DCIT, CIRCLE- 17(1), NEW DELHI V. MONNET ISPAT & ENERGY LTD., NEW DELHI

ITA 173/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8429 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 05-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAMITA M BISWAS
• Assessee Lawyers: V K JAIN
• Keywords: Liquidation
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DLEHI BEFORE SHRI O.P. KANT, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NO. 173/DEL/2018 ASSESSMENT YEAR: 2013-14 DCIT, CIRCLE 17(1), VS. MONNET ISPAT & ENERGY LTD ., NEW DELHI. MONNET HOUSE, 12, MASJID MOTH, G.K. PART II, NEW DELHI. PAN : AAACM0501D (APPELLANT) (RESPONDENT) APPELLANT BY : MS. PRAMITA M. BISWAS, CIT/D R RESPONDENT BY: SH. V.K. JAIN, C.A. DATE OF HEARING: 16/08/2021 DATE OF ORDER : 16/08/2021 ORDER PER K. NARASIMHA CHARY, J.M. CHALLENGING THE ORDER DATED 06.10.2017 IN APPEAL NO . 96/16-17 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)- 6, NEW DELHI (LD. CIT(A)) IN THE CASE OF MONNET ISPAT & ENERGY LTD. (THE ASSESSEE) FOR THE ASSESSMENT YEAR 2013-14, THE REVENUE PREFERRED THIS APPEAL AGGRIEVED BY THE DELETION MADE BY THE LD. CIT(A). 2. AT THE OUTSET, IT IS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE ASSESSEE DEFAULTED IN REPAYMENT OF OUTSTANDING SECU RED LOANS TO VARIOUS CREDITORS, AND ON THE APPLICATION OF STATE BANK OF INDIA, ONE OF THE SECURED 2 FINANCIAL CREDITORS OF THE COMPANY, HONBLE NCLT AD MITTED THE PETITION U/S. 7 OF THE INSOLVENCY AND BANKRUPTCY CODE, 2016 (IBC ), DECLARED MORATORIUM AND FINALLY PASSED FINAL ORDER U/S. 31 O F THE IBC ON 24.07.2018, APPROVING THE RESOLUTION PLAN FILED BY THE SUCCESSF UL RESOLUTION APPLICANT. IN THAT PROCESS, THE NCLT OBSERVED THAT THE RESOLUT ION PROFESSIONAL DETERMINED THE LIQUIDATION VALUE OF THE COMPANY AS RS.23,56,35,25,186/- WHEREAS THE TOTAL AMOUNT OF ADMITTED SECURED FINANC IAL CREDITORS IS RS.9772 CRORES AND THE ADMITTED CLAIMS OF THE UNSEC URED FINANCIAL CREDITORS IS RS.1243 CRORES, PUT TOGETHER RS.1,14,78,09,50,32 5/-, AND BY THIS DIFFERENCE, THE LIQUIDATION VALUE OF THE ASSETS OF THE ASSESSEE IS NOT EVEN SUFFICIENT TO SATISFY THE ADMITTED CLAIM OF THE SEC URED FINANCIAL CREDITORS IN FULL AND, THEREFORE, THE LIQUIDATION VALUE DUE TO T HE UNSECURED FINANCIAL CREDITORS, OPERATIONAL CREDITORS AND OTHER CREDITOR S OF THE ASSESSEE AS PER WATERFALL MECHANISM MENTIONED UNDER SECTION 53 OF T HE CODE IS NIL. IT WAS FURTHER OBSERVED THAT IN RESPECT OF THE TREATMENT O F OTHER CREDITORS, THIS APPROVED RESOLUTION PLAN DISCLOSES THAT ALL OTHER L IABILITIES AND OBLIGATIONS OF THE ASSESSEE ARE BEING EXTINGUISHED IN FULL AND ALL LITIGATIONS AND PROCEEDINGS IN RESPECT TO DEBTS PENDING AGAINST THE ASSESSEE PRIOR TO COMMENCEMENT OF CIRP SHALL STAND ABATED AS THE LIQU IDATION VALUE DUE TO THOSE CREDITORS, AS PER THE WATERFALL MECHANISM IN SECTION 53 OF THE CODE IS NIL. 3. LEARNED AR FURTHER SUBMITTED THAT AS PER SECTION 5(21) OF THE IBC, THE DUES TO THE CENTRAL GOVERNMENT ALSO FALL WITHIN THE DEFINITION OF OPERATIONAL DEBTS AND THE INCOME-TAX DEPARTMENT ALS O FILED CLAIMS BEFORE THE INSOLVENCY RESOLUTION PROFESSIONAL APPOINTED BY NCLT AND BY ENTRY NO. 47 OF THE LIST B, SUCH A DEBT IS REFLECTED IN THE C IRP. 3 4. LEARNED DR ADMITS THIS FACTUAL AND LEGAL POSITIO N, BUT SUBMITS THAT IN VIEW OF NOTE-5, APPENDED TO SCHEDULE-B AS ON THE CO MMENCEMENT OF INSOLVENCY PROCEEDINGS, THE MATTER IS PENDING BEFOR E THE HONBLE HIGH COURT AND OTHER ADJUDICATION AUTHORITIES. 5. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF SUBMISSIONS MADE ON EITHER SIDE. DUES TO THE INCOME-TAX DEPARTMENT A RE REFLECTED IN LIST B APPENDED TO THE ORDER DATED 24.07.2018 PASSED BY TH E NCLT. BY SUCH ORDER, NCLT OBSERVED THAT THERE IS A HUGE DIFFERENC E IN THE TOTAL AMOUNT OF ADMITTED SECURED FINANCIAL CREDITORS WHICH IS TO TH E TUNE OF RS.1,14,78,09,50,325/- AND THE LIQUIDATION VALUE OF THE COMPANY TO THE TUNE OF RS.23,56,35,25,186/- AND THEREFORE, BY APPL ICATION OF THE WATERFALL MECHANISM MENTIONED IN SECTION 53 OF THE CODE, THE LIQUIDATION VALUE DUE TO UNSECURED FINANCIAL CREDITORS, OPERATIONAL CREDI TORS AND OTHER CREDITORS OF THE ASSESSEE BECOMES NIL. IT IS CLEAR THAT IN TE RMS OF THE RESOLUTION PLAN AS APPROVED BY THE NCLT, ALL CLAIMS OR DEMANDS OR L IABILITIES OR OBLIGATIONS OWED OR PAYABLE TO OR ASSESSED BY OR ASSESSABLE BY THE CENTRAL GOVERNMENT/STATE GOVERNMENT IN RELATION TO ANY PERI OD PRIOR TO THE ACQUISITION, WILL BE WRITTEN OFF IN FULL AND WILL B E DEEMED TO BE PERMANENTLY EXTINGUISHED. THIS POSITION OF LAW IS CLEAR IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GHANASHYAM MISHARA AND SONS VS. EDLEWEISS ASSETS RECONSTRUCTION COMPANY LTD. (CIVIL APPEAL NO .8129/2019 ORDER DATED 13/04/2021). 6. IN THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE DUES TO THE INCOME-TAX DEPARTMENT FOR THE ASSESSMEN T YEAR 2013-14, WHICH ARE REFLECTED IN THE LIST-B APPENDED TO NCLT ORDER STOOD FULLY EXTINGUISHED AND NO USEFUL PURPOSE WOULD BE SERVED BY ADJUDICATING THIS 4 MATTER. WITH THIS VIEW OF THE MATTER, WE DISMISS TH E APPEAL OF THE REVENUE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON CONCLUSION OF VIRTUAL HEARING ON THIS THE 16 TH DAY OF AUGUST, 2021. SD/- SD/- (O.P. KANT) (K. NARSIMHA CHARY ) ACCOUNTANT MEMBER JUDICIAL MEMBE R DATED: 16/08/2021 AKS