Rebate u/s 87A allowed on long-term debt capital gains; s.112A(6) bar limited to equity gains only

ITAT Chandigarh-AT allowed the assessee's appeal, holding that the bar under s.112A(6) on granting rebate u/s 87A applies only to long-term capital gains covered by s.112A(1), i.e., long-term equity capital gains, and not to long-term debt capital gains governed by s.112. Since the assessee's long-term debt capital gains tax of Rs. 23,804 and tax on other income of Rs. 3,456 both exceeded the rebate threshold, the assessee was entitled to the full rebate of Rs. 25,000 u/s 87A. CPC was directed to recompute the tax liability accordingly, granting the rebate.

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Assessee's sole dispute concerned the quantum of rebate under section 87A for AY 2024-25 against an intimation under section 143(1). The assessee declared total income of Rs. 5,45,315/- (including Equity LTCG, Debt LTCG with indexation, STCG and income from other sources), computed tax of Rs. 27,586/- and claimed rebate u/s 87A of Rs. 25,000/-. CPC restricted the rebate to Rs. 3,119/-, leading to higher tax demand, which was upheld by CIT(A) by applying section 112A(6), holding that rebate u/s 87A is not allowable on tax computed on Long-Term Capital Gains referred to in section 112A(1). The Tribunal held that section 112A(6) "prohibit rebate u/s. 87A on capital gains as referred to in sub-section (1) of s. 112A". Clause (ii) of section 112A(1) covers only Long-Term Equity Capital Gains, not Long-Term Debt Capital Gains, which are governed by section 112. As there is "no such bar" on rebate for Debt LTCG, and tax on debt LTCG plus normal income exceeded the rebate threshold, assessee was entitled to full rebate of Rs. 25,000/-. CPC was directed to recompute tax.

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