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2023 (12) TMI 654 - HC - Income TaxRecovery of income-tax accrued prior to Insolvency procedures - Tribunal approved the final Resolution Plan and that order was communicated by the petitioner/assessee to the respondents/revenue - whether the respondent/ revenue can justifiably claim and recover from the petitioners any amount of money towards income tax that accrued prior to approval of Resolution Plan under Section 31 of the Code. - HELD THAT - In the present cases the admitted factual matrix is that the notices and orders impugned in these writ petitions pertain to the income tax claims of the respondents/revenue pertaining to the period much prior to the date of approval of the Resolution Plan. The impugned notices and orders were issued by the respondents/revenue admittedly subsequent to the public announcement under Section 15 of the Code regarding CIRP process pertaining to the petitioner/assessee. As noted here public announcement under Section 15 of the Code called for submission of claims by 21.01.2019, but the respondents/revenue did not file any claim till that date or even thereafter; it is only subsequent to approval of the Resolution Plan vide order dated 05.11.2019 of the Tribunal, (which order was communicated to respondents/revenue on 02.12.2019) that the respondents/revenue issued the impugned Assessment Order and Demand Notice both dated 12.12.2019. Similarly, in the other writ petition the impugned notices and orders were issued by the respondents/revenue much subsequent to the public announcement dated 30.09.2019 of commencement of CIRP under Section 13 of the Code; vide order dated 21.02.2022, the Tribunal approved the final Resolution Plan and that order was communicated by the petitioner/assessee to the respondents/revenue, calling upon the latter to withdraw the earlier notices, but to no avail. Thus as the Resolution Plans qua the petitioners/assessees having been approved by the National Company Law Tribunal on 05.11.2019 and on 21.02.2022 respectively, the tax claims pertaining to the Assessment Year 2017-18 and Assessment Year 2014-15 stood extinguished.
Issues Involved:
1. Legality of tax claims and penalties imposed by the revenue post-approval of the Resolution Plan under the Insolvency and Bankruptcy Code (IBC), 2016. 2. Whether the revenue can claim and recover income tax dues that accrued prior to the approval of the Resolution Plan. Summary of Judgment: Issue 1: Legality of Tax Claims and Penalties Post-Approval of Resolution Plan The petitions challenged the tax claims and penalties imposed by the revenue after the approval of the Resolution Plan by the National Company Law Tribunal (NCLT) under Section 31(1) of the Insolvency and Bankruptcy Code (IBC), 2016. The petitioners argued that these claims were "illegal, void and de-hors the binding provisions of the resolution plan" and that all pre-CIRP (Corporate Insolvency Resolution Process) liabilities stood settled upon the plan's approval. The court noted that the revenue did not submit any claims during the CIRP and issued the impugned notices and orders only after the Resolution Plan had been approved and communicated. Issue 2: Recovery of Pre-Approval Income Tax Dues The court examined whether the revenue could justifiably claim and recover income tax dues that accrued before the approval of the Resolution Plan. Referring to the Supreme Court's decision in *Ghanshyam Mishra & Sons Pvt Ltd. vs Edelweiss Asset Reconstruction Co. Ltd.*, the court reiterated that once a Resolution Plan is approved by the adjudicating authority, all claims not included in the plan "shall stand extinguished" and no proceedings for such claims can continue. This principle was further supported by subsequent judgments in *Ruchi Soya Industries Ltd vs Union of India* and *Sree Metaliks Ltd vs Additional Director General & Ors*. Conclusion: The court concluded that the tax claims pertaining to the Assessment Year 2017-18 (WP(C) 10528/2022) and Assessment Year 2014-15 (WP(C) 10628/2022) stood extinguished upon the approval of the Resolution Plans. The argument by the revenue that it should not be bound by the Resolution Process provisions of the IBC was rejected. Consequently, both writ petitions were allowed, and the impugned notices and orders were set aside.
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