Facts of the Case

The assessee, Hindusthan National Glass and Industries Limited, filed its return of income for Assessment Year 2011-12 declaring total income of ₹1,01,21,34,588. During assessment proceedings, the Assessing Officer made disallowances aggregating to ₹4.74 crores under Section 14A read with Rule 8D(2)(ii) and Rule 8D(2)(iii), along with minor additions towards delayed deposit of employees’ contribution to ESI and club expenses. The CIT(A), NFAC partly allowed the appeal and deleted the disallowance made under Section 14A. Aggrieved, the Revenue filed an appeal before the Tribunal with a delay of 140 days, which was condoned.

During pendency of the appeal, Corporate Insolvency Resolution Process was initiated against the assessee under the Insolvency and Bankruptcy Code, 2016. Subsequently, the National Company Law Tribunal, Kolkata approved the resolution plan on 14.08.2025.

Issues Involved

Whether the Revenue’s appeal challenging deletion of disallowance under Section 14A read with Rule 8D could survive after approval of a resolution plan under Section 31 of the Insolvency and Bankruptcy Code, whether statutory income-tax claims not forming part of the resolution plan stand extinguished, and whether continuation of income-tax proceedings is barred by operation of Sections 14, 31 and 238 of the IBC.

Petitioner’s Arguments

The Revenue supported the assessment order and contended that the CIT(A) erred in deleting the disallowance under Section 14A read with Rule 8D. It was argued that availability of interest-free funds was not properly examined and that Rule 8D had been correctly applied by the Assessing Officer.

Respondent’s Arguments

The assessee submitted that the appeal had become infructuous since the Corporate Insolvency Resolution Process had concluded and the resolution plan had been approved by the NCLT. It was argued that, in view of Sections 14 and 31 of the IBC and binding judicial precedents, all income-tax proceedings relating to periods prior to CIRP stood extinguished. Reliance was placed on decisions of the Supreme Court and High Courts, including Ghanashyam Mishra & Sons Pvt. Ltd., Uttam Value Steels Ltd., Asian Colour Coated Ispat Ltd., and coordinate bench rulings of the ITAT.

Court Order / Findings

The ITAT Kolkata held that once a resolution plan is approved under Section 31 of the Insolvency and Bankruptcy Code, it becomes binding on all stakeholders including the Central Government and tax authorities. The Tribunal observed that statutory dues not forming part of the approved resolution plan stand extinguished and no proceedings can be initiated or continued in respect of claims relating to the period prior to CIRP. Relying on authoritative judicial precedents including the Supreme Court decision in Ghanashyam Mishra & Sons Pvt. Ltd. and the coordinate bench decision in Kohinoor Steel (P.) Ltd., the Tribunal held that the Revenue’s appeal could not survive and had become infructuous.

Important Clarification

The Tribunal clarified that the Insolvency and Bankruptcy Code is a complete code with overriding effect under Section 238. Upon approval of a resolution plan, the corporate debtor is entitled to a clean slate, and all past claims, including income-tax demands not provided for in the resolution plan, stand extinguished. Income-tax authorities cannot continue or revive proceedings for such claims.

Final Outcome

The appeal filed by the Revenue for Assessment Year 2011-12 was dismissed as infructuous. Liberty was reserved to the Revenue to seek appropriate remedies in accordance with law only if the approved resolution plan is set aside or annulled by a competent authority.

 Source Link- https://itat.gov.in/public/files/upload/1767256959-gPjdnv-1-TO.pdf

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