State Authorities and Tax Departments cannot challenge Resolution Plan: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the State authorities and the direct and indirect tax departments cannot question the resolution plan as per section 31 of the Insolvency and Bankruptcy Code, 2016.

The department approached the Tribunal against the order of the CIT(A) wherein the assessee was granted relief.

The case of the assessee is pending before the Insolvency Professional in terms of the Insolvency and Bankruptcy Code, 2016 and moratorium period has been declared as per section 14 of the Code.Further, the NCLT has appointed an Interim Resolution Professional for conducting the CIRP and exercise all powers and subject to all duties as contemplated under the provisions of the Code.

As per the provisions of section 14 of the Code institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority shall be prohibited during the moratorium period. The period of moratorium shall have the effect from the date of such order till the completion of the corporate insolvency resolution process.

The Tribunal bench comprising Shri Prashant Maharishi, Accountant Member and Shri Sandeep Singh Karhail, Judicial Member observed thatin the present case, the appeal filed by Revenue is an institution of suit against the corporate debtor, which is prohibited under section 14 of the Code.

“Further, as per section 31 of the Code, resolution plan as approved by the Adjudicating Authority shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. Thus, this will prevent State authorities, Regulatory bodies including Direct & Indirect Tax Departments from questioning the resolution plan. Therefore, there is no reason to keep this appeal pending,” the Tribunal said.

Quashing the order, the Tribunal observed that In view of the above, we dismiss the appeal filed by the Revenue with the liberty to the Assessing Officer to file the appeal afresh after completion of moratorium period upon the revival of the Corporate Debtor as per Resolution Plan as approved by the Adjudicating Authority or upon appointment of the Liquidator, as the case may be.”

To Read the full text of the Order CLICK HERE

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