New Delhi: A two-member NCLAT bench headed by Chairman Justice S J Mukhopadhaya held that statutory liability, including income tax and value added tax dues, of debt-ridden companies are ‘operational debt’. “Central or State Tax Departments such as – Income Tax Department, Sales Tax Departments and Local Authority, entitled for dues are ‘operational creditors’ under the Insolvency & Bankruptcy Code,” the bench added.
“For the said very reason, we also hold that income tax department of the central government and the sales tax Departments of the state Governments and local authority, which are entitled for dues arising out of the existing law are ‘Operational Creditor’ within the meaning of Section 5(20) of the I&B Code’,” said the appellate tribunal.
The National Company Law Appellate Tribunal (NCLAT) order came over a four petitions filed by the Income Tax department, Sales Tax Department, Maharashtra, where question as whether statutory dues come under the definition of the operational debt and if yes, then can they be treated as operational creditors of the company.
Counsel appearing for respective companies has contended before the NCLAT that Income Tax cannot be in the nature of operational debt as it refers to the claim in respect of goods or services, including employment or a debt in respect of repayment of dues of the central, state government or local authorities. However, Income Tax department and Sales Tax Department, Maharashtra contended that operational debt also included debts arising under any law payable to the central and state government.
