Income tax claims prior to Resolution Plan approval under Section 31 extinguished when revenue fails to file within prescribed period

Delhi HC held that income tax claims accruing prior to approval of Resolution Plan under Section 31 of the Insolvency and Bankruptcy Code are extinguished upon plan approval. Revenue authorities issued assessment orders and demand notices after public announcement of CIRP and approval of Resolution Plans by NCLT, without filing claims during the prescribed period. The court ruled that tax claims for Assessment Years 2017-18 and 2014-15 stood extinguished following Resolution Plan approval, as revenue failed to submit claims within the stipulated timeframe under Section 15 of the Code.

---

---

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.

---