Resolution plan extinguishes pre-date tax claims, while clean-slate objections do not bar carry forward of losses.

An approved resolution plan under the Insolvency and Bankruptcy Code can extinguish pre-effective-date income-tax claims where the plan expressly settles all prior claims, liabilities, demands and dues and no income-tax claim was submitted in the resolution process. On that basis, pre-effective-date additions could not support an enforceable tax demand against the assessee. A separate clean-slate objection was not accepted to deny carry forward of losses, because the loss issue was treated as relevant to the resolution process and had not been raised before the resolution forum. The commentary notes relief to the assessee on the substantive tax issue and rejection of the Revenue's contrary position.

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Issues: (i) Whether income-tax additions and demands pertaining to the period prior to the effective date survived in view of the approved resolution plan under the Insolvency and Bankruptcy Code, 2016; (ii) Whether the Revenue could deny carry forward of losses on the basis that the resolution plan granted a clean slate.

Issue (i): Whether income-tax additions and demands pertaining to the period prior to the effective date survived in view of the approved resolution plan under the Insolvency and Bankruptcy Code, 2016.

Analysis: The approved resolution plan provided that all claims, liabilities, demands and other dues pertaining to the period on or before the effective date stood irrevocably and unconditionally settled, discharged and extinguished in perpetuity, and no income-tax claim had been placed before the resolution process as part of the approved plan. In these circumstances, the additions sustained in the assessment could not give rise to an enforceable demand against the assessee for the pre-effective-date period.

Conclusion: The additions and corresponding tax demand did not survive against the assessee.

Issue (ii): Whether the Revenue could deny carry forward of losses on the basis that the resolution plan granted a clean slate.

Analysis: The plea that a clean slate under the resolution plan necessarily bars carry forward of losses was not accepted. The availability of losses was treated as a relevant matter for the resolution process, and the Revenue having not placed the issue before the resolution forum could not successfully resist the assessee's claim on that basis.

Conclusion: The Revenue could not deny carry forward of losses on that ground.

Final Conclusion: The assessee obtained relief on the substantive tax issue, while the Revenue's appeal failed, resulting in a partial allowance of the assessee's cross appeal and dismissal of the Revenue's cross appeal.

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