NCLAT ruled that Income Tax Department cannot set off refunds against tax dues during IBC moratorium. Refund of ₹90.42 lakh directed to corporate debtor.
IT Dept Cannot Set Off Refund During IBC Moratorium: NCLAT
The NCLAT directed the Income Tax Department to refund Rs.90.42 lakh to a corporate debtor, holding that the department’s retention of a tax refund as set-off against pre-existing tax dues violates the moratorium under Section 14 of the IBC.
The appellate tribunal emphasized that the moratorium applies not only to initiation of proceedings but also to any act of recovery or reduction of assets. Since the refund belonged to the corporate debtor during the CIRP, it formed part of the estate and could not be unilaterally appropriated. The department’s action was deemed contrary to the statutory freeze on creditor actions.
This ruling strengthens the integrity of the moratorium regime. Tax authorities must refrain from unilateral set-offs during CIRP. Practitioners should raise such violations promptly before adjudicating authorities to protect the insolvency estate.
Citations
- Insolvency and Bankruptcy Code, 2016, Section 14
