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Facts
The assessee preferred an appeal against the order of the CIT(A) which upheld the assessment order passed by the AO. The assessee's ground for appeal was that the tax authorities ignored the fact that a Resolution Plan, approved by the NCLT, rendered the department's claim for AY 2017-18 non-existent.
Held
The Tribunal held that the Department had raised a claim during insolvency proceedings which was not accepted and therefore, based on the clean slate theory, the successful Resolution Applicant cannot be burdened with any tax liability. Consequently, ground No.1 of the assessee's appeal was allowed.
Key Issues
Whether the tax liability of a corporate debtor can be enforced against a successful Resolution Applicant when the tax claim was not admitted during the insolvency proceedings and the resolution plan was approved by the NCLT under the clean slate theory?
Sections Cited
143(3)
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Income Tax Appellate Tribunal, DELHI BENCHES : F : NEW DELHI
Before: SHRI ANUBHAV SHARMA
ORDER
PER ANUBHAV SHARMA, JM:
This appeal has been preferred by the Assessee against order dated 20.12.2024 of the learned Commissioner of Income Tax (Appeals)-24, New Delhi, in Appeal No.CIT(A), Delhi-24/10397/2016-17, arising out of order dated 22.04.2021 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the ACIT, Central Circle-07, Delhi (hereinafter referred to as ‘the AO’, for short) pertaining to Assessment Year 2013-14.
On hearing both the sides, we find that the assessee has raised a ground No.1 that the ld. tax authorities have ignored the fact that a Resolution Plan stands approved by the NCLT and, thus, no claim for AY 2017-18 of the Department is in existence.
It comes up from the submissions and the material on record that the assessee company was admitted for Corporate Insolvency Resolution Process under the provisions of Insolvency and Bankruptcy Code, 2016 (IBC) vide order dated 2nd January, 2020 of NCLT, New Delhi and Malhotra Realty Pvt. Ltd. (MRPL) was a successful Resolution Applicant whose Resolution Plan was approved by the Committee of Creditors and finally by the NCLT, New Delhi, on 24.05.2023. Now the assessee company is a wholly owned subsidiary of MRPL.
It comes up from the copy of Resolution Plan approved by the NCLT at pages 11-32 of the paper book and relevant page 24 that during the insolvency proceedings, the tax authorities had claimed an amount INR 16,45,17,661/- which was not admitted and no challenge in respect of the same has been filed by the Income-tax Department. At page 155 of the paper book, copy of Form B which is filed with regard to the claim by operational creditors is made available and the same shows that in regard to AY 2016-17 and 2017-18 this claim was made. The copies of assessment orders were part of this form.
Thus, there is no doubt left that the Department had raised the claim during insolvency proceedings, which was not accepted and, thus, based on the clean slate theory as approved by Hon’ble Supreme Court in the case of Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd. & Ors. (2021) ibclaw.in 54 SC, (p94-95) and in CoC of Essar Steel India Ltd. v. Satish Kumar Gupta & Ors. (2019) ibclaw.in 07 SC, the successful Resolution Applicant cannot be burdened with any tax liability.