Home Insolvency & Bankruptcy CIRP Petition U/S 10 Avoiding Income Tax Liability Not Maintainable Under The IBC

CIRP Petition U/S 10 Avoiding Income Tax Liability Not Maintainable Under The IBC

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CIRP Petition U/S 10 Avoiding Income Tax Liability Not Maintainable Under The IBC

The Nationwide Firm Regulation Tribunal (NCLT), Kolkata Bench, comprising of Smt. Bidisha Banerjee (Judicial Member) and Shri Arvind Devanathan (Technical Member) has held {that a} Company Insolvency Decision Course of (CIRP) petition filed beneath Part 10 of Insolvency and Chapter Code, 2016 (IBC) to keep away from Earnings Tax legal responsibility will not be maintainable.

Background Info

On 25.03.2023, Jayam Vyapaar Pvt. Ltd. (Company Applicant) filed a petition beneath Part 10 of IBC for initiation of the CIRP.

It had been assessed for Earnings Tax for the evaluation 12 months 2012-13 on 25.03.2015, with a tax demand of Rs. 2.86 crores together with relevant curiosity and penalties, as per the evaluation order by the Earnings Tax Officer, Ward 1(2) Kolkata.

Additional, an enchantment was made to the Commissioner of Earnings Tax (Appeals) Kolkata, who, on 18.12.2018 dismissed the enchantment. The Appellate Authority upheld the revenue tax demand and famous that revenue had escaped taxation on account of cash laundering. No problem was made earlier than the Earnings Tax Appellate Tribunal (ITAT) ensuing within the finality of the Appellate Authority’s order. The default date for Earnings Tax fee could be 18.12.2018 consequently, if not the date of the evaluation order, which is 25.03.2015.

Regardless of this, the excellent tax legal responsibility remains to be mirrored within the firm’s books as of 31.03.2022.

NCLT Verdict:

The NCLT Kolkata dismissed the CIRP petition to be not maintainable and held {that a} CIRP petition filed beneath Part 10 of the Insolvency and Chapter Code, 2016 (IBC) to keep away from Earnings Tax legal responsibility will not be maintainable.

The Tribunal noticed that the CIRP petition filed by the Applicant seems to be filed to keep away from Earnings Tax legal responsibility particularly, when a discovering exists that the Earnings has escaped tax due to cash laundering which may result in restoration from the Administrators of the firm by way of Part 179 of the Earnings Tax Act.

The Tribunal identified that the Applicant’s utility will not be for the decision of its insolvency however quite is to scuttle the efforts of the Earnings tax division for restoration of its dues. Additionally it is a settled place of regulation that NCLT will not be a restoration Tribunal. Furthermore, the Applicant has filed the Part 10 petition with a fraudulent and malicious intention.

It positioned reliance on Monotrone Leasing Non-public Restricted vs. PM Chilly Storage Non-public Restricted whereby it was noticed that Part 65 of the IBC supplies for penal motion for initiating an Insolvency Decision Course of with a fraudulent or malicious intent or for any goal aside from the decision and thus, the Tribunal noticed that the moment utility is match to invoke Part 65 of IBC.

In conclusion, the Tribunal imposed a penalty of Rs. 1 Lakh on the Company Applicant directing it to be deposited to the “Prime Minister’s Nationwide Reduction Fund” (PMNRF) inside 10 days.

Case Title: M/s Jayam Vyapaar Non-public Restricted

Case No.: Firm Petition (IB) No. 72/KB/2023

Counsel for the Company Applicant: Ms. A. Rao, Adv. and Mr. S. Tibrewal, Adv.

Click on Right here To Learn/Obtain Order

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