ITAT Allows Carry Forward of Losses Despite NCLT-Approved Resolution Plan

Case Details: Orchid Pharma Ltd. vs. Deputy Commissioner of Income-tax [2026] 186 taxmann.com 623 (Chennai-Trib.)

Judiciary and Counsel Details

• Aby T. Varkey, Judicial Member & Ms Padmavathy S, Accountant Member
• Shrenik Chordia, C.A. for the Appellant.
• V. Justin, CIT for the Respondent.

Facts of the Case

The assessee was a company and filed the return of income for the relevant assessment year, admitting a total income of Nil. A search and seizure operation under section 132 was carried out in another case. The Assessing Officer (AO) of the searched party sent a satisfaction notice under section 153C to the assessee.

The assessee filed the return in response to the notice.AO referred the matter to the Transfer Pricing Officer (TPO), who proposed a transfer pricing adjustment. AO passed the draft assessment order incorporating the TP adjustment. The assessee preferred further remedy through CIT(A), the AO passed the final assessment order.

The assessee contended before CIT(A) that as per the provisions of Section 238 of the IB Code 2018, which has an overriding effect on all other laws, any demand arising out of any proceedings prior to the order of the NCLT would become Nil. However, CIT(A) proceeded to adjudicate the issues on merits, stating that the adjudication of the appeal before him is not going to result in any enhancement or reduction of demand since only losses claimed are brought forward will be adjusted. Aggrieved by the order, the assessee filed an appeal to the Chennai Tribunal.

ITAT Held

The Tribunal held that the final assessment order was passed by the AO on 18.02.2019, and the NCLT order approving the resolution plan was passed on 27.06.2019. From the perusal of the order of NCLT, it was noticed that all pending claims that were not part of the resolution plan which pertained to the period on or before the Effective Date, i.e., 31.03.2020, shall stand irrevocably and unconditionally settled, discharged and extinguished in perpetuity.

During the hearing, it was submitted that no demand or claim towards income tax dues had been placed before the NCLT, and the same was not part of the approved resolution plan. Therefore, there was merit in the contention that any demand towards the additions sustained by the CIT(A) can be raised against the assessee since the same pertains to the period before the effective date.

The contention raised by the DR that, if the assessee’s contention that the order of the NCLT provided a “clean slate” is accepted, then the unabsorbed losses of the assessee cannot also be carried forward, was rejected by the Tribunal. It was held that the contention that the “clean slate” provided by the NCLT’s order is to be applied to the brought-forward losses of the assessee company is not acceptable. Therefore, the AO’s additions do not survive.

List of Cases Reviewed

• Amns Gandhidham Ltd. v. ACIT [2025] 180 taxmann.com 43 (Bombay) (para 9) followed

List of Cases Referred to

• Pr. CIT v. Abhisar Buildwell (P.) Ltd. [2023] 149 taxmann.com 399/293 Taxman 141/454 ITR 212 (SC) (para 6)
• Amns Gandhidham Ltd. v. Asstt. CIT [2025] 180 taxmann.com 43 (Bombay) (para 9).