RP can not claim income tax refund for period prior to approval of resolution plan

Resolution Professional can’t claim income tax refund for a period prior to approval of the resolution plan

In a recent judgment, Orissa High Court has held that A Resolution Professional can’t claim income tax refund for a period prior to when he stepped in and managed affairs of the corporate debtor i.e. date of approval of the resolution plan.

ABCAUS Case Law Citation:
4927 (2025) (12) abcaus.in HC

In the instant case, the was the Resolution Applicant (RA) had filed a Writ Petition against the demand order against him by Income Tax Authorities who adjusted refund against the old dues. It was stated that the claim was not placed before the Resolution Professional (RP).

For the relevant assessment year there was refund which the revenue had adjusted against old income tax dues, which had been duly taken into consideration in the resolution process. As a result, the amount of old income tax dues stood reduced by the refund amount.

The Petitioner relied upon the judgment of the Hon’ble Supreme Court wherein it was held that once a resolution plan is duly approved by the adjudicating authority under sub-section (1) of Section 31 of in Insolvency and Bankruptcy Code, 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 the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the adjudicating authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan.

On the other hand, the Revenue drew attention of the Hon’ble High Court to the table of statutory/other legal liabilities in the Writ Petition showing provision for old income tax. The manner was also disclosed, in which said amount, approved in the resolution process, was to be paid by petitioner. It remains unpaid. In the circumstances, adjustment of the refund against old income tax dues was duly made.

In reply the Petitioner submitted that the refund was due to him and there was no tax dues placed for approval in the resolution process. Clear admission was there in the counter. Furthermore, no notice of the adjustment to be made was given. In the circumstances, it was prayed that a direction be issued for disbursement of the refund on holding the adjustment made to be bad.

The Hon’ble High Court rejected petitioner’s claim to have the refund because petitioner can only claim to step into and manage affairs of the corporate debtor from date of approval of the resolution plan. Petitioner cannot claim to have paid tax on assessment made earlier to his appointment.

The Hon’ble High Court held that refund in respect of relevant Assessment Year cannot be due to petitioners, who stepped into shoes of management of the corporate debtors after the AY and proceeded to revive it per the approved resolution plan. Petitioners having assailed the adjustment made by filing the writ petition, cannot still rely on alleged omission to notice them on the adjustment.

Accordingly, the Writ Petition was dismissed.

Download Full Judgment Click Here >>

• ITAT allows credit balance adjustment for addition of deemed dividend u/s 2(22)(e)
• Addition u/s 50C deleted based on FMV as per CA report under Rule 11UA(1)(b)
• Procedure to handle export cargo originating from SEZ due to closure of Strait of Hormuz
• ICAI AQMM review to be applicable to Practice Units which are subject to Peer Review
• ITAT allows remuneration paid by wives of CA partners for their services rendered in firm