2022 (10) TMI 740 - Tri - Insolvency and Bankruptcy

Tribunal Grants Relief on Tax & GST, Directs Applicant to Seek Waiver for Fees

The Tribunal granted relief for waivers of income tax and GST liabilities accrued during the Corporate Insolvency Resolution Process (CIRP) period and ... Extinguishment of pre-CIRP tax and levy liabilities - waiver of tax liabilities arising on implementation of a resolution plan (notional income on write-back) - requirement to file claims with the resolution professional before approval of the resolution plan - extension of time for implementation of resolution plan and temporary protection from enforcement for pre-closing non-compliances - administrative consideration by Registrar of Companies for fees and stamp duty relief under the Companies ActExtinguishment of pre-CIRP tax and levy liabilities - requirement to file claims with the resolution professional before approval of the resolution plan - All past liabilities arising out of any levies/tax dues to government authorities which are not part of the Resolution Plan and pertain to the Corporate Insolvency Resolution Process period stand extinguished from the date of approval of the Resolution Plan, and authorities must file claims before the Resolution Professional prior to approval by the Committee of Creditors. - HELD THAT: - The Tribunal upheld that liabilities which arose during the CIRP period and are not included in the approved Resolution Plan cannot be fastened on the Resolution Applicant after approval. The order records that statutory authorities claiming such dues are expected to present their claims to the Resolution Professional before the Resolution Plan is approved by the CoC; absent such claims being part of the Plan, those liabilities stand extinguished from the date of approval. Applying that principle, the Tribunal granted reliefs sought in respect of income-tax and GST liabilities accrued during the CIRP and prior-to-closing periods as pleaded in the application.Reliefs (i), (ii), (iii) and (iv) granted; past tax and levy liabilities pertaining to the CIRP period and not part of the Resolution Plan are extinguished from date of Plan approval; authorities required to file claims before the RP prior to Plan approval.Waiver of tax liabilities arising on implementation of a resolution plan (notional income on write-back) - Income-tax liability on notional income arising on implementation of the Resolution Plan due to writing back of unpaid dues to creditors in the books of the Corporate Debtor is to be waived. - HELD THAT: - The Tribunal observed that such notional tax consequences, resulting from accounting write-backs effectuated by implementation of the approved Resolution Plan, would unfairly burden the Resolution Applicant and frustrate the commercial intent of the Plan. In the exercise of powers under section 60(5) IBC read with the Plan approval, the Tribunal directed that such notional income tax liabilities be waived.Waiver of income-tax on notional income arising from write-backs granted.Extension of implementation period and moratorium from enforcement for pre-closing non-compliances - Applicant is granted six months after the Closing Date to assess and regularise permits, approvals and consents that may have lapsed or been non-compliant up to the Closing Date, without initiation of investigations, actions or proceedings by Government Authorities for that pre-closing period; implementation period of the Resolution Plan extended by six months. - HELD THAT: - The Tribunal provided a limited, time-bound protective window to enable the Resolution Applicant to determine the status of regulatory permissions and to bring the Corporate Debtor into compliance, thereby avoiding immediate enforcement or initiation of proceedings that would impede implementation. In consequence, the Tribunal extended the time for Plan implementation by six months and barred authorities from initiating actions in respect of non-compliances existing up to the Closing Date during that window.Six-month time granted after Closing Date for assessment and compliance; implementation period of the Resolution Plan extended by six months; authorities restrained from initiating proceedings for pre-closing non-compliances during that period.Administrative consideration by Registrar of Companies for fees and stamp duty relief under the Companies Act - Request for waiver of fees and stamp duty for filing Form SH-7 with the Ministry of Corporate Affairs was not granted by the Tribunal; the Applicant may approach the concerned Registrar of Companies who will consider the request under the Companies Act in light of the IBC's spirit. - HELD THAT: - While the Tribunal recognised the commercial intent behind seeking relief from such statutory fees and duties on implementation, it declined to grant direct waiver of SH-7 filing fees and associated stamp duty itself and instead left the matter for administrative consideration by the Registrar of Companies under the Companies Act, observing that such authorities are best placed to consider the request in view of the IBC framework.Application for waiver of SH-7 filing fees and stamp duty not directly granted; applicant directed to approach the concerned RoC for consideration.Final Conclusion: IA/887/2022 and IA/1606/2022 disposed of as partly allowed: the Tribunal extinguished pre-approval CIRP-period tax and levy liabilities not included in the Resolution Plan (granting the applicant reliefs sought in respect of income-tax and GST for the periods pleaded), waived notional income-tax on write-backs, granted a six-month protective window after Closing Date and extended the Plan implementation period by six months, and directed the applicant to seek RoC consideration for SH-7 fees/stamp duty relief; applications otherwise disposed. Issues:1. Modification of order under Insolvency and Bankruptcy Code, 2016 regarding waivers sought in Resolution Plan.Analysis:The judgment pertains to an application filed by the Resolution Applicant seeking modification of an order under the Insolvency and Bankruptcy Code, 2016, regarding waivers sought in the Resolution Plan. The Tribunal noted that the Resolution Plan had specific provisions related to waivers of liabilities, including past tax dues and levies, and directed that any waivers sought must be subject to approval by the concerned authorities. The Applicant sought specific waivers for various liabilities, including income tax and GST liabilities accrued during the Corporate Insolvency Resolution Process (CIRP) period and post-closing date liabilities. The Tribunal considered each relief sought by the Applicant in detail.The Tribunal granted relief for waivers of income tax and GST liabilities accrued during the CIRP period and post-closing date, as requested by the Applicant. However, for the waiver of fees and stamp duty for filing Form SH-7 with the Ministry of Corporate Affairs, the Tribunal directed the Applicant to approach the relevant authority under the Companies Act for consideration. Additionally, the Tribunal decided to waive the income tax liability on notional income arising from the Resolution Plan's implementation due to writing back of unpaid dues to creditors in the Corporate Debtor's books.Furthermore, the Tribunal provided the Applicant with a 6-month period post the Closing Date to assess the status of permits, approvals, and consents to ensure compliance without facing government investigations or actions for non-compliances. The time period for Resolution Plan implementation was also extended by 6 months. The Tribunal granted relief related to tagging the present Interlocutory Application with another pending application before the Bench.In conclusion, the Tribunal partially allowed the applications, granting specific waivers while directing the Applicant to follow the prescribed procedures for certain relief requests. The judgment emphasized the importance of compliance and provided extensions to facilitate the Resolution Plan's effective implementation.