State Authorities, Regulatory Bodies Including Direct & Indirect Tax Departments Cannot Question Resolution Plan: ITAT Dismisses Revenue Department's Appeal

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has dismissed the appeal filed by the revenue department on the grounds that the state authorities and regulatory bodies, including direct and indirect tax departments, cannot question the resolution plan.The two member bench of Sandeep Singh Karhail (Judicial Member) and Prashant Maharishi (Accountant Member) observed that as per section 31 of the Insolvency and Bankruptcy Code, 2016, the resolution plan as approved by the Adjudicating Authority shall be binding on the corporate debtor and its employees, members, creditors, guarantors, and other stakeholders involved in the resolution plan. The case of the assessee/appellant was pending before the Insolvency Professional in terms of the Insolvency and Bankruptcy Code, 2016. A moratorium period has been declared as per section 14 of the Insolvency and Bankruptcy Code, 2016. The petition was filed by Capman Conpro Pvt. Ltd. and Vighnahartha Corrugators Pvt. Ltd. in their capacity as the Financial Creditors of Global Softech Ltd. (Corporate Debtor) under Section 7 of the Insolvency and Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 before the National Company Law Tribunal (NCLT) for the initiation of the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor. The NCLT appointed Hemant Sharma as the Interim Resolution Professional for conducting the CIRP and exercising all powers and subject to all duties as contemplated under the provisions of the Insolvency and Bankruptcy Code, 2016. The court noted that as per the provisions of section 14 of the Insolvency and Bankruptcy Code, 2016, the institution of suits or continuation of pending suits or proceedings against the corporate debtor, including execution of any judgement, decree, or order in any court of law, tribunal, arbitration panel, or other authority, shall be prohibited during the moratorium period. The period of moratorium shall have effect from the date of the order till the completion of the corporate insolvency resolution process. The court observed that the appeal filed by the department was the institution of suit against the corporate debtor, which is prohibited under section 14 of the Insolvency and Bankruptcy Code, 2016. The Supreme Court in the case of Alchemist Asset Reconstruction Co. Ltd. v. Hotel Gaudavan (P.) Ltd. held that even arbitration proceedings cannot be initiated after the imposition of the moratorium under section 14 (1) (a) of the Insolvency and Bankruptcy Code, 2016 has come into effect and it is non-est in law and could not have been allowed to continue. The Tribunal dismissed the appeal filed by the Revenue with the liberty to the Assessing Officer to file the appeal afresh after completion of moratorium period upon the revival of the Corporate Debtor as per Resolution Plan as approved by the Adjudicating Authority or upon appointment of the Liquidator, as the case may be. Case Title: Dy. Commissioner of Income Tax Versus Global Softech Ltd. Citation: ITA No. 2394/Mum./2017 Dated: 07.03.2022 Counsel For Appellant: None Counsel For Respondent: CIT-DR Shekhar L. Gajbhiye Click Here To Read/Download Order

State Authorities, Regulatory Bodies Including Direct & Indirect Tax Departments Cannot Question Resolution Plan: ITAT Dismisses Revenue Department's Appeal

Mariya Paliwala

Tags