2025 (12) TMI 170

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....h in turn arises out of an order passed by the Assessing Officer dated 24/09/2024 u/s 143(1) of the Income Tax Act, 1961. 2. Grounds of appeal raised by the assessee are as follows: "1. The CIT(A) erred in making an adjustment under section 143(1) of the Act. There was no prima facie mistake. 2. Without prejudice to ground no. 1, the CIT[A] erred in confirming the disallowance of rebate claimed under section 87A of the Act." 3. When this appeal was called out for hearing, Ld. Counsel for the assessee invited my attention to the order dated 12.08.2025, passed by the Division Bench of ITAT Ahmedabad in the case of Jayshreeben Jayantibhai Palsana vs. ITO, in ITA No. 1014/Ahd/2025 for A.Y. 2024-25, wherein the issue rela....

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....ion Bench of this Tribunal in the case of Jayshreeben Jayantibhai Palsana (supra), vide order dated 12.08.2025. In this order, the Tribunal has inter alia observed as follows: "5. We have carefully considered the rival submissions, the impugned order of the CIT(A), the material placed on record, and the applicable statutory provisions. Thus, the core issue for adjudication before us is - "Whether a resident individual who has exercised the option under section 115BAC(1A) and whose total income is below Rs. 7,00,000/-, is eligible to claim rebate under section 87A against tax payable on STCG under section 111A, in the absence of any express restriction in section 87A or section 111A." 5.6 The undisputed facts of th....

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....oes it contain any express exclusion for tax arising under section 111A. 5.10 By contrast, the legislature has inserted an express bar on availability of section 87A rebate in section 112A(6), which states: (6) Where the total income of an assessee includes any long-term capital gains referred to in sub-section (1), the rebate under section 87A shall be allowed from the income-tax on the total income as reduced by tax payable on such capital gains. 5.11 The absence of a corresponding clause in section 111A is legally significant and supports the principle that - when the legislature intended to deny rebate in respect of special income (as in section 112A), it has done so expressly. In contrast, the absence of any ....

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....splaced for two reasons: - - Firstly, the Finance Bill 2025 itself proposes to insert new restrictions on rebate under section 87A w.e.f. A.Y. 2026-27, which implies that the existing law (i.e., as applicable to A.Y. 2024-25) does not contain such a restriction. - Secondly, the Explanatory Memorandum cannot override the plain language of the statute. It is a tool of interpretation, not a source of substantive law. Therefore, the prospective amendment in the Finance Act 2025 supports the view that under the unamended provision applicable for A.Y. 2024-25, rebate under section 87A cannot be denied merely because tax arises under section 111A. 5.15 In the recent judgment dated 24.01.2025 in the case of The C....

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...., we find that the assessee is a resident individual and the total income declared for the assessment year 2024-25 does not exceed Rs. 7,00,000. It is also an admitted position that the assessee has exercised the option to be assessed under the new tax regime in accordance with the provisions of section 115BAC(1A) of the Act. On a plain reading of the statutory provisions, there exists no express bar either in section 87A or section 111A for denial of rebate in respect of tax payable on short-term capital gains arising from transfer of listed equity shares taxable at special rates under section 111A. The legislative intent is further clarified by the subsequent amendment proposed in the Finance Bill, 2025, which is prospective in nature and....