ITAT asserts tax departments cannot challenge resolution plan

ITAT asserts tax departments cannot challenge resolution plan

Under the Insolvency and Bankruptcy Code, proceedings against the corporate debtor are prohibited during the moratorium period

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that under the Insolvency and Bankruptcy Code, 2016, neither the State authorities nor the direct and indirect tax departments can question the resolution plan (RP).

The department had approached the tribunal against the order of the Commissioner of Income Tax (Appeals), wherein the assessee was granted a reprieve.

While the case was pending before the Insolvency Professional, the moratorium period was declared under IBC. The National Company Law Tribunal (NCLT) appointed an Interim Resolution Professional for conducting the Corporate Insolvency Resolution Process (CIRP) and exercising all powers subject to all duties as contemplated under IBC.

IBC rules that the institution of suits or continuation of pending suits or proceedings against the corporate debtor shall be prohibited during the moratorium period. This includes execution of any judgment, decree, or order in any court of law, tribunal, arbitration panel, or any other authority. Also, the period of moratorium is effective from the date of the order until the completion of CIRP.

The tribunal bench comprising Judicial Member Sandeep Singh Karhail and Accountant Member Prashant Maharishi observed that the appeal filed by the revenue department was an institution of suit against the corporate debtor, which was prohibited under IBC.

The bench ruled, "The RP approved by the Adjudicating Authority shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders. This will prevent the State authorities, regulatory bodies including direct and indirect tax departments from questioning the RP."

The tribunal ordered the assessing officer to, "File the appeal afresh after the completion of moratorium period upon the revival of the corporate debtor as per the RP approved by the Adjudicating Authority or upon the appointment of the liquidator."