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08 October 2016

Recovery of arrears when a company is no longer a ‘sick’ company

The Hon’ble Supreme Court of India, recently pronounced a judgement on a very interesting issue regarding recovery of arrears when a company is no longer a ‘sick’ company. The dispute in question pertained to demand by the Income tax department during the time the Draft Rehabilitation Scheme (scheme’) was circulated and sanctioned by the Board of Industrial and Financial Reconstruction (“Board”).

On appeal, The Supreme Court in the case of Director General of Income Tax v. GTC Industries Ltd., had held that once the net-worth of a company turns positive, it is no longer a ‘sick’ company. The Income Tax Department, therefore, has the right to recover the arrears from such a company.

 

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