2023 (9) TMI 819 - AT - Insolvency and Bankruptcy

Who is entitled to get the income tax refund after de-merger - Jurisdiction to direct the IT Department and RBL Bank Ltd. - It is submitted that income tax refund which had been wrongly credited by the IT Department to CLCI-Respondent No.4 - rightful claimant of the tax refund - HELD THAT - The issues concerning payment of interest on tax refund and extension of time to pay tax are matters which intrinsically relate to conduct of assessment proceedings. Such an exercise squarely falls within the competent jurisdiction of the income tax assessing authority and cannot be arrogated by the Adjudicating Authority - there are no error on the part of the Adjudicating Authority in refusing to look into the prayers on jurisdictional grounds. Rightful claimant of the tax refund - HELD THAT - The Adjudicating Authority has only spelt the need on its part to exercise abundant care and caution so as not to interpret the core assessment provisions of the Income Tax Act - the modicum of restraint exercised by the Adjudicating Authority in not getting into computational aspects of income tax assessment or applying the assessment related provisions of the Income Tax Act is appreciated and instead confining itself to the facts and circumstances on record to arrive at a conclusion as whether the Appellant or the Corporate Debtor was the rightful recipient of the tax refund. Hence the contention of the Appellant that the Adjudicating Authority had raised the issue of lack of jurisdiction is devoid of merit and misconceived and therefore not acceptable. CLCI had addressed a series of communications to the IT Dept through their authorized representative on 09.07.2019 06.08.2019 16.09.2019 13.11.2019 19.11.2019 21.11.2019 wherein the Department was requested to give effect to the order of ITAT and issue income tax refund to them. These letters barring that of 09.07.2019 categorically state that the refund amount payable to CLCS belongs to CLCI. It is also noteworthy that in these communications sent by CLCI to the IT Dept it was explained at length that CLCS was de-merged and all the assets and liabilities of CLCS as on the date of de-merger had been transferred to Apro - it is not wrong on the part of the Adjudicating Authority to have come to the conclusion that CLCS and CLCI collectively wanted the refund to go to CLCI-Corporate Debtor. It was vehemently contended by the RP-Respondent No. 4 that only after CLCI went into CIRP and the CLCS came to realize that the refund money cannot therefore be utilized by the ex-management of the Corporate Debtor to their benefit that they wrote to the IT Dept for the first time on 22.02.2020 for crediting the refund to CLCS and not to the Corporate Debtor. There is force in this contention since the material available on record also substantiates that only after the CLCI-Corporate Debtor was admitted into CIRP on 03.01.2020 that CLCS started addressing communications to the IT Dept to issue refund to CLCS. Even the tax consultant had initially informed the RP that refund was due only to the CLCI but on 03.04.2020 the tax consultant changed its stand and informed the RP that the refund was due to CLCS - both the Appellant as well as the tax consultant have taken a somersault post CIRP of the Corporate debtor in claiming the tax refund for the Appellant without stating any credible grounds for the change in their stance. The Adjudicating Authority did not commit any error in dismissing the application - there are no reason to interfere with the impugned order - appeal dismissed.

Summary

Issues Involved:
1. Jurisdiction of the Adjudicating Authority to decide on the income tax refund.
2. Entitlement of the income tax refund between CLCS and CLCI.
3. Procedural propriety and adherence to the Scheme of Arrangement.

Summary:

Issue 1: Jurisdiction of the Adjudicating Authority
The Appellant contended that the Adjudicating Authority should have decided the issue of the income tax refund as per the orders of the Hon'ble Delhi High Court. However, the Adjudicating Authority dismissed the application on grounds of lacking jurisdiction to direct the IT Department and RBL Bank Ltd. The Tribunal upheld this decision, noting that prayers (b) and (c) concerning interest on the refund and extension of tax payment time were outside the Adjudicating Authority's jurisdiction. The Tribunal clarified that the Adjudicating Authority did not claim lack of jurisdiction for deciding the rightful claimant of the tax refund (prayer a), but exercised caution in interpreting the Income Tax Act provisions.

Issue 2: Entitlement of the Income Tax Refund
The Tribunal examined the facts and circumstances, noting that the refund pertained to FY 2000-2001, and payments were made by both CLCS and CLCG. The Tribunal found that CLCI had consistently pursued the refund with the IT Department through communications explaining the corporate restructuring and justifying the refund to CLCI. The Tribunal supported the Adjudicating Authority's conclusion that CLCS and CLCI collectively sought the refund for CLCI, and there was no wrongful refund to the Corporate Debtor. The Tribunal emphasized that the Appellant and the tax consultant changed their stance post-CIRP, which lacked credible grounds.

Issue 3: Procedural Propriety and Scheme of Arrangement
The Tribunal noted that the Adjudicating Authority appropriately avoided delving into the merits of the Scheme of Arrangement approved by the Hon'ble Delhi High Court. The Tribunal acknowledged the de-merger and subsequent mergers leading to the formation of CLCI and the rightful processing of the refund claim by the IT Department based on the communications from CLCI. The Tribunal found no error in the Adjudicating Authority's decision to uphold the IT Department's action in crediting the refund to CLCI.

Conclusion:
The Tribunal dismissed the appeal, affirming that the Adjudicating Authority did not err in its decision. The Tribunal found no merit in the appeal and upheld the impugned order, concluding that the refund was rightfully credited to CLCI-Corporate Debtor.