# In the matter of LML Limited CA No.. 389 of 2019 in CP(IB)No. 55-ALD-2017

> NCLT judgment dated 2020-08-31. Citation: TCN-2020-NCLT-00757. The case involves an application filed by the liquidator of LML Limited under Section 60(5) of…

- **Court:** NCLT
- **Order date:** 31 Aug 2020
- **Citation:** TCN-2020-NCLT-00757
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/lml-limited-ca-no-389-of-2019-in-cpibno-55-ald-2017-cf4afa46

## Summary

### Background

The case involves an application filed by the liquidator of LML Limited under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, seeking directions on whether capital gains tax should be paid from the proceeds of asset sales of the corporate debtor and if it should be included in liquidation costs or distributed as per the waterfall mechanism under Section 53 of the IBC. The applicant has already distributed a majority of the realized amount and needs to distribute the remaining amounts according to the waterfall mechanism. The liquidator is faced with the issue of whether capital gains tax would be attracted on sales of such assets as part of the liquidation estate and included as liquidation costs.

## Facts

LML Limited is undergoing liquidation. The liquidator has filed an application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, seeking directions regarding the treatment of capital gains tax arising from the sale of the corporate debtor's assets. A sum of Rs. 113,88,40,170/- has been realized from various auctions. The liquidator has already distributed a majority of the realized amount. The liquidator is faced with the issue of whether capital gains tax would be attracted on sales of such assets as part of the liquidation estate and included as liquidation costs. The counsel for the liquidator referred to Section 52 of the Code, which gives secured creditors the option to relinquish their security interest or realize it. The Income Tax Department

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## Issues and analysis

### Issue 1: Whether the capital gains tax is to be paid on the proceeds received from the sale of assets of the …

**Ratio:** The ratio is based on the interpretation of Section 53 of the IBC, which outlines the

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**Reasoning:** The Adjudicating Authority reasoned that the IBC is a complete code and that the

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**Interpretation:** The interpretation is that the IBC's provisions regarding the distribution of

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**Application:** The ratio and reasoning apply to the specific facts of the case by determining

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## Parties

- **Judges:** Rajesh Daya…
- **Appellants:** LML LIMITED…
- **Respondents:** LML LIM…; OFFICE OF…

## Timeline

- **2017-01-01 — CP(IB) No.55/…**: Filing of CP(IB)…
- **2019-01-01 — CA No.389 o…**: Filing of CA No.389 of…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 60(5) — Adjudicating Authority for corporate persons](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-60)

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