Orchid Pharma Ltd. Vs DCIT (ITAT Chennai)
ITAT Deletes Income Tax Additions Because NCLT Resolution Plan Extinguished Prior Claims; Tax Demands Prior to Insolvency Resolution Date Cannot Survive; Income Tax Additions Cannot Continue After Approved Insolvency Resolution Plan; ITAT Chennai Rejects Revenue Stand on Carry Forward Losses After Insolvency Resolution Approval.
The Income Tax Appellate Tribunal (ITAT), Chennai, decided cross appeals filed by the assessee and the Revenue against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2015-16.
The assessee had filed its return declaring nil income. A search and seizure operation under Section 132 of the Income Tax Act was conducted in the case of another group, following which proceedings under Section 153C were initiated against the assessee on the basis that certain seized materials belonged to it. The assessee again filed a return declaring nil income. Since the assessee had international transactions, the matter was referred to the Transfer Pricing Officer, who proposed a transfer pricing adjustment of Rs.9.26 crore. The Assessing Officer also made various additions and disallowances while completing assessment proceedings.
Before the CIT(A), the assessee pointed out that the National Company Law Tribunal (NCLT) had approved a resolution plan on 27.06.2019. Though the order was initially set aside by the National Company Law Appellate Tribunal, the Supreme Court later restored the NCLT order on 28.02.2020. The assessee argued that under Section 238 of the Insolvency and Bankruptcy Code, all demands arising prior to the effective date under the resolution plan stood extinguished. However, the CIT(A) proceeded to decide the appeal on merits and granted partial relief.
