The root of the legal dispute dates back to Assessment Year 2014-15, when the Assessing Officer disallowed expenditure claimed to have been incurred by the insurer towards payments made to motor vehicle dealers
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BrianAJackson
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has dismissed an over decade of tax disputes against IndusInd General Insurance Company Ltd (formerly Reliance General Insurance Company Ltd) in a ruling that has a significant bearing on corporate restructuring and bankruptcy law.The decision, given on August 3, 2026, upholds the supremacy of the “clean slate” principle under the Insolvency and Bankruptcy Code (IBC), whereby an approved corporate resolution plan permanently extinguishes pre-insolvency tax liabilities of both the bankrupt parent and its integrated subsidiaries.The legal battle arose from cross-appeals by Revenue (Deputy Commissioner of Income Tax) and the assessee (IndusInd General Insurance Company Ltd)spanning Assessment Years 2011-12 to 2018-19 and 2020-21.The root of the legal dispute dates back to Assessment Year 2014-15, when the Assessing Officer disallowed expenditure claimed to have been incurred by the insurer towards payments made to motor vehicle dealers. This disallowance was the basis for reassessment proceedings in the earlier assessment years, whereas for the subsequent years, similar issues came to be examined in regular scrutiny assessments.The assessee carried the matter in appeal before the Commissioner of IT (Appeals), who granted substantial relief. Aggrieved by the respective appellate orders, both the Revenue as well as the assessee preferred the present cross appeals before the Tribunal.The Corporate Insolvency Resolution Process initiated against the holding company, Reliance Capital Ltd (RCL), by RBI culminated in the approval of a Resolution Plan submitted by IndusInd International Holdings Ltd (IIHL) by the National Company Law Tribunal, Mumbai Bench, in February 2024.Clean slate principleThe advocates of the assessee argued that under Clause 9.1.8 of the NCLT-approved Resolution Plan, all pending tax proceedings and liabilities concerning RCL’s subsidiaries relating to the pre-approval period were permanently extinguished and dismissed.The revenue department’s advocates, referring to a Supreme Court judgment, countered that the Income-Tax Act constitutes a self-contained code for assessment of taxable income and that the Company Court exercising jurisdiction in winding-up proceedings could not assume the statutory functions entrusted to the Income-tax authorities.The ITAT members noted that the Income-Tax Department was itself a participant before the Adjudicating Authority and its objections stood expressly dealt with before the Resolution Plan attained statutory finality.The members said: “The assessee’s appeals are allowed on the preliminary legal issue arising out of the Resolution Plan approved by the Hon’ble National Company Law Tribunal by order dated 27.02.2024, whereas the Revenue’s appeals, being unsustainable in view of the binding effect of the said Resolution Plan, are dismissed.”Published on September 7, 2026
