Insolvency resolution plans and tax dues: uncrystallised liabilities require scrutiny under the Code before enforcement.

An uncrystallised pre-resolution tax liability that had not been quantified when the resolution plan was approved could not be enforced on the existing record, because the demand arose while assessment proceedings were still at the notice and document-production stage. The Court held that the assessing authority had to examine whether the approved resolution plan satisfied Section 30(2) of the Insolvency and Bankruptcy Code, including its treatment of statutory dues, before enforcing the demand. As no such finding had been recorded, the assessment was set aside and the matter remitted for fresh consideration under the insolvency framework.

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Issues: (i) Whether the assessment order for the pre-resolution period could be sustained when the statutory liability had not crystallised before approval of the resolution plan; (ii) Whether the assessing authority was required to examine whether the resolution plan satisfied Section 30(2) of the Insolvency and Bankruptcy Code, 2016 before enforcing the demand.

Issue (i): Whether the assessment order for the pre-resolution period could be sustained when the statutory liability had not crystallised before approval of the resolution plan.

Analysis: The resolution plan had been approved before the impugned assessment was completed, but the tax liability for the relevant assessment year had not been quantified or crystallised at the time of approval. The demand arose from assessment proceedings that were still at the notice and document-production stage when the resolution plan was approved. In such circumstances, the Court treated the uncrystallised liability as not having formed part of the resolution plan and held that the effect of the insolvency resolution process on the tax demand could not be decided without examining the statutory conformity of the plan.

Conclusion: The assessment order could not be sustained on the existing record and was liable to be set aside.

Issue (ii): Whether the assessing authority was required to examine whether the resolution plan satisfied Section 30(2) of the Insolvency and Bankruptcy Code, 2016 before enforcing the demand.

Analysis: The Court held that the binding effect of an approved resolution plan depends upon its conformity with the statutory requirements governing approval, including the requirement that it deal with operational and statutory dues in the manner mandated by the Code. Since no finding had been recorded by the assessing authority on whether the resolution plan met Section 30(2), the demand could not be finally adjudicated without that examination. The matter therefore required reconsideration by the authority in light of the insolvency framework and the supremacy of the Code where applicable.

Conclusion: The matter had to be remitted to the assessing authority for fresh consideration of the resolution plan's conformity with the Code.

Final Conclusion: The impugned assessment was set aside and the matter was sent back for fresh decision after examining the resolution plan's compliance with the Insolvency and Bankruptcy Code, 2016.

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