Income-tax demand against dissolved company for AY 2016-17 extinguished under Section 31(1) IBC as pre-plan liability

ITAT Delhi (AT) held the income-tax demand against the dissolved/insolvent company for AY 2016-17 is extinguished under Section 31(1) of the IBC because the liability predates approval of the resolution plan, following the SC precedent that pre-plan claims (including statutory dues) stand extinguished. Consequently the appeal was dismissed as infructuous.

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The appeal concerns a tax demand for Assessment Year 2016-17 raised under Section 143(3) of the Income Tax Act, 1961, which the assessee challenges on the ground that it predates the approval of a resolution plan under the Insolvency and Bankruptcy Code, 2016 (IBC). The resolution plan was sanctioned by the National Company Law Tribunal (NCLT) under Section 31(1) of the IBC, conclusively ending insolvency proceedings. Citing the Supreme Court's ruling in *Ghanashaym Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd.* (2021) 9 SCC 657, it was held that "all claims, including statutory dues, predating the resolution plan's approval, stand extinguished." Therefore, statutory dues and tax liabilities arising before the resolution plan's sanction cannot survive. The tribunal found no contest to this legal position from the revenue and concluded that the tax demand for the relevant period is extinguished by operation of law under Section 31(1) IBC. Consequently, the appeal was dismissed as infructuous since the liability no longer subsists.

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