NCLAT Dismisses Income-Tax Dept.’s Claim for Outstanding Income Tax as It Was Filed Post-Approval of Resolution Plan

Case Details: Assistant Commissioner of Income-tax, Central Circle-3 v. RP of Diamond Power Infrastructure Ltd. - [2024] 166 taxmann.com 74 (NCLAT)

Judiciary and Counsel Details

• Ashok Bhushan, Chairperson & Barun Mitra, Technical Member
• Pratyaksh Gupta, Ruchi Bhatia & Ashish Kumar, Advs. for the Appellant.
• Malak Bhatt, Ms Neeha Nagpal, Mandeep Singh, Udit Gupta, Prachi Gupta & Nishtha Goel, Advs. for the Respondent.

Facts of the Case

In the instant case, the corporate Debtor was admitted into Corporate Insolvency Resolution Process (CIRP) and, respondent No.1 was appointed as Resolution Professional (RP).

The appellant-Income Tax Department issued notices to the corporate debtor for several assessment years (2013-14 to 2018-19) and later submitted proof of claim to the RP.

The appellant sought and received permission from the Adjudicating Authority (NCLT) to carry out assessment proceedings, which were completed and tax demands were subsequently issued.

However, before assessment proceedings were finalized, the CoC approved a resolution plan submitted by Respondent No.2- SRA, which was later approved by the NCLT. Thereafter, the appellant filed an appeal before the NCLAT, arguing that the resolution plan was approved prematurely without considering their claims.

It was noted that the NCLT had specifically directed the appellant to carry out the requisite assessment only for AYs 2013-14 to 2019-20 and thereafter file a claim with RP within time.

NCLAT Held

The NCLAT observed that the tax demand was finalised on 02.03.2022. However, no claims were filed in this regard before RP; instead, the claim was submitted to the Registrar of the NCLT on 28.03.2022, by which time the CoC had already approved the resolution plan.

The NCLAT held that since the appellant had failed to file its claim with RP before the resolution plan was approved by the CoC, their claim stood extinguished.

The NCLAT, further held that the appellant had failed to file its claim on time before RP. Therefore, it could not be allowed to saddle SRA with liability for its claim, which was never filed on time. Therefore, fresh claims cannot be lodged or enforced against the successful resolution applicant after approval of a resolution plan. Thus, no error was committed by the NCLT in approving the resolution plan.

List of Cases Reviewed

• Prashant Jain RP of Diamond Power Infrastructure Ltd. v. COC of Diamond Power Infrastructure Ltd. [2024] 166 taxmann.com 73 (NCLT – Ahd.) (para 29) affirmed, See Annex