Summary
- The NCLAT has ruled that the Income Tax Department cannot unilaterally set off tax refunds against pre-CIRP dues during liquidation without filing a claim, emphasizing compliance with the Insolvency and Bankruptcy Code.
- Avil Menezes, Liquidator of Sunil Hitech and Engineers Ltd., challenged an NCLT Mumbai order allowing such adjustments, arguing they violated liquidation regulations.
- The Tribunal clarified that while income tax assessments can continue during liquidation, any set-off must adhere to the statutory claims process outlined in Regulation 29 of the Liquidation Regulations.
- This ruling could reshape how tax authorities interact with corporate debtors in insolvency, reinforcing the need for formal claims in liquidation proceedings.
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