TDS dues no ground for insolvency

New Delhi: The National Company Law Appellate Tribunal (NCLAT) has held that dues on account of non-payment of TDS can't be a ground to initiate insolvency proceedings against any company. Setting aside an order of the Kolkata bench of NCLT, the appellate tribunal said "the process of Insolvency & Bankruptcy Code (IBC) can't be utilised" for recovery of TDS dues by an operational creditor of the company.

"The consequences of non-payment of TDS are provided under Income Tax Act, 1961, and income tax authorities have ample powers to take appropriate action," said the NCLAT bench headed by Chairperson Justice Ashok Bhushan.

The bench said the National Company Law Tribunal (NCLT) has committed a "serious error" while directing to initiate insolvency proceedings over a section 9 application filed by an operational creditor under the IBC after admitting that non-payment of the TDS (Tax Deducted at Source) amounts as default "Regarding non-payment of TDS, we are of the view that it is not for us to consider whether TDS amount has been paid or not ... We, thus, are of the view that the Adjudicating Authority (NCLT) has committed a serious error in admitting the Section 9 Application on the ground of non-payment of two TDS amounts," the tribunal said.