Mr. Rajesh Singla vs Chairman Implementation And ...

Comp. App. (AT) (Ins) No. 1313 of 2026 & I.A. No. 5118 of 2026 IN THE MATTER OF: Rajesh Singla ...Appellant(s)

Versus Chairman, Implementation and Monitoring ...Respondent(s) Committee Nexgen Laminators Pvt. Ltd.

Present: For Applicant : Ms. Eshna Kumar, Ms. Astha Agrawal, Mr. Sabari C., Ms. Muskan Abbasi, Advocates

For Respondents : Mr. Abhishek Anand, Mr. Karan Kohli, Ms. Ridhima Mehrotra, Ms. Anurima Gupta, Advocates

ORDER

(Hybrid Mode)

29.09.2026 I.A. No. 5118 of 2026 This is an application for

condonation of 14 days delay in filing the appeal. We have heard Ld.

Counsel for respondent. He has no objection if the delay is condoned.

Considering the submissions made in the application, the delay of 14

days stands condoned.

Application stands disposed of.

Comp. App. (AT) (Ins) No. 1313 of 2026 This appeal is filed against an

impugned order dated 11/05/2026 passed by the Ld. National Company

Law Tribunal, Chandigarh Bench (Court-II) in IA(I.B.C)/2960(CH)2023 in

CP(IB)No.406/CHD/PB/2018.

2. The Appellant is aggrieved by Paragraph 9.4 of the Impugned Order,

wherein the Ld. Adjudicating Authority has ruled that following the CIRP,

extinguished liabilities and share capital would be converted into a Capital/General Reserve, and accumulated losses must "first of all, be set off

against such a reserve" before the SRA can approach the Income Tax

Authorities for any balance amount.

3. It is argued the Impugned Order stands in direct violation to the

settled jurisprudence laid down by this Appellate Tribunal, as in JSW Steel

Coated Products Ltd. vs. Resolution Professional, Asian Colour Coated Ispat

Ltd. & Ors. (Company Appeal (AT) (Insolvency) No. 992 of 2020), this Tribunal

addressed an identical overreach where the Ld. Adjudicating Authority had

disallowed the carry forward of losses on the premise all past liabilities were

waived off. This Tribunal decisively deleted those restrictive observations,

holding unequivocally the SRA is entitled to claim the benefit of carry

forward of losses before the appropriate Income Tax Authority, which must

pass orders strictly in accordance with Section 79 of the Income Tax Act, in

Paragraph 11, 12 & 13 of the above mentioned judgement dated

14/02/2022, as follows :

"11. The amendment in Section 79 of the Income Tax Act, 1961 providing for exception in case of a company where change in shareholding takes place pursuant to Resolution Plan was with purpose and object. Thus, claim of carry forward of losses is not impermissible but can only be granted giving opportunity to the appropriate Income Tax Authority. The judgment of 'JSW Steel Ltd. VS. Ashok Kumar Gulla & Ors.' (supra) relied by the counsel for the Appellant was also a case of Successful Resolution Applicant with regard to whom Adjudicating Authority has made observations in so far as carry forward losses was concerned. In paragraph 12 and 17 of the judgment following has been laid down:

"12. As to the determination of the issue of 'carry forward losses' of the 'Corporate Debtor, in spite of notice to the Income Tax Authority, no reply has been filed and no objection has been raised.

2 of 6 However, taking into consideration the submissions made by the counsel for the Appellant- JSW Steel Limited' and taking into consideration the provisions of the Income Tax Act, 1961, including Section 79 and the Rules and Regulations framed thereunder, (we hold that both the 'Successful Resolution Applicant' and the Income Tax Department will be guided by the Income Tax Act, 1961 and the Rules and Regulations framed thereunder. If the 'Successful Resolution Applicant' is entitled to carry forward losses under Section 79 of the Income Tax Act, it may claim such benefit before the appropriate Authority, who will pass appropriate order in accordance with Section 79 of the Income Tax Act, 1961 and the Rules and Regulations framed thereunder.

17. In view of the discussions as made above, the part of the impugned order dated 19th December, 2018 so far as it relates to laying down conditions by the Adjudicating Authority is concerned, are set aside and deleted and substituted with clarification as made above. The rest part of the impugned order dated 19th December, 2018 as clarified vide order dated 16th April, 2019 approving the 'Resolution Plan' in favour of the Appellant is confirmed. The appeal is allowed with aforesaid observations. No costs."

12. We, thus, are of the view that benefit of carry forward of losses can be availed by the Appellant subject of opportunity to be given to Income Tax Authority to pass appropriate orders in accordance with Section 79. We, thus, are of the view that observations in para 238 deserves to be deleted and are hereby deleted.

13. Now coming to observations of the Adjudicating Authority made in paragraph 244, suffice it to say, Resolution Plan having been approved after recording the finding that the plan is in compliance with provisions of the Code and Regulations, there was no necessity to refer to Section 238 of the Code. Observations in paragraph 244 were uncalled for. We, thus, are of the view that observations made in paragraph 238 and 244 of the order of the Adjudicating Authority need to be deleted and are hereby deleted and the benefit of carry forward losses can be claimed by the Appellant subject to decision by appropriate Income Tax Authority as per Section 79 of the Income Tax Act. It is open for the Appellant to claim benefit of carry forward losses as per Section 79 of the Income Tax Act before appropriate competent Income Tax Authority which shall decide the claim in accordance with law. We make it clear that we have not expressed any opinion regarding merits of the claim of the Appellant under Section 79 of the IT Act. Except deletion of observations made in paragraphs 238 and 244 rest of the judgment of the Adjudicating Authority is untouched in this Appeal.

The appeal is disposed of as above."

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4. This legal principle was subsequently honoured and applied by the

Income Tax Appellate Tribunal (ITAT), Mumbai "F" Bench in JSW Steel

Coated Products Ltd. vs. DCIT (I.T.A. No. 3407/Mum/2025), affirming that

the Assessing Officer must consider the claim under Section 79 of the Act.

5. Having expressly granted liberty to the Appellant in Paragraph 9.5 to

approach such authorities for appropriate reliefs in accordance with law, the

Ld. Adjudicating Authority could not simultaneously proceed in Paragraph

9.4 to impose substantive precondition governing the very manner in which

such claims are to be adjudicated.

6. The observations contained in Paragraph 9.4 effectively direct that

accumulated losses of the Corporate Debtor must first be adjusted against

the Capital/General Reserve arising on account of extinguishment of

liabilities and reduction of share capital before any benefit under the Income

Tax Act, 1961 can be claimed. Such a direction amounts to a binding

determination on the treatment and utilization of accumulated losses, a field

exclusively occupied by the provisions of the Income Tax Act, 1961.

Consequently, while Paragraph 9.5 reserves the issue for consideration by

the competent Income Tax Authorities, Paragraph 9.4 substantially

predetermines the outcome of such consideration by imposing a judicially

created restriction to the statutory framework. The Ld. Adjudicating

Authority could not, on the one hand, acknowledge the entitlement of the

Appellant to carry forward and set-off accumulated losses must be examined

by the concerned competent authorities, on the other hand, fetter such

4 of 6 examination by mandating a prior adjustment of losses against a

Capital/General Reserve. Such mutually inconsistent directions are self-

defeating and legally irreconcilable.

7. The Impugned Order crucially fails to appreciate the Income Tax

Department had full and complete knowledge of the ongoing CIRP. The

Income Tax Authority (ITO (TDS), Patiala) submitted a formal claim

amounting to Rs. 3,50,470/-, which was duly verified and admitted in full by

the Resolution Professional. Having possessed full and complete knowledge

of the insolvency resolution process, and having submitted to the

jurisdiction of the RP, the Income Tax Department tendered no objection to

the Resolution Plan. It is pertinent to note despite being aware of the CIRP

proceedings, filing its claim therein and having its claim duly admitted and

incorporated in the Information Memorandum, the Income Tax Department

neither challenged the Resolution Plan nor raised any objection regarding

the treatment of tax attributes, carry forward of losses, or applicability of

Section 79 of the Income Tax Act, 1961 at any stage of the CIRP

proceedings.

8. In light of this active participation and statutory knowledge, the

Income Tax Department is bound by the proceedings, and the Ld.

Adjudicating Authority was wholly unjustified in acting to place pre-emptive

restriction upon the SRA's statutory rights through an unwarranted

accounting directive. Consequently, we set aside and expunge the

observations and directives contained in Paragraph 9.4 of the Impugned

Order as the Appellant seeks solely to preserve his statutory right to 5 of 6 approach the competent Jurisdictional Assessing Officer under the Income

Tax Act, 1961, to adjudicate the claim for carry forward and set-off of losses

independently, unencumbered by the Ld. Adjudicating Authority's extra-

jurisdictional preconditions.

9. In view of the above, appeal is disposed of to the above extent and

Paragraph 9.4 of the impugned order is expunged.

Pending applications, if any, are also disposed of.

[Justice Yogesh Khanna] The Officiating Chairperson

[Barun Mitra] Member (Technical)

[Ajai Das Mehrotra] Member (Technical) Prerana/md

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