2025 (11) TMI 164 - AT - Income Tax

Resolution applicant not liable for pre-insolvency income-tax claim under clean-slate principle when claim not admitted

ITAT DELHI - AT held that an income-tax claim raised during insolvency proceedings was not admitted, and under the clean-slate principle the successful ... Income tax proceedings against company insolvent - HELD THAT:- There is no doubt left that the Department had raised the claim during insolvency proceedings, which was not accepted and, thus, based on the clean slate theory as approved by Hon’ble Supreme Court in the case of Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd. & Ors. [2021 (4) TMI 613 - SUPREME COURT] and in CoC of Essar Steel India Ltd. v. Satish Kumar Gupta & Ors. [2019 (11) TMI 731 - SUPREME COURT] the successful Resolution Applicant cannot be burdened with any tax liability. We allow ground No.1 of the appeal of the assessee. Assessee underwent Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code; a Resolution Plan by the successful Resolution Applicant was approved by the Committee of Creditors and by the NCLT. During insolvency proceedings the Income-tax Department lodged a claim of INR 16,45,17,661/-, recorded in the Resolution Plan and in Form B as relating to AY 2016-17 and 2017-18, but that claim 'was not admitted' and the Department did not challenge the non-admittance. Applying the Supreme Court precedents in Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd. and CoC of Essar Steel India Ltd. v. Satish Kumar Gupta, the Tribunal relied on the 'clean slate theory' and held that the successful Resolution Applicant 'cannot be burdened with any tax liability.' Consequent assessments and demands for the relevant assessment year were quashed and the assessee's ground allowing exclusion of the Department's claim was allowed.