Resolution plan extinguishes pre-CIRP tax dues, so income tax refunds cannot be adjusted against waived liabilities.

On approval of a resolution plan under the Insolvency and Bankruptcy Code, pre-resolution tax claims not preserved in the plan stand extinguished and bind all stakeholders. Where the approved plan expressly waived and discharged outstanding tax liabilities, including assessed and unassessed dues, the revenue had no legal basis to adjust income tax refunds against those past demands. The court held that recovery by refund adjustment could not continue after extinguishment of the liabilities, and the adjustment was quashed. The merits of the refund claim itself were not examined.

---

---

Issues: Whether the revenue could adjust income tax refunds against pre-CIRP tax demands after approval of the resolution plan extinguishing the corporate debtor's tax liabilities.

Analysis: On approval of a resolution plan under the Insolvency and Bankruptcy Code, the claims not forming part of the plan stand frozen and are binding on the corporate debtor and all stakeholders. The approved plan in the present matter expressly provided for waiver and extinguishment of outstanding tax liabilities, including assessed and unassessed dues. Once such liabilities stood discharged under the plan, the respondent had no legal basis to appropriate the petitioner's refunds towards past tax demands. The challenge was therefore confined to the legality of the refund adjustment, and the merits of the refund claim itself were not examined.

Conclusion: The adjustment of income tax refunds against extinguished pre-resolution tax dues was unlawful and was quashed. The issue is decided in favour of the assessee.

Final Conclusion: Approval of the resolution plan brought the prior tax claims to an end, and the revenue could not continue recovery by adjusting refunds against those extinguished dues.

Ratio Decidendi: Once a resolution plan is approved under the Insolvency and Bankruptcy Code and the relevant claims are not preserved in the plan, those claims stand extinguished and cannot be enforced by adjustment or continuation of recovery proceedings.

---