Resolution Professional's tax payment assurance ignored in extinguishing Rs. 16 crore Income Tax demands

The NCLAT set aside the NCLT Guwahati order regarding extinguishment of Income Tax demands totaling Rs. 16,20,25,953 for Assessment Years 2013-14 and 2014-15. The Income Tax Department received only Rs. 1,20,23,691 (less than 15% of outstanding demand) as payment under the resolution plan. The NCLAT held that the NCLT failed to consider that the Resolution Professional had assured payment of tax dues by the successful resolution applicant after appeal process completion. Citing Rainbow Papers Limited SC judgment, the tribunal recognized government dues as secured creditor claims. The matter was remitted back to NCLT Guwahati for fresh hearing of all parties.

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Issues Involved:
1. Extinguishment of tax demands for various assessment years.
2. Admissibility of tax claims by the Resolution Professional.
3. Compliance with the approved Resolution Plan.
4. Legal standing of the tax department's claims post-CIRP approval.
5. Interpretation of relevant Supreme Court judgments.

Issue-wise Detailed Analysis:

1. Extinguishment of Tax Demands:
The Respondent, Assam Company India Ltd., sought the extinguishment of tax demands for multiple assessment years (1986-1987, 2006-2007, 2010-2011, 2011-2012, 2012-2013, 2013-2014, and 2014-2015) and any other demands prior to September 20, 2018. The Adjudicating Authority ruled that since the Respondents did not file claims for the periods except for 2013-14 and 2014-15 before the Resolution Professional, these claims would not be entertained if filed later.

2. Admissibility of Tax Claims:
The Appellants (Income Tax Department) argued that their claims for the assessment years 2013-14 and 2014-15 were submitted before the approval of the Resolution Plan and should be considered. The Resolution Professional had earlier communicated that the claims were contingent liabilities and would be payable by the new promoter after the final order from the CIT(A). The NCLT, Guwahati, had initially accepted this position, allowing the Appellants to claim these dues from the new promoter.

3. Compliance with the Approved Resolution Plan:
The Respondent contended that the approved Resolution Plan, which extinguished all claims prior to the effective date (September 20, 2018), should be binding. The Appellants argued that the Resolution Professional's communication regarding the contingent nature of the tax claims should be considered part of the Resolution Plan, thus making the new promoter liable for these dues.

4. Legal Standing of the Tax Department's Claims Post-CIRP Approval:
The Appellants argued that the tax dues were government dues and thus should be treated as secured claims. They relied on the Supreme Court judgment in "State Tax Officer (1) Vs. Rainbow Papers Limited," which held that statutory dues are secured claims and should be considered in the Resolution Plan. The Respondent, however, cited other judgments to argue that once a Resolution Plan is approved, it becomes binding on all stakeholders, including the government, and cannot be modified to include additional liabilities.

5. Interpretation of Relevant Supreme Court Judgments:
The Appellants cited the "Rainbow Papers Limited" judgment to support their claim that statutory dues should be treated as secured claims. The Respondent countered with judgments from "Essar Steel," "Ghanashyam Mishra," and others to argue that the Resolution Plan, once approved, cannot be altered to include additional liabilities. The Tribunal noted the importance of the "Rainbow Papers Limited" judgment, which emphasized that statutory dues are secured and must be considered in the Resolution Plan.

Conclusion:
The Tribunal set aside the NCLT's order dated February 10, 2021, and remitted the matter back to the NCLT, Guwahati Bench, for reconsideration. The NCLT was directed to hear the parties again, considering the facts and the Supreme Court judgment in "Rainbow Papers Limited," and to pass fresh orders expeditiously. The Tribunal emphasized that the tax department's claims, being government dues, should be treated as secured creditors.

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