IBC Has Overriding Effect On All The Acts Including Income Tax Act: ITAT

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that the Insolvency and Bankruptcy Code (IBC) has an overriding effect on all acts, including the Income Tax Act, as per Section 178(6) of the Income Tax Act, effective from November 1, 2016.

The bench of Yogesh Kumar U.S. (Judicial Member) and Pradip Kumar Khedia (Accountant Member) has observed that no proceedings can be initiated against the corporate debtor, including proceedings before the Tribunal, income tax proceedings, recovery of demand, or giving effect to any order.

The department/appellant challenged the CIT(A)'s order, which deleted the addition made by the A.O.

The department contended that a financial creditor had filed an application under Section 7 of the Insolvency and Bankruptcy Code 2016 against the assessee before the National Company Law Tribunal (NCLT), and judgment had been passed by the NCLT by allowing the application.

The NCLT has admitted the application filed under the IBC Code in terms of Section 14 of the IBC Code, and consequently, the moratorium terms were imposed.

The tribunal noted that in view of the moratorium declared by NCLT, all the proceedings in the court of law, tribunal, etc. cannot continue in view of the amendment to Section 178(6) of the Act, and therefore, no useful purpose is going to be served in continuing the proceedings.

The ITAT granted the assessee and Revenue the right to seek remedial measures in accordance with the law when the moratorium period expires, the NCLT order is modified, the assessee company is revived, or where it is necessary for the interest of justice.

Case Title: ACIT Versus ABW Infrastructure Ltd.

Citation: I.T.A. No. 2861/DEL/2018 (A.Y 2008-09)

Date: 16.02.2023

Counsel For Appellant: CIT D.R. Kanv Bali

Counsel For Respondent: None

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