The Nagpur Bench of the Income Tax Appellate Tribunal ( ITAT ) observed that all the claims of the income tax return ( ITR ) extinguish upon approval of Resolution Plan ( RP ) if not part of the RP.
Under section 13 of the Code, the adjudicating authority after admission of the application under section 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.
In Ghanashyam Mishra and Sons, the Apex Court has held that, (i) That once a resolution plan is duly approved 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.
It was further held that on the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan; (ii) 2019 amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which I&B Code has come into effect.
Consequently, all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued.
The Bench comprising S.S. Viswanethra Ravi ( Judicial Member ) and Inturi Rama Rao ( Accountant Member ) observed that “In the present case also, 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, the ratio of the Jurisdictional High Court in the case of Murli Industries Limited is also squarely applicable to the facts of the present case. Thus, we do not find any merit in the appeal filed by the assessee and hence stands dismissed as not maintainable.”
“A reading of the provisions under section 13 and 14 of the Code along with the decision in Ghanashyam Mishra And Sons, clearly shows 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” the Bench added.
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