Page 23 - Banking Finance September 2021

LEGAL UPDATE

lay in the entire process, the Standing transfer control to a resolution process Deputy Commissioner of Income Tax,
Committee on Finance of the Lok within this time period," the commit- Mumbai, who wanted to re-open the
Sabha recommended overhauling the tee recommended. tax assessment of a corporate asses-
entire IBC (insolvency and bankruptcy The committee noted that when the see, because the assessing officer
code) process, rejecting any bids which invited bidders are asked to submit changed his opinion about the depre-
comes after the lenders select the their respective resolution plans and ciation claim. In doing so, the Tribunal
highest bidder and appointment of high has established the principle that in
when these resolution plans are evalu-
court judges in the NCLT (National the absence of any new material, a
ated by the CoC, suddenly other bid-
Company Law Tribunal) as judicial case cannot be re-opened, merely on
ders may emerge and submit their own
members in order to reduce litigation. the basis of a change of opinion.
resolution plans. "These bidders typi-
In its report, the committee noted that cally wait for the H1 (highest) bidder Morries Energy of Mumbai, which
71 per cent cases are currently pend- to become public, and they then seek owns a 1.25 MW wind turbine, claimed
ing for more than the mandatory 180 to exceed this bid through an unsolic- 100 per cent depreciation. The claim
days in the NCLT, which points out the ited offer that is submitted after the was examined by the assessing officer
deviation from the original objectives specified deadline. Currently, the CoCs and allowed. But he later said that the
of the code as envisaged by the Parlia- have significant powers to accept late fact that the wind turbine had not
ment. The Indian banks' funds worth bids and these unsolicited bids create been put to use for 180 days, as re-
Rs 9.2 trillion are currently stuck in the a huge delay," the report said. quired for claiming 100 per cent depre-
NCLT after they took defaulters to the The committee, therefore, recom- ciation, had escaped his attention. He
court under the code. mended that the IBC be amended so said that the company was entitled to

Asking for a thorough evaluation of the that no post hoc bids are allowed dur- only 50 per cent depreciation.
entire process, the committee said it ing the resolution process. The company petitioned the Central
is imperative to have a benchmark for The committee said as the cases de- Income Tax Tribunal, which declared
the reassessment invalid, following
the quantum of haircuts, comparable cided at the NCLT are litigated at the
to the global standards, as the haircuts NCLAT and the SC, it is imperative that which the department approached the
in many cases are as high as 95 per the NCLT members should be highly Appellate Tribunal. The Tribunal said:
cent. trained and well experienced. "The "It is quite evident that the original
committee believes that the NCLT ju- return of income stood scrutinised ups
On the role of resolution professionals, 143(3) wherein assessee' claim of de-
the committee said a professional self- dicial members should be at least High preciation was duly examined by Ld.
regulator for RPs that functions like the Court judges so that the country will AO. The claim was allowed after due
benefit from their procedural experi-
Institute of Chartered Accountants of application of mind. The requisite docu-
India (ICAI) should be put in place. The ence and wisdom. ments and details were already fur-
committee, therefore, recommended The report, tabled in the parliament, nished by the assessee during original
that an Institute of Resolution Profes- said financial creditors took 4,356 com- assessment proceedings.
sionals may be established to oversee panies to NCLT under the IBC to re- However, subsequently, on the basis of
and regulate the functioning of RPs so cover Rs 6.77 trillion, while the opera- existing material as available on
that there are appropriate standards tional creditors moved the court record, Ld. AO formed an opinion of es-
and fair self-regulation. against 8,331 companies to recover capement of income which was noth-
their dues worth Rs 78,000 crore. In
On the delay at NCLT, the committee ing but mere change of opinion. There
266 cases, the companies themselves
noted that the NCLT takes considerable was no new tangible material which
moved the NCLT after they failed to
time to admit cases and during this repay debt worth Rs 52,000 crore. would demonstrate any escapement of
time the company remains under the income in the hands of the assessee.
control of the defaulting owner en- CIT(A) was quite justified in declaring
abling value shifting, funds diversion, Re-opening disallowed the reassessment proceedings as in-
and asset transfers. "The NCLT should The Income Tax Appellate Tribunal has valid. Finding no infirmity in the same,
accept defaulters within 30 days and dismissed an appeal filed by the we dismiss the appeal." T

BANKING FINANCE | SEPTEMBER | 2021 | 23