Case Law Details
M Tech Developers Pvt. Ltd. Vs National Faceless Assessment Centre (Delhi High Court)
In a recent case before the Delhi High Court, M Tech Developers Pvt. Ltd. challenged notices issued by the National Faceless Assessment Centre (NFAC) under Section 144B of the Income Tax Act, 1961. These notices pertained to the Assessment Year 2021-22 and were issued despite the approval of a Resolution Plan under the Insolvency and Bankruptcy Code, 2016 (IBC). The petitioner argued that such notices were in violation of Section 31 of the IBC.
Detailed Analysis: The crux of the petitioner’s argument lies in the interpretation of Section 31 of the IBC, which stipulates that once a Resolution Plan is approved, all claims against the corporate debtor, including tax liabilities, for periods prior to the approval are deemed to be settled. The petitioner relied on the legal precedent set by the Supreme Court in Ghanashyam Mishra and Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Ltd., which emphasized the binding nature of a Resolution Plan on all stakeholders.
In the Ghanashyam Mishra case, the Supreme Court elucidated that the purpose of the IBC is to provide for the revival of the corporate debtor and to make it a going concern. The Court held that once a Resolution Plan is approved, it becomes binding on all stakeholders, freezing all claims against the corporate debtor to ensure a fresh start for the successful resolution applicant.
Despite the approval of the Resolution Plan by the National Company Law Tribunal (NCLT) and the subsequent acceptance of the plan by the Committee of Creditors, the Income Tax authorities initiated proceedings under Section 144B. This move, according to the petitioner, was not only unwarranted but also contrary to the spirit of the IBC, which aims to provide a fresh start to the corporate debtor upon approval of the Resolution Plan.
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