2021 (5) TMI 407 - HC - Income Tax

Court dismisses writ petition, directs NCLT approach for refund dispute resolution. Emphasizes jurisdiction & legal procedures.

The Court dismissed the writ petition, allowing the petitioner to approach the NCLT for resolution of the dispute regarding the rightful recipient of a ... Refund of income-tax - Corporate Insolvency Resolution Process - jurisdiction of NCLT under the Insolvency and Bankruptcy Code - rights of the Resolution Professional - forum for determination of competing claims to corporate fundsRefund of income-tax - Corporate Insolvency Resolution Process - jurisdiction of NCLT under the Insolvency and Bankruptcy Code - rights of the Resolution Professional - forum for determination of competing claims to corporate funds - The dispute as to the rightful recipient of the tax refund is to be determined by the NCLT in the insolvency proceedings and not by the revenue in exercise of its refund remittance powers. - HELD THAT: - The refund in question relates to AY 2001-2002 and, pursuant to a sanctioned demerger, the textile business vested in the corporate debtor which is undergoing CIRP before the NCLT. The Resolution Professional acts under the control of the NCLT and the contention as to entitlement to funds said to belong to or have been paid to the corporate debtor involves rights and claims within the insolvency process. In view of the RP's involvement and the statutory scheme of the Code, the High Court held that the appropriate forum to adjudicate competing claims to the refund is the NCLT; the court recorded that this view was prima facie and did not accept the RP's position as correct on merits. The court therefore declined to decide entitlement itself, granted the petitioner liberty to approach the NCLT with an appropriate application, and noted the RP's and revenue's undertaking to assist in early disposal so as to address the petitioner's time-sensitive requirement under the Direct Tax Vivad se Vishwas Act, 2020.The High Court declined to adjudicate entitlement and directed that the question be placed before the NCLT; the writ petition was dismissed as withdrawn and the petitioner given liberty to approach the NCLT.Final Conclusion: The writ petition was dismissed as withdrawn; the petitioner is permitted to move the NCLT for determination of the competing claims to the refund (relating to AY 2001-2002), and the High Court requested that the NCLT take up and decide the matter at the earliest. Issues involved: Determination of the rightful recipient of a refund amount between the petitioner and respondent no.4, both claiming the amount.Analysis:1. Identification of Claimants: The primary issue in this case is to ascertain to whom the refund amount of Rs. 71,02,982 should be remitted. The two claimants are the petitioner and respondent no.4, who is undergoing Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016 (Code) before the NCLT. The RP appointed by NCLT, Mr. Subhash Kumar Kundra, represents respondent no.4.2. Background and Claim: The petitioner claims that the refund is related to the assessment year 2001-2002. Following a demerger scheme sanctioned by the Court in 2002, the textile business of the petitioner vested in respondent no.4. This forms the basis for the petitioner's claim on the refund amount.3. Communication and Responses: The petitioner pointed out a communication from the revenue stating that the refund amount was wrongly remitted to respondent no.4, CLC Industries Ltd., whereas it belonged to the petitioner, CLC & Sons Pvt. Ltd. Subsequently, the RP submitted an affidavit in response to the petitioner's claim, and the revenue withdrew the earlier communication.4. Decision and Jurisdiction: Considering the RP's involvement and the NCLT's jurisdiction over the matter due to the ongoing insolvency proceedings, the Court suggested that the petitioner should seek appropriate directions from the NCLT. The petitioner agreed to withdraw the writ petition and approach the NCLT for resolution. The RP assured to assist in expediting the process due to the petitioner's deadline under the Direct Tax Vivad se Vishwas Act, 2020, expiring soon.5. Dismissal and Liberty to Approach NCLT: The Court dismissed the writ petition as withdrawn, allowing the petitioner to approach the NCLT with a formal application as per the law. It emphasized the need for an early resolution by the NCLT once the petitioner initiates the process.This judgment highlights the importance of proper jurisdiction and legal procedures in resolving disputes over financial matters, especially in cases involving insolvency proceedings and tax-related refunds.