Case Law Details
UM Green Lighting P. Ltd Vs DCIT (ITAT Delhi)
Introduction: The ITAT Delhi ruling in UM Green Lighting P. Ltd vs DCIT is a significant juncture in the intersection of insolvency and income tax laws. The case showcases how a moratorium declared by the NCLT under the Insolvency and Bankruptcy Code (IBC) can override the proceedings in the tribunal. This landmark verdict reshapes our understanding of the enforcement of prohibitions during moratorium periods.
Analysis: In the said case, the Resolution Professional (RP) highlighted that the company was under proceedings as per the IBC. Consequently, a moratorium was declared on all pending lawsuits or proceedings against the company, including any judgement execution. The Revenue could not continue its case against the assessee during this period due to NCLT’s overriding effect.
This ruling is in line with the decision of the Supreme Court in CIT Vs. Monnet Ispat and Energy Limited, where the overriding nature of the IBC was recognised. The assessee cannot pursue the appeal due to the IBC’s statutory provision. Therefore, all proceedings in any court of law, tribunal, etc., must cease, and this appeal had to be dismissed.
Conclusion: The case of UM Green Lighting P. Ltd vs DCIT manifests the overriding power of NCLT’s moratorium during insolvency proceedings as per the IBC. While this judgement reaffirms the principle of suspending all other proceedings during the moratorium period, it also allows the Revenue to seek remedial measures when the moratorium is over, if the company revives, or if the NCLT order changes. The judgement fortifies the function of a moratorium in insolvency proceedings and underscores the primacy of the IBC.
FULL TEXT OF THE ORDER OF ITAT DELHI
The captioned appeal has been filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-IX, New Delhi (‘CIT(A)’ in short) dated 10.12.2018 arising from the assessment order dated 07.12.2017 passed by the Assessing Officer under Section 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2015-16.
2. When the matter was called for hearing, the Resolution Professional (RP) appearing on behalf of the assessee pointed out that the assessee has been subjected to proceedings under Insolvency and Bankruptcy Code, 2016 (IBC) and Corporate Insolvency Resolution Process (CIRP) has been initiated against the assessee by the operational creditors. It was pointed out that in terms of order dated 13.12.2021 delivered by National Company Law Tribunal, New Delhi Bench (NCLT) a moratorium has been declared in the case of the assessee with reference to provisions of Section 14 of the Insolvency Code. The ld. RP appearing for the assessee also pointed out as a necessary consequence of the declaration of moratorium in terms of Section 14 of the Code, several prohibitions have been imposed which inter alia includes continuation of pending suits or proceedings against the assessee including execution of any judgment, decree or order by any Court of Law, Tribunal, Arbitration Penal or Authority. The ld. RP thus submitted that in view of prohibitions imposed by the NCLT order which has the overriding effect on the Tribunal, the present proceedings by the Revenue against the assessee cannot continue during the moratorium period.
3. The Ld. Sr.DR on its part submitted that the present appeal in narrated circumstances cannot be pursued in view of the overriding provisions of insolvency code but however, prayed for liberty to revive the captioned appeal as and when the moratorium period is over or revival of company takes place.
4. In the light of statutory provision and in the light of decision of the Hon’ble Supreme Court in the case of CIT Vs. Monnet Ispat and Energy Limited (2019) 107 taxmann.com 481 and also in the light of the overriding provision of the code, the assessee is estopped to pursue the captioned appeal.
5. Thus, in view of the moratorium declared by NCLT, all proceedings in the court of law, Tribunal etc. cannot continue in view of the overriding provisions of Insolvency & Bankruptcy Code as recognized in Section 178(6) of the Act. That being the position, no useful purpose is going to be served in continuing the present proceedings. Therefore, this appeal needs to be consigned to the records.
6. For such reasons, the appeal of the Revenue is dismissed with a liberty to the Revenue to seek remedial measures in accordance with law as and when the moratorium period is over or order of the NCLT is modified or revival of the assessee company takes place or where it is otherwise necessary to do so in the interest of the parties.
7. In the result, the appeal of the Revenue is dismissed in limine for statistical purposes.
Order pronounced in the open Court on 23.05.2023.
