TaxTMI 
TaxTMI 
INCOME TAX PROCEEDINGS AGAINST THE CORPORATE DEBTOR AFTER THE RESOLUTION PLAN HAS BEEN APPROVED
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....NCOME TAX PROCEEDINGS AGAINST THE CORPORATE DEBTOR AFTER THE RESOLUTION PLAN HAS BEEN APPROVED<br>By: - DR.MARIAPPAN GOVINDARAJAN<br>Corporate Laws / IBC / SEBI<br>Dated:- 17-2-2025<br>In ACIT (OSD) , RANGE-10, DELHI VERSUS GAIL MANGALORE PETROCHEMICALS LTD., MUMBAI - 2025 (2) TMI 304 - ITAT DELHI, the Corporate Debtor, GAIL Mangalore Petrochemicals Limited, Mumbai (previously known as JBF Petrochemicals Limited was set up in September 2008. The objective of the said company is to operate a planned 1.25 million metric tonnes per year purified terephthalic acid (PTA) plant at Mangalore, Karnataka. The Industrial Development Bank of India (financial creditor) initiated a Corporate Insolvency Resolution Process ('CIRP' for short) agains....
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....t the corporate debtor under Section 7 of the Insolvency and Bankruptcy Code, 2016 for the default committed by the corporate debtor. The application of the financial creditor was admitted by the Adjudicating Authority on 28.01.2022. The Adjudicating Authority ordered for moratorium under Section 14 of the Code, staying all the legal proceedings pending at various courts, Tribunals and forums. The Adjudicating Authority also appointed an Interim Resolution Professional who also became the Resolution Professional. The Resolution Professional issued a public announcement on 04.02.2022 calling for the claims of the creditors of the corporate debtor fixing the last date for receipt of claims as 16.02.2022. After verifyi....
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....ng all the claims, the Resolution Professional constituted a Committee of Creditors ('CoC' for short). On 18.04.2022 the Resolution Professional invited Expression of Interest for the submission of a Resolution Plan for the corporate debtor. The Income Tax Department did not file any claim with the Resolution Professional against the dues of the corporate debtor to the Department. The last date for submission of Expressions of Interest for the submission of a Resolution Plan for the Company was 03.05.2022, which was further extended to 17.06.2022. The same was extended to 08.08.2022. The deadline for the submission of resolution plan was further extended to 30.08.2022. 3 resolution plans have been recei....
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....ved by the Resolution Professional. These plans were considered by the CoC and finalised the resolution plan received from the GAIL (India) Limited. The Letter of Intent dated 16.10.2022 was duly acknowledged by GAIL, signifying their acceptance of the terms outlined in the resolution process. Also, on 18.10.2022, GAIL submitted a performance bank guarantee amounting to 10% of the total Resolution Plan value, i.e. Rs. 210.crores. On 20.10.2022 Resolution Professional filed an application before the NCLT, seeking approval of the Resolution Plan pursuant to Section 30(6) of the Code. The Adjudicating Authority issued notice to the Income Tax Department, affording an opportunity to appear and make submissions, including any claims....
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.... or objections they may have had concerning the Resolution Plan. A personal hearing was also afforded to the Department but this opportunity has not been utilized by the Department. The RP sent an email to the Income Tax Department intimating approval of the Resolution Plan by the Adjudicating Authority. Against this communication the Department filed an appeal before the National Company Law Appellate Tribunal ('NCLAT' for short). The Department challenged the approval of the Resolution plan by the Adjudicating Authority on the ground that that the claims of the Tax Department were neither inadequately addressed nor duly considered in the approved plan. The Resolution Plan approved by the Adjudicating Authori....
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....ty did not conform to the statutory requirements in this regard. The NCLAT dismissed the application filed by the Income Tax Department. The NCLAT held that the Resolution Plan had been approved following due process under the Code and was binding on all the stakeholders, including statutory authorities, as provided under Section 31 of the Code. The NCLAT also further observed that the Income Tax Department had been given an opportunity to raise claims or objections during the CIRP as well as again while hearing IA 899/22, but no submissions/ objections were made by the Income Tax Department at the relevant stages. The Code, being a special statute, overrides other laws, including claims for statutory dues under general la....
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....w, and once a Resolution Plan is approved, such claims are extinguished to the extent provided in the plan. The NCLAT reaffirmed that the Resolution Plan could be implemented as per the framework approved by the NCLT, with no further interference warranted. In the meanwhile, the Revenue filed an appeal before the Commissioner of Income Tax (Appeals) against the order of Assessing Officer, National Faceless Assessment Centre, Delhi dated 27.09.2021. The First Appellate Authority, Commissioner of Income Tax (Appeals) decided the appeal against the Department on 30.03.2024. The Department also filed appeal against the order of First Appellate Authority before the Income Tax Appellate Tribunal ('ITAT' for short). The f....
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....ollowing are submitted before ITAT for corporate debtor- * All dues under the Act, in relation to any period prior to the Closing date (i.e. 89 days from the date of approval of Resolution Plan by the Adjudicating Authority) shall stand extinguished and the Respondent Company shall not be liable to pay any amount against such demand. In other words, any dues/ demands raised even subsequent to the date of approval of the Resolution Plan (but within 89 days therefrom) shall also stand extinguished. * Once the Resolution Plan has been approved by the NCLT, new claims of the Tax Department cannot be considered as upheld by the Supreme Court of India in GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY VERSUS ....
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....EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR & ORS. - 2021 (4) TMI 613 - SUPREME COURT. * Once the resolution plan has been approved the plan becomes binding on Corporate Debtor, its employees, members, creditors, guarantors and other stakeholders involved in the resolution Plan. * The legislative intent behind this is, to freeze all the claims so that the resolution applicant starts on a clean slate and is not flung with any surprise claims. The appellant department contended that being the State exchequer, it cannot be bound by the Resolution Process provisions of the Code. The ITAT held as detailed below- * Once a resolution plan is duly approved by the Adjudicating Authority under sub-section (1) of ....
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....Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan. * Consequently, all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand....
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.... extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued. The ITAT further held that the impugned assessment order was framed on 27/09/2021 and during the insolvency proceedings income tax Department was informed by the resolution professional and only claim with regard to TDS violation of Rs. 10.14 Cr. was filed. The same was also not accepted in insolvency proceedings and even appeal by the department stands dismissed by the NCLAT. The impugned assessment order is not left with any legal sanctity and enforceability under law. The ITAT dismissed the appeal filed by the department.<br> Scholar....
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