TaxTMI 
TaxTMI 
2026 (8) TMI 1099
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....ility of the proceedings themselves, they were heard together and are being disposed of by this consolidated order for the sake of convenience and to avoid repetition of facts and findings. For the purpose of narration, the facts relating to Assessment Year 2014-15, being the lead year from which the dispute originated and upon which the assessments for the other years substantially rest, have been taken as the principal facts, the decision whereon shall govern the remaining appeals also with necessary variations in the respective assessment years. 2. The assessee, presently known as IndusInd General Insurance Company Limited (formerly Reliance General Insurance Company Limited), is engaged in the business of general insurance covering, inter alia, motor, health, marine, fire and allied insurance products. During the relevant period, the assessee was an unlisted subsidiary of Reliance Capital Limited ("RCL"), the holding company, which admittedly held approximately 99.83% of its equity share capital. For the Assessment Year 2014-15, the Assessing Officer framed the assessment making, inter alia, disallowance of expenditure claimed to have been incurred towards payments made to m....
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....addressed before us at the threshold, we are of the considered opinion that the issue requires examination at the very inception, before embarking upon the merits of the various additions and disallowances challenged by either side. The question raised does not involve any disputed investigation of facts but arises out of subsequent undisputed developments founded upon the Resolution Plan approved by the Hon'ble NCLT and the legal consequences flowing therefrom under the provisions of the Insolvency and Bankruptcy Code, 2016. If the assessee's contention is ultimately found to be legally sustainable, the continuation of the present proceedings on merits would become wholly unnecessary and purely academic. Conversely, if the preliminary objection fails, the Tribunal would thereafter proceed to adjudicate the rival grounds on merits. It is, therefore, both appropriate and judicially expedient to first examine the maintainability of the additional ground and the plea raised under Rule 27 and thereafter determine the legal effect, if any, of the approved Resolution Plan upon the continuation of the present appeals. We accordingly proceed to examine the preliminary issue in the light of....
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...., the assessee, taking note of the legal consequences flowing from the Resolution Plan approved under Section 31 of the IBC, raised an additional ground in the appeals preferred by it for Assessment Years 2012-13 and 2020-21. In the Revenue's appeals, the assessee invoked Rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963, contending that irrespective of the merits of the individual additions, the appeals themselves had become liable to be disposed of in the light of the binding effect of the approved Resolution Plan. The plea, therefore, was not directed against the correctness of any individual disallowance or addition, but against the very continuation of the pending tax proceedings relating to periods prior to the NCLT approval date. The assessee simultaneously submitted that since the issue arose entirely on account of subsequent undisputed events and rested upon the interpretation of statutory provisions and the approved Resolution Plan, no further investigation into facts was necessary and the issue could appropriately be raised for the first time before the Tribunal. In support of the maintainability of the additional ground and the Rule 27 plea, reliance was placed....
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.... allowed on the preliminary legal issue itself without requiring any examination of the grounds raised on the merits of the additions. Since this contention strikes at the very foundation of the pending proceedings and has the potential to render all remaining issues purely academic, both parties addressed elaborate arguments before us on this preliminary question, which we propose to examine first before considering whether any occasion survives for entering upon the merits of the individual disallowances. 9. Elaborating the preliminary objection, the learned Counsel submitted that the Resolution Plan approved by the Hon'ble National Company Law Tribunal is not merely a commercial arrangement between the successful Resolution Applicant and the Committee of Creditors, but is a statutory instrument which derives its binding force from Section 31 of the Insolvency and Bankruptcy Code, 2016. It was submitted that once the Resolution Plan received the imprimatur of the Adjudicating Authority by order dated 27.02.2024, every stakeholder, including all Government authorities, became bound by the terms and consequences flowing therefrom. Inviting our attention to the relevant clauses o....
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....s of no ambiguity. The present proceedings admittedly relate to assessment years much prior to 27.02.2024 and, therefore, according to the assessee, squarely fall within the category of proceedings contemplated by Clause 9.1.8. It was thus argued that continuation of the present appeals would run directly contrary to the express stipulations incorporated in the approved Resolution Plan itself. Likewise, reliance was also placed upon Clause 9.1.9, which stipulates that no governmental authority, including any regulatory, judicial or quasi-judicial authority, shall issue any order, direction or judgment in derogation of or contrary to the approved Resolution Plan. It was submitted that the Tribunal, being a quasi-judicial authority functioning under the Income-tax Act, is equally bound to give full effect to the approved Resolution Plan while adjudicating the present appeals. 11. The learned Counsel thereafter invited our attention to the order dated 27.02.2024 passed by the Hon'ble NCLT approving the Resolution Plan. It was submitted that while approving the Resolution Plan, the Adjudicating Authority specifically dealt with the objections raised by the Income-tax Department and ....
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....relief granted under the approved Resolution Plan. It was further submitted that the practical understanding of the Resolution Plan by other statutory authorities also lends support to the assessee's interpretation. In this regard, reference was made to proceedings under the GST enactments wherein, according to the assessee, the concerned authorities have either withdrawn pending proceedings or granted consequential relief by accepting that the benefit of the approved Resolution Plan extends to the present assessee as a subsidiary of Reliance Capital Limited. It was submitted that the dispute which ultimately culminated in the impugned additions had its genesis in proceedings initiated by the GST authorities themselves, and therefore, the subsequent understanding adopted by those authorities regarding the legal effect of the Resolution Plan constitutes a relevant surrounding circumstance. On the strength of these facts, it was argued that the Revenue's appeals deserve to be dismissed and the assessee's appeals deserve to be allowed solely on the preliminary legal issue without entering into the merits of the various additions. 13. Per contra, the learned DR opposed the prelimina....
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....interpreted in a manner that defeats the sovereign power of assessment vested in the tax authorities. The learned DR thus submitted that the assessee's interpretation enlarges the scope of the Resolution Plan far beyond what was either contemplated or intended by the Hon'ble NCLT. 15. In support of the aforesaid submissions, the learned DR placed considerable reliance upon the judgment of the Hon'ble Supreme Court in S. V. Kondaskar v. V. M. Deshpande & Ors. [(1972) 83 ITR 685 (SC)]. Referring to the ratio of the said decision, he submitted that proceedings under the Income-tax Act constitute a self-contained statutory code and that assessment proceedings are distinct from proceedings relating to recovery or enforcement of tax dues. It was argued that the Hon'ble Supreme Court has recognised the independent jurisdiction of the income-tax authorities to determine taxable income notwithstanding proceedings pending before the Company Court and, therefore, the mere existence of insolvency or analogous proceedings cannot denude the authorities functioning under the Income-tax Act of their statutory jurisdiction to determine the correct tax liability of an assessee. According to the l....
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....efore it. The object of the appellate jurisdiction is not merely to examine the correctness of the conclusions reached by the subordinate authorities but also to ensure that the final decision accords with the correct legal position prevailing on the date of adjudication. If, during the pendency of appellate proceedings, subsequent statutory events or judicial developments fundamentally alter the legal complexion of the dispute, the Tribunal would not only be justified but would, in appropriate cases, be duty-bound to take cognizance of such subsequent events so that its decision reflects the law as it stands on the date of disposal of the appeal rather than the law as it existed on the date of assessment. 18. In the present case, the preliminary objection raised by the assessee does not seek to introduce any new factual controversy nor does it require the parties to adduce any additional evidence beyond what already forms part of the record. The entire foundation of the additional ground rests upon the Resolution Plan approved by the Hon'ble National Company Law Tribunal on 27.02.2024, the subsequent correction order dated 13.03.2024 and the statutory consequences flowing there....
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.... present plea would in any manner prejudice its case or enlarge the scope of the appeal beyond permissible limits. On the contrary, declining to examine a pure question of law arising from undisputed subsequent events would compel the Tribunal to undertake an elaborate adjudication on the merits of several additions which may ultimately prove to be wholly academic if the assessee succeeds on the preliminary issue. Judicial discipline demands that where a foundational legal issue is capable of disposing of the entire controversy, the same should ordinarily receive consideration at the threshold before embarking upon issues of fact or computation. Such an approach not only promotes judicial economy but also avoids rendering findings on questions which may never survive for consideration. We, therefore, hold that the additional grounds raised by the assessee in its appeals deserve to be admitted and that the plea advanced under Rule 27 in the Revenue's appeals is equally maintainable. Having held so, we now proceed to examine the principal question, namely, the true scope and legal effect of the Resolution Plan approved by the Hon'ble National Company Law Tribunal under Section 31 of ....
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....hts and obligations of all stakeholders thereafter stand regulated by the terms of the approved plan. This legislative objective would stand substantially diluted if liabilities relating to periods antecedent to the approval date were permitted to continue indefinitely outside the framework of the approved Resolution Plan, thereby exposing the successful Resolution Applicant to uncertainties which were neither contemplated nor factored into the commercial resolution process. 23. It is in this statutory backdrop that Section 31 of the Insolvency and Bankruptcy Code assumes central importance. Sub-section (1) thereof unequivocally provides that once the Adjudicating Authority approves the Resolution Plan, the same shall be binding upon the corporate debtor, its employees, members, creditors, guarantors and the Central Government, any State Government and every local authority to whom statutory dues may be payable. The legislative intent is manifest. Parliament has consciously accorded overriding statutory sanctity to an approved Resolution Plan so that, upon its approval, all stakeholders are governed by a common and binding framework. Significantly, the binding effect is not conf....
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....eatened, present or future, in relation to any period prior to the approval date, concerning the corporate debtor, its affiliates, subsidiaries and associate companies, shall stand withdrawn and dismissed. The clause further stipulates that all liabilities and obligations arising therefrom shall be deemed to have been permanently extinguished and that no adverse orders passed in such proceedings shall thereafter apply either to the corporate debtor, its affiliates, subsidiaries or associate companies or to the successful Resolution Applicant. It also declares that after the approval of the Resolution Plan, no fresh enquiries or proceedings of a similar nature shall be initiated or entertained in relation to any period anterior to the approval date. Thus, the clause does not merely deal with the recovery or enforcement of existing liabilities but expressly addresses the very continuation of pending proceedings and the initiation of future proceedings concerning periods preceding the NCLT approval date. The language employed is comprehensive and leaves little room for importing limitations which the Resolution Plan itself does not envisage. 26. Equally significant is Clause 9.1.9 ....
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....he period prior to the approval date stand extinguished and that neither the corporate debtor nor the successful Resolution Applicant can thereafter be saddled with any liability, whether existing or arising subsequently, in respect of such period. The Adjudicating Authority further approved the reliefs and concessions contained in the relevant clauses of the Resolution Plan, thereby according judicial imprimatur to the consequences flowing therefrom. Though paragraph 49 initially contained an inadvertent typographical reference to certain clause numbers, the Hon'ble NCLT, by its subsequent order dated 13.03.2024, corrected the said error and clarified that the approval extended, inter alia, to Clauses 9.1.8 to 9.1.13. The correction order did not enlarge or modify the original relief; it merely removed an obvious clerical inaccuracy so that the operative portion of the order accurately reflected the clauses which had in fact been approved. 28. Another circumstance which, in our view, assumes considerable significance is that the width of paragraph 49 subsequently came to be questioned before the Hon'ble NCLT itself. As noticed earlier, the Securities and Exchange Board of India....
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....d the State Governments. Equally significant is the declaration that all claims which do not form part of the approved Resolution Plan stand extinguished on the approval date and no person is thereafter entitled either to initiate or continue any proceedings in respect of such claims. The emphasis laid by the Hon'ble Supreme Court is not merely upon the extinguishment of monetary claims but upon the finality and binding nature of the Resolution Plan itself. The Court observed that unless such finality is accorded to an approved Resolution Plan, no successful Resolution Applicant would be willing to undertake the revival of a distressed corporate entity while remaining exposed to uncertain and indeterminate liabilities arising from periods antecedent to the approval of the Resolution Plan. The doctrine evolved by the Hon'ble Supreme Court is, therefore, founded upon the larger legislative objective of ensuring certainty, commercial efficacy and successful implementation of the insolvency resolution process. 30. Applying the aforesaid principles to the facts before us, we find that the present case stands on an even stronger footing. Here, the Resolution Plan itself specifically i....
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....ing with proceedings under the Income-tax Act. In AMNS Gandhidham Ltd. v. ACIT Writ Petition No.1435 of 2025 (Bombay), the Hon'ble High Court, following the ratio of Ghanashyam Mishra, held that assessment proceedings relating to periods covered by an approved Resolution Plan could not be permitted to continue. Similar views have been expressed in AMNS Khopoli Ltd. v. ACIT (2024) 164 taxmann.com 187(Bombay), Uttam Galva Metallics Ltd. v. ACIT (2024) 246 COMP CASE 678 (Bombay), and Uttam Value Steels Ltd. v. ACIT (2024) 186 SCL 70 (Bombay), where reassessment notices, assessment proceedings and proceedings under Section 153C, as the case may be, were interfered with on the ground that the claims pertaining to the pre-resolution period stood concluded by virtue of the approved Resolution Plan. Though the factual matrix in each of these decisions may not be identical, the underlying principle emerging therefrom is uniform, namely that the statutory consequences flowing from an approved Resolution Plan cannot be diluted by continuing proceedings relating to liabilities which stand governed by the Resolution Plan. Being decisions of the jurisdictional High Court rendered in the context ....
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....e, cannot be divorced from the precise issue which arose for determination and mechanically transplanted into an entirely different statutory framework enacted several decades thereafter. 33. The distinction between the legal regime governing liquidation under the Companies Act and the corporate insolvency resolution mechanism under the Insolvency and Bankruptcy Code is both fundamental and substantive. Liquidation under the Companies Act contemplates the eventual dissolution of the corporate entity after realisation and distribution of its assets. The Corporate Insolvency Resolution Process under the IBC, on the other hand, is premised upon the preservation and revival of the corporate enterprise as a going concern through an approved Resolution Plan having statutory force. Parliament has consciously incorporated Section 31 into the IBC to ensure that once the Resolution Plan receives approval from the Adjudicating Authority, every stakeholder, including Government authorities, remains bound by its terms so that the successful Resolution Applicant is not subsequently confronted with unresolved liabilities pertaining to periods anterior to the approval date. It is precisely this....
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....l and the judicial precedents governing the field, we are left with no manner of doubt that the preliminary objection raised by the assessee deserves to succeed. The Resolution Plan approved on 27.02.2024 has attained finality. The Income-tax Department was admittedly a participant in the proceedings before the Hon'ble NCLT; its objections were considered and rejected; the reliefs and concessions embodied in the Resolution Plan, including Clauses 9.1.8 and 9.1.9, received judicial approval; the subsequent correction order dated 13.03.2024 removed any possible ambiguity regarding the clauses approved; and the attempt to confine the benefit of the Resolution Plan only to the corporate debtor, to the exclusion of its subsidiaries, was not accepted by the Hon'ble NCLT. In these circumstances, permitting the present appeals to proceed on merits in relation to assessment years admittedly preceding the NCLT approval date would not only be inconsistent with the express terms of the approved Resolution Plan but would also run contrary to the statutory mandate contained in Section 31 of the Insolvency and Bankruptcy Code as interpreted by the Hon'ble Supreme Court and consistently followed b....