The National Company Law Appellate Tribunal (NCLAT) has held that insolvency proceedings cannot be initiated against any company on the basis of tax deducted at source (TDS) arrears. The NCLAT set aside an order of the Kolkata Bench of NCLT, saying that an operating lender of the company cannot use the process of Insolvency and Bankruptcy Act (IBC) for recovery of TDS dues.
The consequences of non-payment of TDS are mentioned in the Income Tax Act, 1961. The Income Tax Officers have the powers to take appropriate steps in this direction. The bench said, the NCLT has committed a grave error by ordering initiation of insolvency proceedings against the debtor company considering the default of non-deposit of TDS in the matter.
It is not our job to think whether TDS has been paid or not. The NCLAT also imposed a fine of one lakh on the operating lender for misuse of process. The NCLT had ordered insolvency proceedings against Team Taurus Realty and Infra for non-payment of two TDS installments of Rs 66,884 and Rs 1.10 lakh.