TaxTMI 
TaxTMI 
2026 (2) TMI 146
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....5BAC, computed tax liability of Rs. 22,536/- but claimed rebate of Rs. 22,536/- u/s 87A and effectively offered "Nil" tax. The return filed by assessee was processed by AO u/s 143(1) wherein the AO accepted total income without any variation. However, in computation of tax liability, the AO allowed rebate u/s 87A partially to the extent of Rs. 200/- only and thereby disallowed the rebate of Rs. 22,336/-. The AO created demand of tax, cess and interest accordingly. The assessee filed a rectification application u/s 154 which was also rejected by AO vide order dated 19.03.2025. Aggrieved, the assessee filed first-appeal to CIT(A) but still did not get any relief. Now, the assessee has come in next appeal before us. 3. The assessee has raised following grounds: "1. The learned Commissioner of Income Tax (Appeals) [CIT(A)] erred in law and on facts in confirming the action of the CPC in restricting the rebate allowable under section 87A of the Income-tax Act, 1961 to Rs. 200/- instead of Rs. 22,536/- as claimed by the appellant. 2. The CIT(A) has wrongly interpreted the proviso to section 87A (as amended by Finance Act, 2023) to mean that rebate is not allowable on....
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....decisions of ITAT benches in favour of assessee: (i) ITAT, Ahmedabad in Jayshreeben Jayantibhai Palsana Shingala Sheri Vs. ITO, Ward-1(9), Ahmedabad, ITA No. 1014/Ahd/2025, order dated 12.08.2025 for AY 2024-25: "3. Being aggrieved by the said order of CIT(A), the assessee has preferred the present appeal before us raising the following ground: The Learned Commissioner of Income Tax (Appeals) has erred in the interpretation of law and in the facts of the case by disallowing the claim of rebate of Rs. 13,320/- under section 87A of the Act in respect of tax on short term capital gain. 4. The learned Authorised Representative (AR) for the assessee has filed detailed written submissions. The AR submitted that the provisions of the first proviso to section 87A, as inserted by the Finance Act, 2023 with effect from A.Y. 2024-25, grant a rebate to a resident individual who has opted for taxation under the new regime u/s 115BAC(1A) and whose total income does not exceed Rs. 7 lakhs. The text of the proviso does not impose any restriction on the nature of income or exclude incomes taxed at special rates under Chapter XII. The statutory language of the fir....
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.... the total income does not exceed Rs. 7 lakhs. 4.4 The AR further submitted that the Finance Bill 2025 proposes to amend section 87A to deny rebate on all incomes taxable under special rates, including those under section 111A, from A.Y. 2026-27 onwards. However, this amendment is prospective in nature and has no application to the assessment year under consideration, i.e., A.Y. 2024-25. Thus, reliance placed by the learned CIT(A) on the Finance Bill 2025 is misplaced. 4.5 It was also contended that the disallowance of rebate by the CPC appears to be a result of a programming change in the utility logic post January 2025 and is not supported by any statutory amendment or binding judicial precedent. The rejection of the assessee's claim under section 87A on technical grounds without affording a prior opportunity is also violative of the proviso to section 143(1), which mandates the issue of an intimation or notice prior to making such adjustments. 4.6 In support of the assessee's contention, the AR placed reliance on the order passed by CIT(A)-1, Nagpur in the case of Avni Milanbhai Maniya (DIN & Order No.: ITBA/APL/S/250/2025-26/1076482829(1) dated 27....
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....ncome of Rs. 6,76,402/-, comprising short-term capital gain on listed equity shares taxable at 15% under section 111A, and opted for taxation under the new regime under section 115BAC(1A). The CPC, Bengaluru, processed the return under section 143(1) and denied rebate under section 87A of Rs. 13,320/-, resulting in a demand of Rs. 1 5,820/-. The CIT(A) upheld the denial, primarily relying on - (i) the "subject to" clause in section 115BAC(1A), (ii) provisions of Chapter XII, and (iii) the Explanatory notes to the Finance Bill 2025. 5.7 Having perused the relevant statutory provisions and the arguments advanced by the assessee's Authorised Representative (AR), we find merit in the claim of the assessee. 5.8 The amended first proviso to section 87A [inserted by the Finance Act, 2023 w.e.f. A.Y. 2024-25] provides: "Where the total income of the assessee is chargeable to tax under subsection (1A) of section 115BAC and the total income - (a) does not exceed seven hundred thousand rupees, the assessee shall be entitled to a deduction..." 5.9 This provision applies to any resident individual whose total income does no....
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....find this reliance to be misplaced 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 Chamber of Tax Consultants vs. Director General of Income Tax (Systems) [TS5026-HC-2025 (Bombay)-O], the Hon'ble Bombay High Court considered the issue of system-based denial of 87A rebate on STCG under section 111A for assessees who had opted for 115BAC(1A). While the Hon'ble Court refrained from interpreting the substantive provisions, it held that the assessee must be allowed to claim rebate under section 87A, and it is....
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....come includes STCG taxable under section 111A. The AO is directed to allow rebate of Rs. 13,320/- and recompute tax liability accordingly. The demand of Rs. 15,820/- raised in CPC intimation stands deleted. Refund, if any, shall be granted in accordance with law. 6. In the result, the appeal of the assessee is allowed." (ii) ITAT, Chennai in Venkedapathy Venugopal Vs. ITO, ITA No. 2064/Chny/2025, order dated 09.10.2025 for AY 2024-25: "7. We have heard the rival submissions and carefully perused the orders of the lower authorities as well as the material placed on record. The sole issue arising for our adjudication is whether the assessee is entitled to rebate of tax u/s 87A of the Act where the total income consists, inter alia, of income chargeable to tax at special rates. 8. We note that an identical issue came up for consideration before this Tribunal in the case of Venkatachalam Venkatraman v. ITO [ITA No. 1431/Chny/2025, order dated 20.08.2025]. The Tribunal therein held that the provisions of section 87A of the Act provide rebate on the entire tax liability computed on the "total income" without drawing any distinction between income taxab....