Generally, no: while the Insolvency and Bankruptcy Code’s section 14 moratorium is in force for a company undergoing insolvency resolution, the Income Tax Department cannot use that company’s refund to recover pre-CIRP tax dues if the adjustment would amount to recovery barred by the moratorium. The Income-tax Act’s section 245 permits certain refund set-offs, but it does not by itself override an inconsistent IBC moratorium. After a resolution plan is approved, the plan’s treatment of the tax claim—and the period to which it relates—becomes decisive. These conclusions come from decisions on particular corporate insolvencies, not a blanket rule for every taxpayer or every tax refund.
Why the answer depends on the insolvency stage
An IBC moratorium is not the same thing as approval of a resolution plan. During the moratorium, the question is whether the Department’s adjustment is a recovery against the corporate debtor that section 14 prevents. After plan approval, the question shifts to whether the tax claim was dealt with in the plan and whether the plan binds the authorities. A refund being available, or a tax demand being recorded, does not alone settle either question.
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| Stage | Key issue | What the cited decisions show |
|---|---|---|
| Section 14 moratorium running during CIRP | Would setting off the refund recover a debt covered by the moratorium? | An NCLT Chandigarh order dated 15 December 2022 treated a tax recovery during the moratorium as unlawful and directed repayment. |
| Resolution plan approved | Did the plan provide for the tax claim, and what period does the demand cover? | The Calcutta High Court on 18 September 2026 ordered repayment of refunds adjusted against demands for a pre-transfer period frozen by the plan in the case before it. |
What section 245 allows—and what it does not decide
Section 245(1) of the Income-tax Act, 1961 allows specified tax officers, instead of paying a refund, to set it off in whole or in part against a sum remaining payable under the Act. The officer must first give the taxpayer written intimation of the proposed action. The current text was substituted by the Finance Act, 2023, with effect from 1 April 2023, according to the Income Tax Department’s official section 245 page.
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One free scan finds every outdated or missing driver and matches the right update for your exact hardware.Free scan · exact hardware matchSection 245(2) addresses a narrower situation: where assessment or reassessment proceedings are pending, an officer may withhold a refund if the officer records the opinion that paying it is likely to adversely affect revenue, records reasons in writing, and obtains prior approval. That provision is not a general permission to bypass insolvency restrictions.
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The existence of section 245 and compliance with its notice requirement do not answer whether an adjustment is permitted under the IBC. The NCLT Chandigarh order applied the IBC’s overriding-effect provision, section 238, where it found a recovery inconsistent with the moratorium. It reproduced the Supreme Court’s statement in Principal Commissioner of Income Tax v Monnet Ispat and Energy Ltd: “Given Section 238 of the Insolvency and Bankruptcy Code, 2016,it is obvious that the Code will override anything inconsistent contained in any other enactment, including the Income-Tax Act.” The quotation is reproduced as it appears in the tribunal order.
Adjustment while the section 14 moratorium is running
In its order dated 15 December 2022, the NCLT Chandigarh considered an Income Tax Department appropriation of ₹85,04,845 from advance tax/TDS on 16 June 2020. The company’s moratorium had begun on 12 February 2019. The tribunal held that this recovery during the moratorium violated the law and directed the Department to refund the amount.
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This is an NCLT decision applying the moratorium to the facts before it; it is not a Supreme Court ruling specifically about tax-refund set-offs. Its useful point is narrower: a department’s characterization of an action as an adjustment does not necessarily prevent it from being treated as recovery during the moratorium.
Adjustment after a resolution plan is approved
In Ultra Tech Cement Limited & Anr v Union of India & Ors, WPA 2036 of 2020, decided on 18 September 2026, the Calcutta High Court considered refunds set off against tax demands for a period before transfer under the approved resolution plan for Binani Cement. The tax authorities relied on section 245 and said written intimation had been issued. The court nevertheless concluded that “the Income Tax Authorities have no right to adjust refund for period which stood frozen” by the plan, and directed repayment of amounts already adjusted against pre-transfer demands, with interest in accordance with law.
The judgment applied the Supreme Court’s rule in Ghanashyam Mishra and Sons v Edelweiss Asset Reconstruction Company: once a resolution plan is approved, claims provided for in it bind stakeholders, including government authorities, and claims not included in it stand extinguished. The High Court’s ruling concerns the plan and tax periods before it; it does not establish that every refund in every insolvency must be paid out irrespective of the plan or claim history.
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 in that dispute, not broader statistics about tax refunds or insolvency cases. The judgment is dated 18 September 2026; its appeal or stay status is not established here.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What to check in a particular company’s case
- Moratorium start date: confirm the CIRP admission date and whether section 14 was in force on the date the refund was withheld or adjusted.
- Demand period: identify the assessment year or tax period behind the demand, and whether it predates CIRP or relates to a later period.
- Refund and adjustment dates: distinguish when the refund was determined from when it was actually withheld or set off.
- Department’s claim: establish whether the tax authority lodged a claim in the insolvency process and how that claim was addressed.
- Approved plan: read the plan’s treatment of tax claims, the periods it covers, and any relevant transfer or cut-off provisions.
- Section 245 procedure: keep the written intimation and related notices or orders. A notice may matter to the tax procedure, but does not by itself resolve the IBC issue.
- Current case status: before relying on the September 2026 Calcutta High Court decision, verify whether a later appeal or stay affects its application.
The cited decisions concern corporate debtors in insolvency resolution under the IBC. A company assessing a disputed adjustment should compare its dates, tax periods, claim record, and plan language with those decisions and obtain advice based on the full record.
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