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Generally, no: while the Insolvency and Bankruptcy Code, 2016 (IBC) section 14 moratorium is in force for a corporate debtor, the Income Tax Department cannot use a refund to recover pre-CIRP tax dues where that adjustment amounts to recovery barred by the moratorium. After a resolution plan is approved, the answer depends on how the plan treats the tax claim. A section 245 notice is relevant, but it does not by itself make an adjustment lawful under the IBC.
Why section 245 does not settle the IBC question
Section 245 of the Income-tax Act, 1961 allows specified tax officers, in lieu of paying a refund, to set it off against a sum remaining payable under that Act after written intimation of the proposed action. Its current text was substituted by the Finance Act, 2023, with effect from 1 April 2023. The section also contains a separate, narrower provision for withholding a refund in specified pending assessment or reassessment circumstances, subject to recorded reasons and prior approval.
Those tax-law procedures do not answer whether an adjustment is permissible against a company subject to an IBC moratorium or bound by an approved resolution plan. The courts and tribunals discussed below treated the IBC restrictions and the plan’s terms as controlling in the disputes before them. A notice under section 245 may meet a procedural requirement under tax law; it does not itself resolve the IBC issue.
Which insolvency stage is the company in?
| Stage | What the cited decision establishes | What to examine |
|---|---|---|
| Section 14 moratorium is running during CIRP | In a 15 December 2022 order, NCLT Chandigarh treated a tax recovery by appropriation during the moratorium as unlawful and directed repayment. | Whether CIRP had been admitted and the moratorium was active on the adjustment date; when the tax demand arose; and whether the adjustment recovered a pre-CIRP due. |
| Resolution plan approved | On 18 September 2026, the Calcutta High Court ordered repayment of refund amounts adjusted against demands for a pre-transfer period frozen by the approved plan. | The plan’s treatment of the tax claim and period, whether the department lodged a claim, and whether the demand falls within the period addressed by the plan. |
| Different timing or claim circumstances | The cited decisions do not establish a universal outcome for every tax refund, demand, or insolvency case. | The precise refund, demand, claim, plan, and adjustment dates, as well as any later court order relevant to the case. |
Adjustment during the section 14 moratorium
In an order dated 15 December 2022, NCLT Chandigarh considered the appropriation of ₹85,04,845 in advance tax/TDS on 16 June 2020. The company’s section 14 moratorium had begun on 12 February 2019. The tribunal held that the recovery during the moratorium violated the law and directed the department to refund the amount.
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The tribunal relied on the Supreme Court’s statement in Principal Commissioner of Income Tax v Monnet Ispat and Energy Ltd that section 238 of the IBC overrides inconsistent provisions in other enactments. This was the tribunal applying the moratorium to the facts before it; it was not a Supreme Court decision specifically about tax-refund set-off. The order’s point is that an appropriation can function as recovery even when it is carried out through a tax refund rather than a separate collection step.
Adjustment after a resolution plan is approved
The moratorium period and the period after plan approval are distinct legal stages. Once a resolution plan is approved, the plan’s treatment of claims becomes central. In Ultra Tech Cement Limited & Anr v Union of India & Ors, WPA 2036 of 2020, the Calcutta High Court considered adjustments against pre-transfer tax demands after approval of a resolution plan for Binani Cement.
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The tax authorities relied on section 245 and written intimation. In its judgment dated 18 September 2026, the High Court concluded that the authorities had no right to adjust refunds for a period frozen by the approved plan, and directed repayment of amounts already adjusted against demands for that pre-transfer period, with interest in accordance with law. The judgment records a refund of ₹1,12,73,866 for AY 2019–20 adjusted against an outstanding AY 2011–12 demand; it also identifies adjustments of ₹1,43,46,686 and ₹67,69,380. These are amounts from that case, not general measures of tax-refund disputes.
In reaching its conclusion, the High Court applied the Supreme Court’s rule in Ghanashyam Mishra and Sons v Edelweiss Asset Reconstruction Company: after approval, a resolution plan binds stakeholders, including government authorities, and claims not included in the plan stand extinguished. That does not mean every tax claim or refund is automatically extinguished or payable. The claim period, the department’s claim, the plan’s language, and the facts before the court matter. The reported judgment alone does not establish whether it has since been appealed or stayed.
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What to check before challenging an adjustment
- Confirm the insolvency dates. Identify the CIRP admission date and the start of the section 14 moratorium, then compare them with the refund determination, proposed set-off notice, and actual adjustment dates.
- Match the demand to its tax period. Establish whether the tax demand predates CIRP, relates to a period covered by the approved plan, or arose in a different period. Do not assume the cases resolve demands outside the periods they addressed.
- Check the department’s claim and the plan. If a plan has been approved, review whether the tax authority lodged a claim and how the plan provides for that claim. The plan’s treatment is material to the post-approval analysis.
- Keep the section 245 record. Preserve the written intimation, refund order, demand notices, adjustment details, and relevant correspondence. A notice may matter to the Income-tax Act procedure, but it does not alone determine whether the IBC permits recovery.
- Identify the procedural stage and applicable orders. Distinguish an adjustment made during CIRP from one made after plan approval, and verify whether any later order affects the decision relevant to the facts.
The outcome is fact-dependent. The NCLT Chandigarh order and the Calcutta High Court judgment illustrate different insolvency stages; neither should be treated as a blanket ruling that every refund must be released in every corporate insolvency.
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