One more time-consuming process under liquidation, now resolved – ease of compliance

A clarification on no requirement for seeking No Objection Certificate or No Dues Certificate from the Income Tax Department

In a welcome move that will ease some compliance burden coupled with process time savings, the Insolvency and Bankruptcy Board of India (IBBI) has clarified vide its circular no. : IBBI/LIQ/45/2021 dated 15th November 2021, that the liquidators would not be required to obtain any non-objection (“NOC”) or no dues certificate (“NDC”) from the Income Tax Department while handling the voluntary liquidation process.


As per Section 178 of the Income-tax Act, 1961 (“ITA”), a liquidator is obligated to fulfill specific income tax-related requirements once the liquidator takes over the liquidation process. Sub-section 6 of Section 178 explicitly states that its provisions “shall have effect notwithstanding anything to the contrary contained in any other law for the time being in force except the provisions of the Insolvency and Bankruptcy Code, 2016”.

Under the compliance burden, the liquidator seeks NOC/NDC from the Income Tax Department for the company under liquidation, which consumes substantial time and efforts that do not agree with the express provisions of the Code and defeat the objective of time-bound completion of liquidation process under the Code. It is worth noting that there is no express requirement for the liquidators to seek for the said certificates neither under the Code nor the Regulations nor under section 178 of the ITA.

Factual position:

The responsibility to demand/ claim and settle income tax dues from the assesse is cast upon the income tax office. The respective income tax office needs to place its claims with the liquidator within the statutory period of 30 days when the liquidator publishes the announcement and seeks the claims from all affected creditors/claimants, which includes government and revenue authorities too [Refer Regulation 14 of the IBBI (Voluntary Liquidation) Regulations 2017 for mandatory announcement by the liquidator within five days of his appointment, calling for submission of claims by stakeholders providing thirty days for submission of their claims, from the liquidation commencement date].

Ease of compliance:

As the Liquidators are at the helm of affairs of the company under liquidation, in case any claim arises after the dissolution, the liquidators may be required to settle such claims from their resources. Hence, liquidators sought such NOC/NDC from tax authorities having jurisdiction over the company in liquidation. Therefore, this clarification shows the silver lining to the speedy completion of the liquidation process without casting any responsibility on the professional and provides the opportunity to put the entire voluntary liquidation process on a fast track, bringing greater clarity and transparency.

The principles that the Code enjoys supremacy and that the Code intends to achieve the time-bound objective are reiterated with the said clarification. This principle would operationally ease the process of voluntary liquidation.

The views expressed herein are of the author, and there may be a different interpretation by different authorities.