Income Tax Liability on Notional Income arose on Resolution Plan due to write back of unpaid dues to Creditors can be waived off: NCLT [Read Order]

The Mumbai Bench of the National Company Law Tribunal (NCLT) has held that income tax liability on notional income arose on resolution plan due to write back of unpaid dues to creditors can be waived off

The application is filed by Taguda Pte. Limited (Resolution Applicant) under section 60(5) of Insolvency and Bankruptcy Code, 2016 read with Rule 11 of NCLT Rules, 2016, against Subodh Kumar Agrawal, RP of Ushdev International Limited, seeking modification of the order dated 03.02.2022, limited up to waivers as sought under the Resolution Plan.

On perusal of the Application, it reveals that this Tribunal while approving the Resolution Plan has ordered and directed that all the past liabilities arising out of any levies/tax dues to any government authorities, etc. which are not part of the Resolution Plan and about pre-Corporate Insolvency Process period shall stand extinguished from the date of approval of the Resolution Plan.

The Applicant is seeking specific waivers of various liabilities which includes the liabilities accrued during the CIRP period, liabilities which shall occur till the closing date and liabilities which shall arise on implementation of the Resolution Plan.

A Coram of Member (Judicial) Justice P.N. Deshmukh and Member (Technical) Mr Shyam Babu Gautam that all the past liabilities arising out of any levies/tax dues to any government authorities, etc. which are not part of the Resolution Plan and about Corporate Insolvency Process period shall stand extinguished from the date of approval of the Resolution Plan. The authorities have to file the claim before the RP before the approval of the Resolution Plan by the CoC.

It was observed that the income tax liability on notional income arising on implementation of the Resolution Plan due to writing back of the unpaid dues to the creditors in the books of the Corporate Debtor is to be waived off. Further, the Applicant is provided 6-month time after the Closing Date to assess the status of the permits, approvals and consents that may have lapsed, expired, suspended, cancelled, revoked or terminated and to ensure that the Corporate Debtor is compliant with them without initiating any investigations, actions or proceedings by the Government. The appeal was disposed of as partly allowed.

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