Taxpayer entitled to rebate under Section 87A despite long-term capital gains taxed at special rates; Section 115BAC(1A) amendment not applicable

ITAT, Chennai allowed the assessee's claim for rebate under section 87A, overturning the CPC's denial that long-term capital gains taxed at special rates were excluded. The Tribunal held section 87A contains no such exclusion and the proviso concerning total income under section 115BAC(1A) was amended effective 01.04.2025 (applicable from AY 2025-26), so AY 2024-25 is unaffected. Because the statutory provision granting the benefit is unambiguous, the assessee's appeal was allowed.

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Assessee's claim of rebate of Rs. 12,500 under section 87A was denied by CPC and affirmed by the CIT(A) on the premise that long-term capital gains (taxable at special rates) are ineligible and because return was filed under section 115BAC. Assessee contended total income under section 2(45) includes all heads, so with total income of Rs. 4,97,220 rebate should apply. Tribunal held the CIT(A)'s view excluding special-rate incomes is incorrect: section 87A's plain language contains no exclusion of any category of income for computing "total income" and the first proviso to section 87A exempting section 115BAC(1A) was introduced by Finance Act, 2024 w.e.f. 01.04.2025 and does not affect AY-2024-25. Reliance placed on Bombay High Court in Rajiv G Shah: "there is no indication in the plain language of Section 87A that any category of income or tax should be excluded from the computation. If the total income is within the threshold prescribed, rebate cannot be denied." Appeal allowed; AO directed to allow rebate u/s 87A.

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