RAMANAGARAM ENTERPRISES PRIVATE LIMITED,HYDERABAD V. DCIT., CENTRAL CIRCLE-2(1), HYDERABAD

ITA 1306/HYD/2024

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Ramanagaram Enterprises Private Limited, engaged in hydropower generation, faced income tax assessments for the years 2017-18 and 2018-19, which included disallowances under Section 14A read with Rule 8D of the Income Tax Rules, 1962. The company entered a Corporate Insolvency Resolution Process (CIRP) initiated by Andhra Bank, leading to a resolution plan approved by the NCLT. The Income Tax Department's claims were part of this plan. The CIT(A) dismissed the company's appeal as non-maintainable due to the ongoing CIRP. However, the Tribunal found that the CIT(A) erred in not considering the implications of the NCLT's approval of the resolution plan, which led to the setting aside of the CIT(A)'s order and a directive to the A.O. to act in accordance with the resolution plan.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 783594 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2018-2019
• Appeal Filed On: 18-12-2024
• Other Referred Cases: Ghanashyam Mishra and Sons Pvt. Ltd. Vs. Edelweiss Asset Reconstruction Company Ltd., Vaibhav Goel and Others vs DCIT
• Laws Referred To: Income Tax Act, 1961, Insolvency and Bankruptcy Code, 2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Rule 8D
• Section: 143(3); 14A; 115JB

Judgement Text

"आयकर अपीलीय न्यायाधिकरण में, हैदराबाद ‘बी’ बेंच, हैदराबाद IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad “B” Bench, Hyderabad श्री विजय पाल राि, माननीय उपाध्यक्ष एिं श्री मंजूनाथ जी, माननीय लेखा सदस्य SHRI VIJAY PAL RAO, HON’BLE VICE PRESIDENT AND SHRI MANJUNATHA G, HON’BLE ACCOUNTANT MEMBER आयकरअपीलसं./I.T.A.Nos.1305 and 1306/Hyd/2024 (निर्धारण वर्ा/ Assessment Years: 2017-18 and 2018-19) Ramanagaram Enterprises Private Limited, Hyderabad. PAN : AABCV6386N Vs. The Assistant Commissioner of Income Tax, Circle 16(1), Hyderabad/ The DCIT, Central Circle 2(1), Hyderabad. (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Shri M.V. Prasad, C.A. and Mr. K.S. Rajendra Kumar (IRS Retired). राजस्व का प्रतततितित्व/ Department Represented by : Dr. Narendra Kumar Naik, CIT-DR सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 28.10.2025 घोर्णध की तधरीख/ Date of Pronouncement : 07.11.2025 O R D E R PER MANJUNATHA G., A.M : These appeals filed by the assessee are directed against the separate orders of Commissioner of Income Tax (Appeals) – 12, Printed from counselvise.com 2 ITA Nos.1305 and 1306/Hyd/2024 Ramanagaram Enterprises Private Limited Hyderabad, dated 22.10.2024 pertains to the assessment years 2017-18 and 2018-19. 2. The assessee has more or less raised common grounds of appeal for both the assessment years. Therefore, for the sake of brevity, the grounds in ITA No.1305/Hyd/2024 for A.Y 2017-18 are reproduced as under : “1. The order of the learned Commissioner of Income Tax (Appeals)-12, Hyderabad, is erroneous both on facts and in law so far as it is prejudicial to the appellant. 2. The learned Commissioner of Income Tax (Appeals), has erred in dismissing the appeal brushing aside the National Company Law Tribunal order dated 26 April 2021 and Appellant submissions. 3. The learned Commissioner of Income Tax (Appeals), has erred in not adjudicating the matter considering the insolvency and Bankruptcy code, 2016 (I&B). 4. The learned Commissioner of Income Tax (Appeals), has erred in dismissing the appeal by not considering the fact that, the appellant is under Corporate Insolvency Resolution Process (CIRP) under section 7 of the I&B, and Interim Resolution Professional (IRP) made public announcement on 11.05.2019. 5. The learned Commissioner of Income Tax (Appeals), has erred in dismissing the appeal by not considering NCLT directions, that, the Income tax department filed its claim in Form B dated 21.02.2020 and 21.05.2020 by that time Assessment order for the Asst year 2017-18 was completed vide order dated 25.12.2019. Wherein Hon'ble NCLT has stated that, the Resolution Professional has allocated Rs.1 Crore towards Operational Creditors, which covered Income tax demand, and further stated that, the department has no other objection to the relief started by Resolution Professional. 6. The learned Commissioner of Income Tax (Appeals), has erred in considering the fact that, once the adjudicating authority approves the resolution plan, the plan become binding on Financial creditors and Operational Creditors and stakeholders. In the Resolution Plan, approved by the adjudicating authority there is no specific allocation of funds to the Printed from counselvise.com 3 ITA Nos.1305 and 1306/Hyd/2024 Ramanagaram Enterprises Private Limited Operational Creditors including Income Tax Department except Rs.1 Crore for all operational creditors including CIRP costs. 7. The leamed Commissioner of Income Tax (Appeals), has to consider that, all dues including statutory dues owed to the Central Government, Statement Government or any local authority, if not part of the resolution plan, shall stands extinguished and no proceedings in respect of such dues for a period prior to the date on which the executing authority grant such approval. 8. The learned Commissioner of Income Tax (Appeals), has not considered the fact that, the NCLT has initiated Corporate Resolution Process on 9th May, 2019 and Interim Resolution Professional made a public announcement on 11th May 2019, No proceedings could be initiated or continued till the proceedings are completed. 9. The learned Commissioner of Income Tax (Appeals), has erred in dismissing the appeal as non-maintainable without adjudicating the disallowance u/s 14A of the Income Tax Act, 1961. 10. The learned Commissioner of Income Tax (Appeals), has erred in treating the appeal filed by the appellant as infructuous. 3. The brief facts of the case are that the assessee company is engaged in the business of generation and sale of hydropower, filed its return of income for AY 2017-18 on 13.10.2017, admitting total loss of Rs. 9,54,70,524/- under normal provisions of the Income Tax Act, 1961 and book loss of Rs. 16,92,97,604/- under Section 115JB of the Income Tax Act, 1961. The case was selected for scrutiny, and the assessment has been completed under Section 143(3) of the Act, 1961 on 25.12.2019 and determined the total income at Rs. 12,96,92,475/- under normal provisions of the Act, and a book profit of Rs. 5,58,65,396/- under Section 115JB of the Income Tax Act, 1961 by making additions of Rs. Printed from counselvise.com 4 ITA Nos.1305 and 1306/Hyd/2024 Ramanagaram Enterprises Private Limited 22,51,63,000/- towards disallowance under Section 14A read with Rule 8D of Income Tax Rules, 1962. 4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). 5. Before the Ld. CIT(A), the assessee has challenged additions made by the A.O. towards disallowance of expenses relatable to income exempt under Section 14A read with Rule 8D of Income Tax Rules, 1962. The assessee further submitted the details of petition filed by Andhra Bank (financial creditor of the assessee company) under Section 7 of Insolvency and Bankruptcy Code, 2016 (for short “IBC, 2016”) before the National Company Law Tribunal (for short “NCLT”). The assessee company also submitted a copy of the order passed by the NCLT in IA No. 839 of 2020 in CP (IB) No. 597/HDB/2018 dated 26.04.2021 whereby the NCLT accepted the corporate insolvency resolution proceedings initiated against the assessee company. The Ld. CIT(A), after considering the relevant order passed by the NCLT dated 26.04.2021 and also by following the decision of Hon’ble Supreme Court in the case of Ghanashyam Mishra and Sons Pvt. Ltd. Vs. Edelweiss Asset Reconstruction Company Ltd. [2021] 126 taxmann.com 132 (SC), Printed from counselvise.com 5 ITA Nos.1305 and 1306/Hyd/2024 Ramanagaram Enterprises Private Limited held that all dues, including those of the Central Government, any State Government or any local authority, guarantors, and other stakeholders shall extinguish, once the proceedings have been commenced by institution of an application under Section 7 or 9 or 10 of the IBC, 2016, and continuance of pending proceedings is prohibited and once they reach their logical conclusion with due approval of the resolution plan by adjudicating authority under Section 31(1) of IBC, 2016, the claims as provided in the resolution plan shall stand frozen, and will be binding on the corporate debtor and its employees, members, creditors, including central government, any state government or any local authority, guarantors and other stakeholders. Therefore, in view of the proceedings initiated under IBC, 2016, the appeal filed by the assessee is not maintainable. Accordingly, the Ld. CIT(A) dismissed the appeal filed by the assessee in ‘limine’. 6. Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal. 7. The learned counsel for the assessee Shri M.V. Prasad, C.A. and Shri K.S. Rajendra Kumar (IRS Retired), referring to the order passed by the Hon'ble NCLT under Section 31(1) of IBC, 2016, by Printed from counselvise.com 6 ITA Nos.1305 and 1306/Hyd/2024 Ramanagaram Enterprises Private Limited order dated 26.04.2021 in IA No. 839 of 2020 in CP (IB) No. 597/HDB/2018 dated 26.04.2021, submitted that, the corporate insolvency resolution process initiated against the assessee has been approved by the adjudicating authority and the company has been taken over by the successful resolution applicants, which was also approved by the Committee of Creditors. The NCLT approved the resolution for payment of Rs. 136 crores for resolution of all the assets of the corporate debtor, which includes the claim made by the Income Tax Department in Form B filed on 21.12.2020 for A.Y. 2017-18. Therefore, he submitted that, once the resolution plan has been approved by the adjudicating authority in terms of Section 31(1) of IBC, 2016, the A.O. needs to pass an order under Section 156A of the Income Tax Act, 1961 and issue a revised demand notice, if any, as per the resolution plan approved by the NCLT under Section 31(1) of IBC, 2016 and also in light of the decision of Hon’ble Supreme Court in the case of Ghanashyam Mishra and Sons Pvt. Ltd. Vs. Edelweiss Asset Reconstruction Company Ltd. (supra). The Ld. CIT(A), without appreciating the relevant facts, simply dismissed the appeal filed by the assessee in ‘limine’. Therefore, he submitted that, the Printed from counselvise.com 7 ITA Nos.1305 and 1306/Hyd/2024 Ramanagaram Enterprises Private Limited appeal filed by the assessee should be allowed with suitable directions to the A.O. to pass an appropriate order under Section 156A of the Act. The learned counsel for the assessee, in reply to a specific question from the Bench with regard to the demand for AY 2018-19, submitted that the assessment order for AY 2018-19 was passed on 23.04.2021, just three days before the NCLT passed the order under Section 31(1) of the IBC, 2016 approving the resolution plan submitted by the successful bidders, and the A.O. has not submitted any claim before the CIRP for AY 2019-20. However, in the NCLT order, it was observed that, the claim of the department for AYs 2017-18 and 2018-19 is part of the resolution plan accepted by the adjudicating authority, and accordingly, he submitted that, the A.O. is bound to give effect to the order passed by the NCLT in terms of Section 156A of the Act. 8. The Ld. CIT-DR Shri Naredra Kumar Naik, on the other hand, submitted that, there is no dispute with regard to the fact that the corporate insolvency resolution process initiated against the company has been finally concluded by the NCLT by passing an order under Section 31(1) of IBC, 2016. Once the resolution plan has been approved by the adjudicating authority, then the A.O. is Printed from counselvise.com 8 ITA Nos.1305 and 1306/Hyd/2024 Ramanagaram Enterprises Private Limited bound to pass an order under Section 156A of the Act, in terms of the order passed by the NCLT. Therefore, the Ld. CIT-DR submitted that the matter may be set aside to the file of A.O. to pass a suitable order under Section 156A of the Act. 9. We have heard both parties, perused the material available on record, and had gone through the orders of the authorities below. The Ld. CIT(A) dismissed the appeal in limine on the ground that the corporate insolvency resolution process has been initiated against the assessee company by Andhra Bank, the financial creditor of the assessee company, before the NCLT under Section 7 of IBC, 2016, and the NCLT Hyderabad had passed an order in IA No. 839 of 2020 in CP (IB) No. 597/HDB/2018 dated 26.04.2021, dated 26.04.2021. Once the proceedings have been commenced by initiation of an application under Section 7, 9, or 10 of the IBC, 2016, the continuance of the pending proceedings are barred, and further, when the proceedings reached logical conclusion with due approval of the resolution plan by the adjudicating authority under Section 31(1) of the IBC, 2016, the claim as provided for in the resolution plan shall stand frozen, and is binding, including on the Central Government, CBDT, and other Printed from counselvise.com 9 ITA Nos.1305 and 1306/Hyd/2024 Ramanagaram Enterprises Private Limited stakeholders. Accordingly, the Ld. CIT(A) dismissed the appeal filed by the assessee as not maintainable. The learned counsel for the assessee had furnished a copy of the order passed by the NCLT under Section 31(1) of IBC, 2016, dated 26.04.2021, which was available in Paper Book filed by the assessee where the CIRP initiated against the assessee has been accepted by the NCLT upon successful submission of the proposal by the successful bidder. Once the CIRP initiated against the company has been successfully concluded upon the order passed under Section 31(1) of the IBC, 2016, any claims made prior to the CIRP stand frozen, and there cannot be any scope for making further claim, including any claim towards liability by the Income Tax Department, as held by the Hon’ble Supreme Court in the case of Ghanashyam (supra), wherein, in para 95 of the order, it was categorically held that, once the resolution plan is duly approved by the adjudicating authority under Section 31(1) of IBC, 2016, the claim as provided in the resolution plan stands frozen and will be binding for the corporate debtor and its employees, members, creditors, including the Central Government or any State Government or any local authority, etc. Further, on the date of approval of resolution plan Printed from counselvise.com 10 ITA Nos.1305 and 1306/Hyd/2024 Ramanagaram Enterprises Private Limited by the adjudicating authority, all such claims which are not a part of the resolution plan shall stand extinguished, and no person will be entitled to initiate or continue any proceedings in respect of the claim which is not part of the resolution plan. Consequently, all the dues, including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished, and no proceedings in respect of the period prior to the date on which the adjudicating authority grants its approval under Section 31(1) of IBC, 2016 can be continued. 10. In the present case, it was the claim of the learned counsel for the assessee company that, the A.O. has lodged a claim for the demand raised for AY 2017-18, however, there was no claim for A.Y. 2018-19. In our considered view, once the department has lodged a claim for the recovery of the outstanding liability before the NCLT, then the department is bound to follow the order passed by the NCLT under Section 31(1) of IBC, 2016, and the A.O. is bound to pass an order under Section 156A of the Act. The Ld. CIT(A), without appreciating these facts, simply dismissed the appeal filed by the assessee in ‘limine’. Thus, we set aside the Printed from counselvise.com 11 ITA Nos.1305 and 1306/Hyd/2024 Ramanagaram Enterprises Private Limited order of the Ld. CIT(A) and restore the issue back to the file of the A.O. The A.O. is directed to pass a consequential order in terms of Section 156A of the Act, 1961 giving effect to the order passed by the NCLT under Section 31(1) of IBC, 2016, keeping in view the decision of the Hon’ble Supreme Court in the case of Ghanashyam Mishra and Sons Pvt. Ltd. Vs. Edelweiss Asset Reconstruction Company Ltd (supra) and also the decision of the Hon’ble Supreme Court in the case of Vaibhav Goel and Others vs DCIT in Civil Appeal No. 49 of 2022 for both the assessment years. 11. In the result, both the appeals filed by the assessee are allowed for statistical purposes in terms of our observations given hereinabove. Order pronounced in the Open Court on 7th November, 2025. Sd/- श्री विजय पाल राि (VIJAY PAL RAO) उपाध्यक्ष /VICE PRESIDENT Sd/- (मंजूिधथ जी) (MANJUNATHA G.) लेखा सदस्य/ACCOUNTANT MEMBER Hyderabad, dated 07.11.2025. TYNM/sps Printed from counselvise.com 12 ITA Nos.1305 and 1306/Hyd/2024 Ramanagaram Enterprises Private Limited आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/The Assessee : Ramanagaram Enterprises Private Limited, Plot No.18, iLabs Centre, Building 3, Software Units Layout, Madhapur – 500081, Hyderabad. 2. रधजस्व/ The Revenue : The Assistant Commissioner of Income Tax, Circle 16(1), Hyderabad / The Deputy Commissioner of Income Tax, Central Circle 2(1), Hyderabad. 3. The Principal Commissioner of Income Tax (Central), Hyderabad. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Hyderabad Printed from counselvise.com "