# In the matter of Om Prakash Agarwal Vs. Chief Commissioner of Income Tax & Anr. IA 992-2020 in CP-294-2018

> NCLT judgment dated 2020-06-11. Citation: TCN-2020-NCLT-01183. The liquidator filed an application seeking direction against R2 (successful bidder) and R1…

- **Court:** NCLT
- **Order date:** 11 Jun 2020
- **Citation:** TCN-2020-NCLT-01183
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/om-prakash-agarwal-vs-chief-commissioner-of-income-tax-anr-ia-992-2020-in-cp-294-b6135fef

## Summary

### Background

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.

## Facts

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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## Issues and analysis

### Issue 1: Whether the deduction of TDS on the sale of the Corporate Debtor's asset is inconsistent with the …

**Ratio:** The principle is that TDS deduction is a statutory obligation under the Income Tax Act

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**Reasoning:** The court reasoned that the Income Tax Act mandates TDS deduction on certain

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

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**Application:** In this case, the court applied the principle by stating that the deduction of

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## Parties

- **Judges:** SH. B.S.V.…
- **Appellants:** Om Prakash…
- **Respondents:** Chief Commissioner…
- **Advocates:** Rohan Agg…; Darshit…; +3 more

## Timeline

- **2020-06-11 — Order Del…**: Order was delivered on…
- **2020-06-11 — Hearing and D…**: The matter was heard and dictated…

## 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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