Analysis of NCLAT Judgement in Pr. Director General of Income Tax (Admn. & TPS) vs. M/s. Synergies Dooray Automotive Ltd. & Ors.

The statutory dues are been treated as ‘Operational Debt’ and equated them with similarly situated ‘Operational Creditors’.

The question arises for consideration in these appeals are:

(i) Whether the ‘Income Tax’, ‘Value Added Tax’ or other statutory dues, such as ‘Municipal Tax’, ‘Excise Duty’, etc. come within the meaning of ‘Operational Debt’ or not? and;

(ii) Whether the Central Government, the State Government or the legal authority having statutory claim, come within the meaning of ‘Operational Creditors’?

‘Operational Debt’ in normal course means a debt arising during the operation of the Company (‘Corporate Debtor’). The ‘goods’ and ‘services’ including employment are required to keep the Company (‘Corporate Debtor’) operational as a going concern. If the Company (‘Corporate Debtor’) is operational and remains a going concern, only in such case, the statutory liability, such as payment of Income Tax, Value Added Tax etc., will arise. As the ‘Income Tax’, ‘Value Added Tax’ and other statutory dues arising out of the existing law, arises when the Company is operational, we hold such statutory dues has direct nexus with operation of the Company. For the said reason also, we hold that all statutory dues including ‘Income Tax’, ‘Value Added Tax’ etc. come within the meaning of ‘Operational Debt’. Thus the Adjudicating Appellate Authority held that the statutory dues have been treated as ‘Operational Debt’ and equated them with similarly situated ‘Operational Creditors’.

Judgement link : https://nclat.nic.in/Useradmin/upload/18804390935c921e960a11a.pdf