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2022 (9) TMI 749 - AT - Income TaxContinuation of proceedings in respect of dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 of IBC, once the proceedings have commenced by institution of application under section 7 or 9 or 10 of the Code - HELD THAT - A reading of the provisions under section 13 and 14 of the Code along with the decision in GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR ORS. 2021 (4) TMI 613 - SUPREME COURT , clearly shows that once the proceedings have commenced by institution of application under section 7 or 9 or 10 of the Code, the continuance of the pending proceedings is prohibited and when once they reach the logical conclusion with due approval of the resolution plan by the Adjudicating Authority under sub section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. At any rate, for the time being, this appeal cannot be proceeded with during the continuance of the proceedings under the Code. However, depending upon the result of such proceedings before the adjudicating authority in respect of the corporate debtor, appropriate steps if any, may be taken by the appellant/respondent. The appeal of Revenue is dismissed in limine.
Issues:
1. Appeal against the order passed by the Commissioner of Income Tax (Appeals)-3 for the assessment year 2008-09. 2. Interpretation of provisions of Insolvency and Bankruptcy Code, 2016 regarding moratorium and resolution plan. 3. Effect of the decision in Ghanashyam Mishra And Sons case on pending proceedings against the corporate debtor. 4. Continuance of appeal during Corporate Insolvency Resolution Proceedings (CIRP). Issue 1: Appeal against CIT(A) Order: The judgment deals with an appeal filed by the Revenue against the order passed by the Commissioner of Income Tax (Appeals)-3 for the assessment year 2008-09 in the case of M/s. Neueon Towers Ltd. The Revenue challenged the decision before the Appellate Tribunal ITAT Hyderabad. Issue 2: Interpretation of IBC Provisions: The Tribunal analyzed the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC) in light of a case law involving moratorium and resolution plans. It highlighted that under section 13 of the Code, a moratorium is declared after the admission of an application, prohibiting the institution or continuation of suits or proceedings against the corporate debtor. The judgment referenced the Ghanashyam Mishra And Sons case, emphasizing that claims provided in an approved resolution plan become binding on the corporate debtor and extinguish claims not part of the plan. Issue 3: Impact of Ghanashyam Mishra And Sons Case: The Tribunal reiterated that once proceedings under the IBC commence, the continuation of pending proceedings is prohibited. Upon approval of a resolution plan by the Adjudicating Authority, the claims specified in the plan become frozen and binding on the corporate debtor and stakeholders. The judgment clarified that statutory dues not part of the resolution plan stand extinguished, preventing any proceedings related to such dues prior to the approval of the plan. Issue 4: Continuance of Appeal during CIRP: Considering the ongoing Corporate Insolvency Resolution Proceedings (CIRP) against the assessee, the Tribunal held that the appeal cannot proceed during the CIRP. It allowed the appellant/respondent to seek restoration of the appeal based on the CIRP outcome. Citing a precedent from the Mumbai Bench of the Tribunal, the judgment dismissed the Revenue's appeal in limine, indicating that further steps could be taken based on the CIRP results. In conclusion, the Tribunal dismissed the Revenue's appeal due to the ongoing CIRP and the binding nature of the resolution plan under the IBC, emphasizing the need to await the CIRP outcome before proceeding with the appeal.
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