TaxTMI 
TaxTMI 
2026 (4) TMI 1488
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....Commissioner of Income Tax (Appeals), Addl/JCIT(A)-3, Bengaluru, [in short, Ld. CIT(A)], dated 07.11.2025, which in turn arises out of an assessment order passed by the Assessing Officer (AO), Central Processing Centre (CPC) under section 154 of the Income Tax Act, 1961 ('the Act') dated 21.12.2024. 2. The grounds of appeal raised by the assessee are as follows: "1. The CIT(A) erred in upholding the adjustment made under section 154 of the Act, as there was no prima facie error apparent from the return of income. 2. Without prejudice to Ground No.1, the learned CIT(A) has erred in upholding the disallowance of the rebate claimed by the appellate under section 87A of the Act. 3. Without prejudice to Ground No.1,....
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..../-, 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 the case are that the assessee, a resident individual, filed a revised return of income for A.Y. 2024-25 declaring total income 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. 15,820/-. The CIT(A) upheld the denial, primarily relying on - (i) the "subj....
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....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 exclusion in section 111A or in section 87A must be construed in favour of the assessee. 5.12 At this point we discuss the interplay of Section 115BAC(1A) with Chapter XII where the scope is Confined to Computation of Tax Rates. Section 115BAC(1A) opens with the phrase: "Notwithstanding anything contained in this Act but subject to the provisions of this Chapter..." 5.13 The purpose of this clause is to enable the computation of income tax under the concessional rate regime, subject to existing special rate pr....
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....mended 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 assessee's 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 for the quasi-judicial authority to decide on merits. Thus, the Hon'ble High Court clearly held that the C....
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....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 thereby reinforces that no such restriction was in force during the relevant assessment year. The denial of rebate under section 87A by the CPC, Bengaluru, appears to be based solely on system-driven logic and not on any statutory mandate. Moreover, the interpretation adopted by the CIT(A) in upholding such denial is, in our considered view, not in consonance with the plain and unambiguous language of the law as applicable for A.Y. 2024-25. 5.18 Accordingly, we hold that the assessee is eligible for rebate under section 87A....
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....e, subject to conditions).The rebate is limited to the amount of income-tax payable on total income. 6. Now, the question arises whether rebate can be applied against tax computed at special rates, e.g., capital gains under sections 111A, 112, 112A of the Act. We note that rebate generally allowable irrespective of heads of income. There is no restriction in section 87A of the Act, that excludes income under Capital Gains and Income from Other Sources. Thus, mere existence of such heads does not disentitle the assessee. However, there is restriction where income is taxed at special rates. The Rebate u/s 87A of the Act is not allowable against tax payable on incomes taxed at special rates, particularly capital gains. Hence, the rebate und....