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Issues: (i) Whether the additional grounds and the plea under Rule 27, founded on subsequent approval of a resolution plan, were maintainable before the Tribunal; (ii) Whether pending income-tax proceedings for periods preceding approval of the resolution plan could continue against a subsidiary covered by that plan.
Issue (i): Whether the additional grounds and the plea under Rule 27, founded on subsequent approval of a resolution plan, were maintainable before the Tribunal.
Analysis: The plea arose from undisputed subsequent events, namely approval of the resolution plan and its statutory consequences. A pure question of law going to the root of the proceedings, requiring no fresh factual investigation, may be raised before the Tribunal under its appellate jurisdiction. Entertaining the plea avoided adjudication of merits that could become academic.
Conclusion: The additional grounds and the Rule 27 plea were maintainable and were admitted in favour of the assessee.
Issue (ii): Whether pending income-tax proceedings for periods preceding approval of the resolution plan could continue against a subsidiary covered by that plan.
Analysis: Section 31 of the Insolvency and Bankruptcy Code, 2016 gives an approved resolution plan binding effect against governmental and statutory authorities. The approved plan expressly covered affiliates and subsidiaries, provided for withdrawal and dismissal of pending tax proceedings concerning the pre-approval period, permanently extinguished related liabilities, and prohibited governmental or quasi-judicial action contrary to the plan. The income-tax department had participated in the insolvency proceedings and its objections had been rejected. The statutory resolution framework and the clean slate principle prevail over continuation of pre-resolution tax proceedings; the earlier winding-up jurisprudence concerning assessment jurisdiction did not govern an approved resolution plan under the Insolvency and Bankruptcy Code, 2016.
Conclusion: The pre-approval income-tax proceedings could not continue and stood extinguished under the binding resolution plan, in favour of the assessee.
Final Conclusion: All tax disputes in the batch relating to periods before the resolution-plan approval date were rendered academic, with the merits of the additions and disallowances left open.
Ratio Decidendi: A resolution plan approved under Section 31 of the Insolvency and Bankruptcy Code, 2016 binds tax authorities and extinguishes pending tax claims and proceedings for the pre-approval period where the plan expressly covers them.
Approved resolution plans bind tax authorities, extinguishing covered pre-approval tax proceedings and rendering merits disputes academic.
Approved resolution plans under Section 31 of the Insolvency and Bankruptcy Code, 2016 bind governmental and statutory authorities. Where a plan expressly covers affiliates and subsidiaries, requires withdrawal or dismissal of tax proceedings for periods before approval, extinguishes related liabilities, and bars contrary governmental or quasi-judicial action, pending income-tax proceedings for that period cannot continue. The clean slate principle applies where tax authorities participated in the insolvency process and their objections were rejected. Subsequent approval of such a plan may also support additional grounds or a Rule 27 plea before the Tribunal where it raises a pure legal issue without requiring fresh factual enquiry, avoiding an academic merits determination.
Additional legal ground based on subsequent undisputed events - Binding effect of approved resolution plan on pre-resolution tax proceedings Maintainability of the additional grounds and the Rule 27 plea founded on the subsequent approval of the Resolution Plan - HELD THAT: - The objection raised a pure question of law arising from undisputed subsequent events and materials already on record, requiring no fresh factual enquiry. The Tribunal's appellate jurisdiction extends to a legal issue going to the root of the matter, particularly where its determination may render adjudication of the remaining grounds academic. The principles in Peter Vaz [2021 (4) TMI 605 - BOMBAY HIGH COURT] and Hazarimal Nagji & Co. [1961 (10) TMI 78 - BOMBAY HIGH COURT] supported admission of such a legal plea. [Paras 17, 18, 19, 20] The additional grounds were admitted and the assessee's Rule 27 plea was held maintainable. Binding effect of approved resolution plan on pre-resolution tax proceedings - Clean slate principle under insolvency resolution - Continuation of income-tax appeals concerning periods preceding approval of the Resolution Plan applicable to the holding company and its subsidiaries - HELD THAT: - An approved Resolution Plan acquires statutory force under section 31 of the Insolvency and Bankruptcy Code and binds governmental and statutory authorities. Clauses 9.1.8 and 9.1.9 expressly extinguished and required withdrawal of pending tax proceedings concerning pre-approval periods in relation to the corporate debtor, its affiliates and subsidiaries, and prohibited orders contrary to the Plan. The Income-tax Department had participated in the resolution proceedings and its objections had been rejected. Applying the clean-slate principle stated in Ghanashyam Mishra & Sons (P.) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. [2021 (4) TMI 613 - SUPREME COURT] and the jurisdictional High Court authorities, the Tribunal held that income-tax jurisdiction cannot be exercised inconsistently with the binding Resolution Plan. S. V. Kondaskar v. V. M. Deshpande & Ors. [1972 (1) TMI 60 - SUPREME COURT] concerning winding-up under the Companies Act, was held inapplicable to the distinct statutory consequences of an approved Resolution Plan under the IBC. [Paras 32, 33, 34, 35, 36] The pending appeals relating to the pre-approval assessment years could not continue; the assessee's appeals were allowed on the preliminary legal issue and the Revenue's appeals were dismissed, with all merits issues left open. Final Conclusion: The assessee's appeals were allowed and the Revenue's appeals were dismissed because the approved Resolution Plan precluded continuation of tax proceedings for the relevant pre-approval periods. The merits of the additions and disallowances were left open.