assessee company are ultimate beneficiaries and therefore this transfer amounts to the distribution by way of release of assets in favour of shareholders only and accordingly conditions of Section 2(22)(a) are satisfied?
Whether on the facts and in the circumstances of the case and in law, the Ld. CIT erred in holding that provisions of Section 2(22)(e) do not attract to the above transfer without appreciating that second limb of Section 2(22)(e) covers any payment for the individual benefit of shareholder and the impugned transfer amounts to payment by it for the individual benefit of its shareholder since the assessee itself is the partner in said LLP?
Whether on the facts and in the circumstances of the case and in law, the Ld. CIT erred in not taking cognizance of the facts of the case which clearly throw light on the impugned transaction and lead to a conclusion that the impugned transaction is a colorable device employed for avoiding DDT, particularly the fact that LLP was incorporated on 30th March 2017 and the shares were transferred on 31st March 2017 by way of gift and the LLP had not filed return of income for AY 2017-18?
Whether on the facts and in the circumstances of the case and in law, the Id. CIT erred in accepting this transaction as gift without appreciating that the donor and donee are identical since the donor Le., assessee company is 99.90% partner in donee i.e., LLP and gift cannot be given to oneself and the element of natural love and affection cannot be said to exist in this transaction?"
The Appellant craves leave to add, amend and/or vary the grounds of Appeal before or during the course of hearing.
ITA No. 1973/Mum/2023 (Assessment Year: 2017-18) The relevant facts in brief are that the Assessee is a company 3. engaged in the business of leasing, investing and renting of properties. The Assessee has filed its return of income for the Assessment Year 2017-18 on 03/11/2017 declaring total income of INR 31,36,86,200/-. Subsequently, the case of the Assessee was selected for complete scrutiny. Assessment was framed on the Assessee vide Assessment Order, dated 26/12/2019, passed under Section 143(3) of the Act after making an addition of INR 1,82,09,39,092/- holding the same to be deemed dividend under Section 2(22)(a) of the Act. The aforesaid addition made by the Assessing Officer was deleted by the CIT(A) vide order, dated 28/03/2023, passed in appeal preferred by the Appellant-Company. Being aggrieved, the Revenue has preferred the present appeal before the Tribunal.
When the appeal was taken up for hearing none was present on 4. behalf of the Respondent/Assessee. In response to a query from the Bench, the Learned Departmental Representative pointed out that insolvency proceedings have been initiated in the case of the Assessee. On perusal of record, we found that during the pendency of the present appeal, vide letter dated 28/11/2023, a copy of the letter dated 25/11/2023 send by the Interim Resolution Professional (IRP) to the office of Departmental Representative along with the order, dated 23/11/2023, passed by the National Company Law Tribunal [NCLT], Ahmedabad Bench, passed in CP(IB)/247/7/AHM/2023 in terms of Section 7 of the Insolvency and Bankruptcy Code, 2016 [for short ‘IBC’] read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 was placed on record by the IRP. On perusal of the aforesaid order, dated 23/11/2023, passed by the NCLT we find that
ITA No. 1973/Mum/2023 (Assessment Year: 2017-18) the petition preferred by the financial creditor (i.e. M/s Zep Infratech Limited) under Section 7 of the IBC has been admitted by the NCLT and IRP has been appointed. On admission of the aforesaid insolvency petition the moratorium has also come into effect, bringing to halt continuation of pending proceedings during the operation of moratorium as per the provisions contained in Section 14(1) of IBC. In the case of Pr. Commissioner of Income Tax-6, New Delhi Vs. Monnet Ispat & Energy Ltd.: [ITA No. 533 to 552 & 554 of 2017], the Hon’ble Delhi High Court had, vide order dated 04/09/2017, held that on admission of petition under Section 7 of IBC, ‘the institution of suits or continuation of pending suits or proceedings’ against the corporate debtor was not permitted and the same would include income tax appeals. In Special Leave Petition arising from the aforesaid order [SLP (C) No. 6487 of 2018, dated 10/08/2018], the Hon’ble Supreme Court upheld overriding nature and supremacy of the provisions of the IBC over any other enactment in case of conflicting provisions by virtue of Section 238 of the IBC. The aforesaid judgment was relied upon by the Mumbai Bench of the Tribunal in the case of DCIT Vs. Global Softech Ltd: [2022] 140 taxmann.com 103 (Mumbai - Trib.) while dismissing the appeal preferred by the Revenue in identical facts and circumstances on the ground that moratorium has come into effect and therefore, as per the provisions of section 14 of the IBC the appellate proceedings before the Tribunal cannot continue. Further, as per Section 31 of the IBC the resolution plan, if approved, was binding upon the income tax authorities and therefore, no purpose would have been served in keeping the appeal pending before the Tribunal. Accordingly, taking a view consistent with the taken by the Tribunal in the aforesaid decision, we dismiss the appeal preferred by the Revenue. However, liberty is granted to the Revenue to file a fresh
ITA No. 1973/Mum/2023 (Assessment Year: 2017-18) appeal either after completion of the moratorium period or earlier expiry thereof.
In result, in terms of paragraph 4 above, the present appeal 5. preferred by the Revenue is dismissed.
Order pronounced on 29.01.2024.
Sd/- Sd/- (Prashant Maharishi) (Rahul Chaudhary) Accountant Member Judicial Member म ुंबई Mumbai; दिन ुंक Dated : 29.01.2024 Alindra, PS
ITA No. 1973/Mum/2023 (Assessment Year: 2017-18) आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त/ The CIT 4. प्रध न आयकर आय क्त / Pr.CIT 5. दिभ गीय प्रदिदनदध, आयकर अपीलीय अदधकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file.
आिेश न स र/ BY ORDER, सत्य दपि प्रदि //True Copy// उप/सह यक पुंजीक र /(Dy./Asstt. Registrar) आयकर अपीलीय अदधकरण, म ुंबई / ITAT, Mumbai