ITR Dues Claims Shall Stand Extinguished Upon Approval Of Resolution Plan If They Were Not Part Of RP, Reiterates Nagpur ITAT

Referring to the decision of Apex Court in the case of Ghanashyam Mishra And Sons vs. Edelweiss Asset Reconstruction (2021) 126 taxmann.com 132 (SC), the Nagpur ITAT found that all the claims are not part of the Resolution Plan and hence dismissed the appeal filed against the orders of National Faceless Appeal Centre.

The Bench comprising S.S. Viswanethra Ravi (Judicial Member) and Inturi Rama Rao (Accountant Member) observed that, “once the proceedings have commenced by institution of application under section 7 or 9 or 10 of the Code, the continuance of the pending proceedings is prohibited and when once they reach the logical conclusion with due approval of the resolution plan by the Adjudicating Authority under sub section (1) of 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.” (Para 6)

As per the brief facts of the case, the Assessee company had preferred the appeal challenging separate orders of the National Faceless Appeal Centre, contending that the Corporate Insolvency Resolution Proceedings (CIRP) were pending against the assessee and presently the National Company Law Appellate Tribunal (NCLAT) was seized with the jurisdiction.

The Coram noted that u/s 13 of the Code, the adjudicating authority after admission of the application u/s 7 or 9 or 10 of the Code shall declare a moratorium which shall include the prohibition of the institution of suits or continuation of pending suits or proceedings against the corporate debtor in any court of law or tribunal.

Referring to the case of Murli Industries Limited vs. ACIT 441 ITR 8 (Bom.), where High Court referred the decision of Supreme Court in case of Ghanashyam Mishra And Sons, the Bench stated that on the date of approval of the resolution plan by the Adjudicating Authority, all such claims which are not a part of the resolution plan, shall stand extinguished and no personnel shall be entitled to initiate or continue any proceedings in respect to a claim, which is not a part of the resolution plan.

The Bench also stated that it is not a case of the Department that the claims which are part of subject matter of appeal are part of the resolution plan.

Therefore, clarifying that claim in respect of dues arising under the Income Tax Act, 1961, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to such claim, if it is not a part of the Resolution Plan, the ITAT dismissed the appeal.

Counsel for Appellant/ Taxpayer: Soumen Adak

Counsel for Respondent/ Department: Kailash Kanojiya

Case Title: Murli Industries Ltd. verses DCIT

Case Number: ITA Nos.182 to 185/NAG/2022

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