The NCLT MUMBAI has directed the income tax department to return the tax deducted at source (TDS) from Precision Fasteners after the auto-component maker was referred for liquidation.
The ruling is expected to set a precedent in several such cases where the revenue department is seeking to recover statutory dues from companies facing liquidation.
Track your NCLT / NCLAT cases or orders in your apple iOS / Google Android smartphones. Available for free trial period of 15 days.
The liquidator of the company had approached the Mumbai bench of the National Company Law Tribunal (NCLT) to recover about Rs 1 crore deducted from the company as TDS even when there was a moratorium in place under the insolvency and bankruptcy law.
Mumbai-based Precision Fasteners was admitted under the corporate insolvency resolution process (CIRP) in 2017, on a petition filed by Asset Reconstruction Company India. However, in the absence of any viable resolution plan, the tribunal allowed the resolution personnel’s petition to admit the company for liquidation.
The liquidator approached the tribunal last year after the revenue department deducted TDS of more than Rs 98 lakh on certain transactions, despite the fact that the company was under liquidation.
Under Section 53 of IBC, statutory dues including that to the income tax department are operational dues and under the waterfall mechanism, liquidation cost, secured creditors and workmen of the company get priority to receive their dues.
As per latest data from the Insolvency & Bankruptcy Board of India, 5,258 companies were admitted for CIRP till the end of March 2022. Out of these, 1,609 cases, or 30.61%, ended in liquidation.
