The Hon'ble Supreme Court rules unapproved dues are extinguished once resolution plan is approved, rejects post-resolution income tax demand.

The Hon’ble Supreme Court in a recent judgment dismissed a claim by the Income Tax Department to include tax demands in a Resolution Plan post its approval under the Insolvency and Bankruptcy Code (IBC), 2016. The Hon’ble Court referenced its 2021 ruling in Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd., which held that any claims not part of an approved Resolution Plan are extinguished upon the plan's approval.

In the present case, the Income Tax Department raised demands for the assessment years 2012-13 and 2013-14 after the approval of the Resolution Plan for the corporate debtor. The Court noted that since these tax dues were not included in the approved resolution plan, they stood extinguished under Section 31 of the IBC. The Court emphasized that allowing such belated claims would create uncertainty and hinder the successful implementation of the Resolution Plan, which is intended to offer a "clean slate" to the resolution applicant.

The Hon’ble Apex Court held that any demands raised after the approval of the plan, which were not included in it, could not be enforced. The present ruling reaffirms the principle that once a Resolution Plan is approved, no subsequent claims, particularly statutory dues like income tax, can be introduced; as doing so would prevent the corporate debtor from restarting its operations.

The Hon’ble Court thus set aside the decisions of the NCLT and NCLAT, invalidating the income tax demands for the mentioned assessment years.

Vaibhav Goel & Anr. versus Deputy Commissioner of Income Tax & Anr. 

2025 LiveLaw (SC) 330