Introduction
The High Court’s decision in WPA 2036 of 2020, Ultra Tech Cement Limited & Anr. v. Union of India & Ors., addresses the conflict between the IBC and the Income Tax Act, 1961. The petitioner challenged orders dated 24.12.2019, 31.12.2019 and notices dated 3.1.2020, 20.1.2020, 23.1.2020, by which refunds for A.Y. 2019-20 were adjusted against pre-transfer demands for A.Y. 2011-12, relating to A.Y. 2007-08 to 2015-16. The Court quashed the notices/orders and directed refund with interest. This was a writ petition before the High Court, not an ITAT appeal against an Assessment Order, involving an intimation under Section 143(1) and Section 245 adjustment.
Facts
Petitioner No.1 is a wholly owned subsidiary of Ultratech Cement Limited, engaged in cement manufacturing, and was the successful resolution applicant for Binani Cement Ltd. under IBC. CIRP commenced on 25.7.2017 on Bank of Baroda’s Section 7 application. A public announcement under Sections 13 and 15 was issued on 29.7.2017. The resolution plan was approved by NCLAT on 14.11.2018 in Company Appeal (AT) No.188 of 2018, affirmed by the Supreme Court on 26.7.2019. Effective takeover was 20.11.2018 (Transfer Date). The petitioner challenged adjustment of Rs. 1,43,46,686; Rs. 67,69,380; and Rs. 1,12,73,866—refund for A.Y. 2019-20 adjusted against A.Y. 2011-12 demand, all pre-Transfer Date. The Department claimed Section 245 set-off; CPC issued Section 245(1) intimation, and refund for A.Y. 2019-20 was determined under Section 143(1) by intimation dated 24.08.2020. The Department filed Form B proof of debt for Rs. 24,06,35,175, rejected after collation.
Reasoning
The High Court framed whether tax authorities could raise pre-CIRP demands after plan approval, whether reassessment/adjustment after 20.11.2018 was legal, and whether it violated the plan and Sections 31 and 238 of IBC. The petitioner argued that despite an interim order dated 08.07.2021 restraining effect of impugned orders/notices, CPC adjusted refunds for pre-transfer demands. This was de hors the approved plan, which stated all assets would be free from encumbrances, claims known or unknown, and all litigations before Transfer Date stood withdrawn and extinguished.
The petitioner relied on Ghanashyam Mishra and Sons (P) Ltd. v. Edelweiss Asset Reconstruction Company Ltd., (2021) 9 SCC 657. Paragraphs 102–102.3 hold that once a plan is approved under Section 31(1), claims stand frozen and bind all stakeholders, including Central Government, State Government and local authorities. Claims not part of the plan stand extinguished; no person can initiate or continue proceedings on them. The 2019 Amendment to Section 31 is clarificatory and declaratory, effective from IBC commencement. All dues, including statutory dues owed to Central/State/local authorities, if not part of the plan, stand extinguished, and no proceedings for the pre-approval period can continue.
Reliance was also placed on JSW Steel Ltd. v. Pratistha Thakur Haritwal, 2025 SCC Online Supreme Court 672 (paras 35–37), where continuation of proceedings after Ghanashyam Mishra was held contemptuous; demand notices were illegal and quashed. In PCIT-3 Kolkata v. M/s. Srishtri Hotel Private Ltd., I.A. No. G.A/3/2024 in ITA/36/2020 (paras 11–12), the Division Bench held that where a claim was not lodged after public announcements under Sections 13 and 15 IBC, on plan approval all claims stood frozen and no claim outside the plan survived; deposited amount was refunded with interest. Vaibhab Goyal v. DCIT, 2025 SCC Online Supreme Court 592, read with Committee of Creditors of ESSAR Steel Ltd. v. Satish Kumar Gupta, (2019) 16 SCC 1478, holds that no belated claim can be included; a resolution applicant cannot face undecided claims like Hydra heads popping up. The business must recommence on a clean slate and paid-off basis; all claims must be submitted to the Resolution Professional. The Department’s Form B claim was rejected after collation. Section 238 of the IBC gives the Code overriding effect over inconsistent laws.
The Department countered that adjustment was under Section 245 of the Income Tax Act, 1961, which empowers set-off of refund against any sum payable after written intimation. CPC issued intimation under Section 245(1) and adjusted A.Y. 2019-20 refund against A.Y. 2011-12 demand.
The Court found a prima facie case. Taking judicial notice of documents and judgments, it held that the Income Tax Authorities had no right to adjust refund for a frozen period. On 14.11.2018, when NCLAT approved the plan, all claims stood frozen; no claim outside the plan could survive. The authorities could not initiate fresh proceedings for demands prior to Transfer Date, up to A.Y. 2019-20. Section 238 of IBC applies. Income tax dues, as crown debts, have no priority over secured creditors and stand extinguished if not included in the plan. The Section 245 adjustment was de hors the approved plan. The impugned notices, orders and proceedings were arbitrary, illegal and unsustainable, and were quashed. Directions issued: refund adjusted amounts with interest, permit carry forward of unabsorbed depreciation and accumulated losses, accept pre-transfer returns, and not initiate reassessment or other proceedings for the pre-transfer period.
Conclusion
The High Court’s ruling reinforces the finality of an approved resolution plan under the IBC. It prevents tax authorities from using Section 245 of the Income Tax Act to defeat the IBC’s clean-slate principle. By applying Ghanashyam Mishra, JSW Steel, Srishtri Hotel, Vaibhav Goyal and Essar Steel, the Court confirmed that claims not in the plan, including crown debts, stand extinguished. The writ petition was disposed of with directions, offering significant guidance on IBC override and tax recovery.