Following the receipt of a demand notice from the Income Tax (I-T) Department, Welspun Corp has pointed out that under section 31(1) of IBC, the Resolution Plan is binding on all creditors, such as all government or statutory authorities including the I-T Department.
"Further, as per legal advice received, the liabilities of an entity emerging from CIRP (corporate insolvency resolution process) under a resolution plan approved by the NCLT (National Company Law Tribunal) including liabilities relating to a prior period, stand extinguished and therefore SBAPL will not be liable for such liabilities," Welspun Corp said in a filing after its subsidiary got a demand notice.
Sintex BAPL Ltd (SBAPL), the company’s wholly-owned subsidiary, was recently acquired by Welspun Corp through a resolution plan in the CIRP under the provisions of the Insolvency & Bankruptcy Code (IBC) pursuant to the order of the NCLT, Ahmedabad Bench, dated March 17, 2023.
On July 26 (Wednesday), SBAPL has received an intimation-cum-demand notice vide Section 143(1) of the I-T Act, 1961, from the Centralised Processing Centre (CPC), I-T Department, Bengaluru, pertaining to the AY 2022-23 for Rs. 104.22 crore.
"SBAPL is in the process of filing rectification application/appeal before the I-T Department in the matter on the basis of legal advice received and is hopeful of a favourable outcome," Welspun Corp said.
SBAPL’s Return of Income for the AY 2022-23 has been processed as per provision of section 143(1) of the Income Tax Act, 1961.
In the intimation order, the I-T Department has raised a demand of Rs104.22 crore and the demand was raised in respect of addition of Rs 278.61 crore towards "increase in the profit or decrease in loss because of deviation, if any, from the method of valuation specified under Section 145A".
Under Section 143(1) of the Act, the I-T Department has only considered “increase in profit” of Rs 278.61 crore due to inclusion of GST in sales and closing stock, but not considered “decrease in profit” of Rs 278.61 crore due to inclusion of GST in cost of goods, the company pointed out.
Consequently, there is a demand on SBAPL of Rs. 104.22 crore, inclusive of interest. The net impact on the profit of SBAPL for the AY 2022-23, due to above adjustments required under section 145A on account of GST, is "nil", it added.
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