TMI Blog2022 (8) TMI 474X X X X Extracts X X X X X X X X Extracts X X X X ..... ve Ltd. Ors. [ 2019 (3) TMI 1238 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] wherein the Hon ble NCLAT observed and held that We hold such statutory dues has direct nexus with operation of the Company. For the said reason also, we hold that all statutory dues including Income Tax , Value Added Tax etc. come within the meaning of Operational Debt . In the present case, there was a demand against the corporate debtor for Assessment Year 2016-17 by the Income Tax Department on 06.12.2018 much prior to 28.02.2019 i.e., the CIRP commencement date. The said demand was to be paid within 30 days upto 06.01.2019 under the relevant provisions of the Income Tax Act. The corporate debtor has filed an appeal challenging the order dated 06.12.2018 of the Assessing Officer before the Commissioner of Income Tax (Appeals) on 14.12.2018 as per Annexure A-8 of the reply. The claim that the demand for Assessment Year 2016-17 has not crystallised because of the pending appeal appears to be an afterthought as the Department has already treated it as a crystallized demand and filed a Form B on 01.12.2020 before the Resolution Professional for the demand for the Assessment Year 2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und of Rs.1,15,27,130/- representing for Assessment Year 2018-19 for an amount of Rs.43,49,040/- and Rs.71,78,090/- for Assessment Year 2019-20 along with interest to the Corporate Debtor i.e. M/s International Mega Food Park Limited. 3. This case was re-listed for hearing on 01.08.2022 on the grounds mentioned in the administrative order dated 29.07.2022. On the date of hearing, it was stated by the learned counsel for the applicant that the applicant has already received the amount of Rs.71,78,090/- for the Assessment Year 2019-20 along with interest, and his prayer is now restricted to the release of a refund of an amount of Rs.43,49,040/- with interest by the respondents. It was also clarified by the learned Senior Standing Counsel for the Income Tax Department that the amount of refund of Rs.43,49,040/- for Assessment Year 2018-19 has been set off against the demand for Assessment Year 2016-17 after the Income Tax Department issued a notice under Section 245 to the applicant dated 20.09.2019 and the same was not contested. 4. It is stated that for Assessment Year 2018-19 an intimation under Section 143(1) dated 18.09.2019 was issued to the applicant (attached as Annexure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents Pvt. Ltd. Vs. State of Karnataka Ors. MANU/SC/1661/2019 decided on 03.12.2019 has been misread. It also asserted that the judgment clearly indicates that the said dues payable to the Government will come within the meaning of the expression operational debt under Section 5(21), making the Government an operational creditor in terms of Section 5(20). It is also stated that after the commencement of CIRP, intimation under Section 143(1) of the Income Tax Act, 1961 dated 18.09.2019 was issued crystalizing a refund of Rs.43,49,040/- that became due and payable post-CIRP and as per Section 14(1)(c) the respondent cannot recover previous crystalized dues from the corporate debtor by adjustment of refund that fell due for payment during CIRP period. It is further stated that the critical issue is the date on which the demand and the refund crystalized. In its rejoinder, it is pointed out that the respondent-Income Tax Department has already processed and released a refund amount of Rs.78,24,110/- which includes the interest of Rs.6,46,020/- as on 18.09.2020 after the date of filing of the present application on 10.08.2020. It is, therefore, logical for the Department to refund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment on 01.12.2020 after adjusting the demand of Rs.43,49,040/- from the demand for the Assessment Year 2016-17. Reliance has been placed on the decision of the Hon ble Apex Court in the case of Embassy Property Developments Private Limited, and the following extract has been quoted in the reply:- Therefore, the jurisdiction of the NCLT delineated in Section 60(5) cannot be stretched so far as to bring absurd results. (It will be a different matter if proceedings under statutes like Income Tax Act had attained finality, fastening a liability upon the corporate debtor, since, in such cases, the dues payable to the Government would come within the meaning of the expression operational debt under Section 5(21), making the Government an operational creditor in terms of Section 5(20). The moment the dues to the Government are crystalized and what remains is only payment, the claim of the Government will have to be adjudicated and paid only in a manner prescribed in the resolution plan as approved by the Adjudicating Authority, namely the NCLT) 9. It is further stated that the corporate debtor has filed an appeal against the Assessment Order for Assessment Year 2016-17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse means a debt arising during the operation of the Company ( Corporate Debtor ). The goods and services including employment are required to keep the Company ( Corporate Debtor ) operational as a going concern. If the Company ( Corporate Debtor ) is operational and remains a going concern, only in such case, the statutory liability, such as payment of Income Tax, Value Added Tax etc., will arise. As the Income Tax , Value Added Tax and other statutory dues arising out of the existing law, arises when the Company is operational, We hold such statutory dues has direct nexus with operation of the Company. For the said reason also, we hold that all statutory dues including Income Tax , Value Added Tax etc. come within the meaning of Operational Debt . 30. For the said very reason, we also hold that Income Tax Department of the Central Government and the Sales Tax Department(s) of the State Government and local authority , who are entitled for dues arising out of the existing law are Operational Creditor within the meaning of Section 5(20) of the I B Code. (emphasis supplied) 13. This ratio was subsequently followed by the Hon ble NCLAT in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Department is an operational creditor and is entitled to dues arising out of the existing law are Operational Creditor within the meaning of Section 5(20) of the I B Code. With the initiation of CIRP, the Moratorium under section 14 of the IBC, 2016 came into force on 28.02.2019. The provisions of Section 14 of the IBC provide that on the insolvency commencement date, the Adjudicating Authority shall, by order, declare a moratorium prohibiting the institution of suits or continuation of pending suits or proceedings against the corporate debtor, including the execution of any judgment, decree, or order in any court of law, Tribunal, Arbitration Panel, or any other authority. The present refund of Rs.43,49,040/- for the Assessment year 2018-19 was determined on 18.09.2019 and adjusted on 29.10.2019, i.e. after the initiation of the CIRP and the declaration of the moratorium period under the provisions of Section 14 of the IBC, 2016, which is unjustified being against the settled law as discussed above. 16. In view of the above discussions, the respondent is directed to release the refund of an amount of Rs.43,49,040/- with interest up to the date of the issuance to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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