The liquidator filed an application seeking direction against R2 (successful bidder) and R1 (Income Tax Authority) to prevent the deduction of 1% TDS from the sale of the corporate debtor's asset. The liquidator argued that tax dues should not be prioritized over the waterfall mechanism under Section 53 of the Insolvency and Bankruptcy Code (IBC), and Section 238 has an overriding effect. The Income Tax Department contended that there is no provision under IBC or the Income Tax Act for exemption from TDS deduction on the sale of a corporate debtor's asset in liquidation, especially when the sale consideration exceeds ₹50 lakhs, triggering Section 194IA of the Income Tax Act.
The liquidator filed an application against R2 (successful bidder in an auction) and R1 (Income Tax Authority) concerning the sale of the Corporate Debtor's asset. The liquidator sought to prevent the deduction of 1% TDS from the sale consideration of ₹43 Crores, arguing that tax dues should not take precedence over the waterfall mechanism outlined in Section 53 of the IBC. The liquidator also invoked Section 238 of the IBC, claiming its overriding effect. The Income Tax Department countered that no provision exists under the IBC or the Income Tax Act to exempt TDS deduction on the sale of a corporate debtor's asset in liquidation, especially since the sale consideration exceeded ₹50 lakhs, triggering Section 194IA of the Income Tax Act, which mandates a 1% TDS
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Order was deli…
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The liquidator filed an application seeking direction against R2 (successful bidder) and R1 (Income Tax Authority) to prevent the deduction of 1% TDS from the sale of the corporate debtor's asset. The liquidator argued that tax dues should not be prioritized over the waterfall mechanism under Section 53 of the Insolvency and Bankruptcy Code (IBC), and Section 238 has an overriding effect. The Income Tax Department contended that there is no provision under IBC or the Income Tax Act for exemption from TDS deduction on the sale of a corporate debtor's asset in liquidation, especially when the sale consideration exceeds ₹50 lakhs, triggering Section 194IA of the Income Tax Act.
The liquidator filed an application against R2 (successful bidder in an auction) and R1 (Income Tax Authority) concerning the sale of the Corporate Debtor's asset. The liquidator sought to prevent the deduction of 1% TDS from the sale consideration of ₹43 Crores, arguing that tax dues should not take precedence over the waterfall mechanism outlined in Section 53 of the IBC. The liquidator also invoked Section 238 of the IBC, claiming its overriding effect. The Income Tax Department countered that no provision exists under the IBC or the Income Tax Act to exempt TDS deduction on the sale of a corporate debtor's asset in liquidation, especially since the sale consideration exceeded ₹50 lakhs, triggering Section 194IA of the Income Tax Act, which mandates a 1% TDS
…Order was deli…
The matter was heard…