Do these 3 things before closing this tab:
1Repair Windows errors before they cause bigger problems2Scan for outdated or missing drivers - takes under a minute3Clear out junk files and repair common Windows errorsDuring a company’s corporate insolvency resolution process (CIRP), the Income Tax Department generally cannot take a refund owed to the company and use it to collect pre-CIRP tax dues. It may determine the tax liability and issue the refund, but the department must pursue its claim through the insolvency process rather than recover it by unilateral set-off during the Section 14 moratorium. The result can depend on when the refund or adjustment occurred and whether the company is in CIRP or liquidation.
Can the Income Tax Department adjust a refund during the moratorium?
Tribunal decisions say that assessment and recovery are different acts. Finalizing a tax assessment, quantifying a demand, or issuing a refund does not by itself amount to collecting the debt. But using a refund owed to the corporate debtor to satisfy an existing tax demand takes value from the company and is a recovery action.
In a 9 February 2024 order, NCLT Hyderabad held that the department could finalize the assessment and issue a refund, but could not adjust that refund against its demand during the moratorium. It directed the adjusted amount to be returned and said the tax authority should lodge its claim in the CIRP. Read the NCLT Hyderabad order.
NCLAT reached the same result in Devarajan Raman v. Principal Commissioner Income Tax (Mumbai-1) & Ors. The IBBI legal-framework digest records that the tribunal held tax-refund adjustment impermissible under Section 14(1)(a), (b), and (c). The appeal was Company Appeal (AT) (Insolvency) No. 977 of 2023, decided 24 May 2024. See the IBBI digest entry.
#1 Best Overall
What Section 14 does—and does not do
Section 14 of the Insolvency and Bankruptcy Code, 2016 imposes a moratorium from the insolvency commencement date while CIRP is under way. It restricts specified proceedings against the corporate debtor and actions to recover or enforce claims against it. The moratorium is not a declaration that the company owes nothing, nor does it automatically extinguish government dues.
The Supreme Court’s 2022 decision in Sundaresh Bhatt v. Central Board of Indirect Taxes and Customs concerned customs authorities, not an income-tax refund. The Court distinguished determining or quantifying dues from enforcing recovery: an authority may determine what is owed, but cannot use the moratorium period to collect outside the IBC process where that enforcement is barred. Its reasoning supplies a general enforcement principle; the refund-specific holdings described above are tribunal decisions. Read the Supreme Court judgment.
Rank #2
- Quick reference learning guide
- Definitions and glossary of terms
- Tax tips, and everything else you need to know about filing
- Common mistakes, understand audits
- Claiming a dependant and more
How tax claims are meant to proceed
The tribunal rulings characterize tax dues as operational debt and direct the department to submit its claim to the resolution professional instead of gaining priority through unilateral set-off. During CIRP, a government creditor should use the claims process and the applicable IBC framework; it should not treat a refund owed to the company as an independent route around that process.
A later NCLT Hyderabad order dated 10 February 2025 also discusses the distinction between assessing income-tax dues and executing recovery during the moratorium, including unilateral refund adjustment. It is a tribunal application of the principles, not a new Supreme Court ruling or a change to the Code. Read the 2025 NCLT order.
Quick wins for a faster PC:
Scan for outdated or missing drivers - takes under a minuteDriver Scan →Repair Windows errors before they cause bigger problemsFix Now →Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →How the answer changes with timing and insolvency stage
| Situation | What the cited decisions establish |
|---|---|
| Before the insolvency commencement date | Section 14’s CIRP moratorium has not yet begun. The cited decisions do not determine every question about the validity or reversal of a pre-CIRP set-off. |
| During the Section 14 moratorium in CIRP | The refund-specific NCLT and NCLAT decisions prohibit adjustment of a tax refund against dues during the moratorium; the authority should pursue its claim through the CIRP. |
| After CIRP moves to liquidation or a resolution plan is implemented | The cited materials do not establish one result for every procedural variant. The relevant insolvency stage, timing of the adjustment, and applicable Code provisions matter. |
The IBBI digest summary does not establish the complete later appellate history of Devarajan Raman, including the procedural interval between the end of the CIRP timeline and a liquidation order. Do not assume that the cited CIRP rulings settle that distinct timing question.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What about other government dues?
The broad principle is that a statutory authority’s power to calculate a liability does not automatically give it permission to collect during the moratorium in a manner barred by the IBC. Sundaresh Bhatt applies that principle to customs enforcement, while the tax-refund cases apply similar reasoning to income-tax set-off.
That does not establish a blanket rule for every government claim. The treatment of a particular duty, tax, fee, or other public liability may depend on its governing statute, the nature and timing of the claim, and the insolvency stage. The authorities discussed here support using the IBC claims process during the moratorium; they do not resolve every category of public dues identically.
Quick Recap
Best Value
Practical checks for a company or creditor
- Identify the insolvency commencement date and confirm whether the company was in CIRP when the refund was adjusted.
- Separate the tax assessment or demand from the act of taking or withholding the refund to satisfy that demand.
- Check whether the claim was submitted to the resolution professional and how it was treated in the insolvency process.
- For liquidation or a disputed transition between insolvency stages, review the relevant orders and subsequent appellate history rather than relying only on the CIRP refund decisions.
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
The Tool Desk
Outbyte Driver Updater FREEFix the driver behind crashes, sound loss and screen glitchesFind Drivers →Outbyte PC Repair FREERepair Windows errors before they cause bigger problemsFix Now →
