IBC | Once Resolution Plan Approved, Dues Not Part Of It Get Extinguished : Supreme Court Rejects Post-Resolution Income Tax Demand

The Supreme Court today (March 20) declined a claim raised by the Income Tax Department to include a tax demand in a Resolution Plan after it was approved by the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016 (IBC).

Citing the case of Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd. (2021) 9 SCC 657, which held that all claims not included in the resolution plan are extinguished upon its approval, the bench comprising Justices Abhay S. Oka and Ujjal Bhuyan observed:

“in view of the declaration of law made by this Court (Ghanashyam Mishra's case), all the dues including the statutory dues owed to the Central Government, if not a part of the Resolution Plan, shall stand extinguished and no proceedings could be continued in respect of such dues for the period prior to the date on which the adjudicating authority grants its approval under Section 31 of the IB Code. In this case, the income tax dues of the CD for the assessment years 2012-13 and 2013-14 were not part of the approved Resolution Plan. Therefore, in view of sub-section (1) of Section 31, as interpreted by this Court in the above decision, the dues of the first respondent owed by the CD for the assessment years 2012-13 and 2013-14 stand extinguished.”

The Court held that the income tax demands for assessment years 2012-13 and 2013-14 were not part of the Resolution Plan and were raised after the approval of the Resolution Plan. Therefore, these demands were invalid and could not be enforced.

The Court reasoned that a successful resolution applicant must be able to take over the corporate debtor on a clean slate, free from undecided or belated claims and if claims are allowed after the approval of the Resolution Plan, it would create uncertainty and hinder the implementation of the plan.

“Once the Resolution Plan is approved by the NCLT, no belated claim can be included therein that was not made earlier. If such demands are taken into consideration, the appellants will not be in a position to recommence the business of the CD on a clean slate….The additional demands made by the first respondent in respect of the assessment years 2012-13 and 2013-14 will operate as roadblocks in implementing the approved Resolution Plan, and appellants will not be able to restart the operations of the CD on a clean slate.”, the court observed.

“We, therefore, hold that the demands raised by the first respondent against the CD in respect of assessment years 2012-13 and 2013-14 are invalid and cannot be enforced. We set aside the impugned orders of NCLT and NCLAT and allow the appeal accordingly.”, the court added.

Case Title: Vaibhav Goel & Anr. versus Deputy Commissioner of Income Tax & Anr.

Citation : 2025 LiveLaw (SC) 330

Click here to read/download the judgment

Appearance:

For Appellant(s) Mr. Nikhil Nayyar, Sr. Adv. Ms. Charchika Yadav, Adv. Mr. Devashish Chauhan, Adv. Ms. Charu Ambwani, AOR

For Respondent(s) Mr. N Venkatraman, A.S.G. Mr. Raj Bahadur Yadav, AOR Mr. Rajat Nair, Adv. Mr. H R Rao, Adv. Mr. Ishaan Sharma, Adv. Mr. Sachin Sharma, Adv. Mr. Sarthak Karol, Adv.