Case Law Details
ACIT Vs Indus Mobile Distribution Pvt. Ltd. (ITAT Chennai)
ITAT Chennai in the case of ACIT Vs Indus Mobile Distribution Pvt. Ltd. exempts a dissolved company from Income Tax Assessment proceedings, in accordance with Section 54(2) of the Insolvency and Bankruptcy Code, 2016.
M/s. Indus Mobile Distribution Pvt. Ltd., the Assessee Company, was dissolved by the National Company Law Tribunal (NCLT), Chennai Bench, following Section 54(2) of the Insolvency and Bankruptcy Code, 2016. This led to the dissolution of the corporate debtor, namely the appellant company.
Despite the company being officially dissolved, the revenue authorities claimed that the company’s liquidation process had not been completed, citing the company’s “under liquidation” status on the MCA (Ministry of Corporate Affairs) portal. However, the ITAT Bench, composed of G. Manjunatha and Mahavir Singh, ruled that once a company has been dissolved, it ceases to exist and thus, no proceedings can be kept pending against it.
This verdict emphasizes the legal finality of dissolution and the fact that no further proceedings can be initiated or sustained against a dissolved entity, highlighting the definitive nature of dissolution under insolvency and bankruptcy laws.
The judgement by ITAT’s Chennai Bench in the case of ACIT Vs Indus Mobile Distribution Pvt. Ltd. reinforces the insurmountable nature of company dissolution. Once a company is dissolved under the Insolvency and Bankruptcy Code, it ceases to exist as an entity and thus, is exempted from further legal proceedings, including Income Tax Assessment proceedings.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal by the Revenue is arising out of the order of the Commissioner of Income Tax (Appeals)-18, Chennai in ITA No.757/CIT(A)-18/2016-17 & 179/CIT(A)-18/2019-20 dated 24.11.2022. The assessment was framed by the ACIT, Central Circle 1(1), Chennai for the assessment year 2014-15 u/s.143(3) r.w.s.263 of the Income Tax Act, 1961 (hereinafter the ‘Act’), vide order dated 30.12.2019.
2. At the outset, it is noticed that this company is dissolved by NCLT, Chennai Bench vide its order dated 17.10.2022 in IA(IBC)/939(CHE)/2022 in CP/763/2018 by exercising the powers conferred u/s 54(2) of the Insolvency and Bankruptcy Code, 2016 read with Regulation 14 of IBBI (Liquidation Process) Regulations, 2016 and order the dissolution of the corporate debtor viz. the appellant company. The NCLT finally held as under:-
“10. Heard the submissions of the Ld. Applicant counsel. On perusal of the submissions made before us and the documents placed on record it appears that the there is no prospects left I the Liquidation process of the Corporate Debtor hence this present application has been filed. Thus this Tribunal on exercise of the powers conferred under Sub-section (2) of Section 54 of the IBC, 2016 read with Regulation 14 of the IBBI (Liquidation Process) Regulations, 2016 hereby order the dissolution of the Corporate Debtor, viz., Indus Mobile Distribution Private Limited. Consequently, from the date of this order the Corporate Debtor stands dissolved.
The Registry and the Liquidator are directed to serve a copy of this order upon the Registrar of Companies, Chennai, and also to IBBI, within 14 days from the date of this Order,”
3. The assessee informed this fact vide letter 24.03.2023.
Now Revenue has written exactly the same facts which is mailed vide dated 01.05.2023 and the relevant text of the email reads as under:-
“In the case of the assessee company M/s. Indus-Mobile Distribution Pvt. Ltd. For the A.Y.2014-15 an appeal against the order of the CIT(A) was filed on 06-02-2023. In this connection the assessee has filed a letter stating that the company has been liquidated and dissolved vide order of the NCLT Division bench, Chennai on 17-10-2022. In this regard it is hereby submitted that the liquidation process in the case of assessee company has not been completed and the same is evident from the MCA portal wherein the status of the company is still under liquidation.
In addition to the above, the department is also proposing to file an appeal against the NCLT order vide reference stated above. Under this circumstances, the department may be allowed to file revised Form-36 in the name of the liquidator before the Hon’ble ITAT, Chennai.”
3.1 The ld.DR now before us stated that a short adjournment be given as the AO wants to verify the dissolution of the company in MCA portal.
4. We have gone through the NCLT order and noted that the company stands dissolved u/s.54(2) of the Insolvency and Bankruptcy Code, 2016 and once the company is dissolved, the entity has come to an end. No proceedings of any sort can be kept pending once company is dissolved because the artificial entity has come to an end. Hence, we dismiss this appeal of Revenue.
5. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 2nd May, 2023 at Chennai.
