S. DHANAPAL vs INCOME TAX OFFICER, TDS Ward -2 - 2026 Supreme(Online)(NCLAT) 278

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2026 Supreme(Online)(NCLAT) 278

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Sharad Kumar Sharma, Member (Judicial)
S. DHANAPAL – Appellant
Versus
INCOME TAX OFFICER, TDS Ward -2 – Respondent
Company Appeal (AT) ( CH) (Ins) No. 644/2025

Important Points

NCLT lacks jurisdiction to direct TDS refund on liquidation fixed deposit interest; liquidator must submit income/expenditure accounts to tax authorities first. Appeal against procedural NCLT directions is premature absent adverse tax decision.

Subject

Insolvency and Bankruptcy - Liquidation Process

Act Referred

Insolvency and Bankruptcy Code, 2016: S.9, S.7, S.10, S.238, S.230
Income Tax Act: S.140, S.139, S.115WD, S.178
Insolvency and Bankruptcy Code, 2016: S.3(18), S.5(1)

Headnote

(A) Insolvency and Bankruptcy Code, 2016 - Sections 9, 230, 238 - Income Tax Act, 1961 - Sections 139, 140, 115-WD - Liquidation process - Interest on fixed deposit of sale proceeds - TDS deduction by bank - Liquidator's application seeking refund of TDS and restraint on future deductions disposed by NCLT directing submission of simpliciter account sheet to tax authorities - Appeal against such order - NCLT/NCLAT lacks jurisdiction to direct refund of TDS or interpret tax exemptions; matter lies within domain of tax authorities - Liquidator must first submit income/expenditure account based on existing balance sheets for tax authorities to consider refund claim - No decision yet on merits by tax authorities renders appeal premature and anticipatory - Direction to prepare account sheet is procedural and enabling, not requiring full profit/loss account preparation - Provisions of Section 140 on verification by insolvency professional during CIRP do not preclude liquidator's accounting obligations - Tax laws operate in own domain, overriding by IBC not applicable absent direct conflict and adverse tax authority decision. (Paras 15, 20-25, 28, 32-34)

(B) Appellate Jurisdiction - Prematurity of appeal - Challenge to interlocutory order directing procedural compliance before competent authority (tax department) not maintainable where no merits decision taken and relief (TDS refund) deferred to statutory process - Appeal lacks cause of action if filed in apprehension of future procedural demands. (Paras 21-22, 27, 30)

Facts of the case:
Liquidator of corporate debtor in liquidation sold assets via e-auction realising sale consideration kept in fixed deposit with bank. Bank deducted TDS on accruing interest. Liquidator sought refund of TDS (Rs.1,57,47,550/-) and no future deductions via application before NCLT, which directed submission of simpliciter income/expenditure account to tax authorities. Liquidator appealed impugned order.

Findings of Court:
Impugned order merely directs liquidator to furnish relevant accounts to tax authorities for processing TDS refund claim; no interference warranted as NCLT cannot adjudicate tax refunds or exemptions.

Issues: Whether NCLT can direct tax authorities to refund TDS without liquidator filing returns/accounts; applicability of Section 140 exemption to liquidator; prematurity of appeal against procedural directions.

Ratio Decidendi: NCLT/NCLAT cannot issue TDS refund directions or pre-empt tax authority decisions on filing requirements/exemptions under tax laws; liquidator must comply with procedural accounting submission first, rendering challenge to enabling order premature.

Result: Company appeal dismissed.

Advocates:
For the Appellants/Petitioners:Mr. S. Satish, Advocate
For the Respondents:Mr. Raj Jhabakh, Advocate

Table of Content
1. liquidation process initiated; assets sold via e-auction. (Para 1 , 2 , 3)
2. liquidator challenges unlawful tds deduction on fd interest. (Para 4 , 5 , 6 , 7 , 8)
3. section 140 it act requires liquidator verification of returns. (Para 9 , 10 , 11)
4. section 140 applies to both cirp and liquidation. (Para 12 , 13)
5. liquidator must submit income-expenditure account for tds refund. (Para 14 , 15 , 16 , 17 , 18 , 19)
6. nclt lacks jurisdiction over tds refund; defer to it authorities. (Para 20 , 21 , 22 , 23 , 24 , 25)
7. appeal premature; tds refund by it authorities post-account submission. (Para 26 , 27 , 28 , 29 , 30 , 31 , 32)
8. ibc override on it act only post it authority decision. (Para 33 , 34)
9. company appeal dismissed for lack of merit. (Para 35)

JUDGMENT

(Hybrid Mode)

[Per: Justice Sharad Kumar Sharma, Member (Judicial)]

The Appellant, Liquidator, having been thus appointed in pursuance to the order dated 24.04.2018 as passed by Ld. NCLT, Chennai Bench, in CA/152/IB/2018, which was preferred in CP/514/IB/2017, was to act as a Liquidator in the liquidation process of M/s. Servalakshmi Paper Limited, which was undergoing with the liquidation process, on the basis of the proceedings that were being held under Section 9 of I & B Code, 2016, at the behest of the Operational Creditor, M/s. Shakti Energy Private Limited.

2. In the proceedings thus carried, owing to the fact that, after the admission of the CIRP process by an order of 21.06.2017, as there was no acceptable plan, which was received thereafter, the Corporate Debtor was directed to face the liquidation process by an order dated 24.04.2018. In pursuance to the orders that has been passed by the Ld. Adjudicating Authority, the assets of the Corporate Debtor, M/s. Servalakshmi Paper Limited, were said to have been sold as a going concern basis, by way of an e-auction, that was held on 05.10.2022, showing the realisation of the sale consideration of Rs. 105 Crores.

3. The amount thus realised under the e-auction process, as it stood concluded on 05.10.2022, the sale consideration amount, pending distribution to the stakeholders, was directed to be kept in a fixed deposit with Respondent No.2, the State Bank of India. Obviously, the amount thus deposited in the shape of a fixed deposit with the State Bank of India, was bound to accrue interest upon it as per admissible rates. The Respondent No. 2, before remittance of the amount of interest accruing on the fixed deposit into the liquidation account, had deducted TDS on the same. It is contended by the Appellant, that the said deduction of the TDS amount from the interest accruing on the fixed deposit by Respondent No. 2 on the fixed deposit kept with it, was unlawful.

4. For the purposes of airing his grievances, the Appellant contended that in fact no TDS could have been deducted on the interest accruing on the fixed deposit by Respondent No. 2 and that, he has written a letter on 13.04.2023 to Respondent No. 2, to refund the amount of TDS which has been thus deducted and further, not to deduct the said amount in future from and out of the interest, which was accruing on the said fixed deposits.

5. The grievance of the Appellant is that, despite the said correspondence of 13.04.2023, seeking a restraint from deduction of the TDS from the interest earned on fixed deposit, they contended that Respondent No. 2 thereafter still persisted with the deduction of the TDS amount at source, on the interest accruing on the fixed deposit, ignoring the request made by the Appellant. The Appellant contends that, for the purposes of seeking a restraint, as against Respondent No. 2, from deducting the TDS on the interest, they have also written a letter to the Respondent No. 1, pointing the above grievance.

6. In response to the said letter written by the Appellant to the Income Tax Department, the Respondent No. 1, in turn, has requested the Liquidator to file the return of income tax for all the assessment years for clai