ITR Refund Adjustment to Old Tax Dues of Company in Resolution Process: Supreme Court to Hear SLP against Orissa HC Ruling [Read Order]
The Orissa High Court had dismissed the writ petition, holding that the refund for AY 2010–11 was rightly adjusted against liabilities already factored into the approved resolution plan of 2017
Supreme Court, Orissa High Court, ITR Refund, ITR Refund Adjustment
Supreme Court, Orissa High Court, ITR Refund, ITR Refund Adjustment
The Supreme Court is to hear a special leave petition filed by the petitioner against the Orissa High Court ruling that upheld the adjustment of a ₹6.00 crore income tax refund against old tax dues.
Issuing notice on the Special Leave Petition, the apex court kept alive the company’s plea while noting the High Court’s reasoning that refund claims relating to assessment years predating the resolution plan cannot be maintained by a Resolution Applicant.
The dispute arises from the adjustment of a ₹6,00,71,354 refund due to Sree Metaliks Limited for Assessment Year 2010-11. The Income Tax Department set off this refund against “old income tax dues” reflected in the company’s balance sheet and considered during the corporate insolvency resolution process.
Sree Metaliks, as the successful Resolution Applicant, approached the Orissa High Court contending that the refund was independently due and could not be appropriated against liabilities that were not placed before the Resolution Professional during the resolution proceedings.
The petitioners relied on the Supreme Court’s ruling in Ghanashyam Mishra and Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. (2021), where the Court held that once a resolution plan is approved under Section 31(1) of the Insolvency and Bankruptcy Code, all claims not included in the plan stand extinguished.
On this basis, counsel argued that the refund could not be adjusted against tax dues that were not part of the resolution plan and that the Department’s unilateral action was impermissible.
The Revenue, however, pointed to disclosures made in the resolution process itself, where “income tax old” liabilities of ₹14.26 crore were acknowledged.
According to the Department, the refund adjustment was a legitimate reduction of those dues, consistent with the resolution plan approved by the National Company Law Tribunal in November 2017.
The Department further argued that the Resolution Applicant could not claim a refund for taxes paid by the corporate debtor in years preceding the resolution plan, since the applicant only assumed management after the plan was approved.
The Orissa High Court accepted the Department’s reasoning. It held that the refund pertained to AY 2010-11, a period well before the resolution plan, and therefore could not accrue to the Resolution Applicant.
The Court observed that the refund adjustment had the effect of reducing the old tax dues already considered in the resolution process, and that the petitioner could not demand disbursement of the refund separately. The writ petition was accordingly dismissed, with the High Court concluding that the claim lacked merit.
Aggrieved, Sree Metaliks approached the Supreme Court through a Special Leave Petition. The Division Bench of Justice Manoj Misra and Justice Ujjal Bhuyan issued notice both on the application for condonation of delay and on the SLP itself, returnable in six weeks. The Supreme Court will hear the matter after a period of six weeks.
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