In a recent case in Hyderabad concerning the Income Tax Department, it has come out that the department has no right over immovable property and the right falls first to financial creditors.
A corporate debtor went into liquidation following an order passed by the adjudication authority. The liquidation process included the selling of immovable property of the corporate debtor through the e-auction process. On this immovable property the Income Tax Department claimed their right under Secion 178 of the Income Tax Act, 1961.
The liquidation process includes the selling of all assets to disperse all liablities which also includes immovable properties and other assets. The question thus arises, if the person who bought the property has right on the property or does the Income tax department under the above mentioned section?
The high court, in this respect, examined the clauses of Section 238 of IBC and Section 178 of the IT Act and declared that Section 238 of IBC prevails over and above the latter.