Income Tax Refund of liquidation period cannot be adjusted/ set off against past years outstanding demands | Insolvency Code overrides Income Tax Act, 1961 – Vinod Kumar Kothari, Liquidator of CD Vs. The Assessing Officer, Income Tax Department and Ors. – NCLT Kolkata Bench
In this important judgment, Hon’ble NCLT Kolkata Bench holds that:
(i) Where matters covered by the 2016 Code are concerned [including insolvency resolution of corporate persons] if provisions contained therein are inconsistent with other statutes, including the Income Tax Act, 1961, it shall override such laws.
(ii) The Income Tax Department may have claim against the Corporate Debtor and would fall under the category of an Operational Creditor and would have to accordingly file their claim before the Resolution Professional or the Liquidator, in the present case, with the Liquidator for recover of their dues in the requisite form.
(iii) The refund from the Income Tax falls under the asset of the Corporate Debtor and would be added to the liquidation assets. Under the scheme of the code, the Creditors; in this case the Income Tax Department, are not empowered to set off the returns of the Corporate Debtor which fell within the liquidation period against the past dues.
(iv) The Code overrides the Income Tax Act, 1961 in so far as the present case is concerned and hence the adjustment of the Income Tax returns during the liquidation period which is an asset of the Corporate Debtor in pursuance to the Income Tax Act, 1961 is void.
