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IBCInsolvency & Bankruptcy CodeIs Section 238 of IBC applicable to Income Tax Act? (IBC)


In the case of Pr. Commissioner of Income Tax v. Monnet Ispat and Energy Ltd (Petition(s) for Special Leave to Appeal (C) No(s). 6483/2018) the main issue before the Hon’ble Supreme Court was that whether moratorium will be applicable to the proceedings of Income Tax Appellant Tribunal.

In this an application under Section 7 of the IBC was filed against the Corporate Debtor i.e. and moratorium was issued. In the Hon’ble High Court of Delhi, the Principal Commissioner of Income Tax challenged if the moratorium period will be applicable to the Income Tax Appellate Tribunal proceedings. It was held that Section 14 would apply to the proceedings. The purpose of Moratorium is to ensure that the assets of the Corporate Debtor are not disturbed so as to assess the financial position, so that a plan can be formed accordingly.

Also, Section 238 of the Insolvency and Bankruptcy Code, 2016 would override any law including the Income Tax Act if it is inconsistent with the IBC.

The Hon’ble Supreme Court upheld the order of the Hon’ble High Court of Delhi when it was challenged before it. It also referred to the case of  Dena Bank vs. Bhikhabhai Prabhudas Parekh and Co. & Ors.[1] and held that  “income-tax dues, being in the nature of Crown debts, do not take precedence even over secured creditors, who are private persons.”[2]

[1] (2000) 5 SCC 694

[2] Petition(s) for Special Leave to Appeal (C) No(s). 6483/2018