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2026 (5) TMI 1715
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....nvenience are not inclined to reproduce here. The grounds raised by the assessee are interconnected and pertains to denial of rebate u/s 87A of the Act. 3. The brief facts of the case are that the assessee is an individual who filed her ROI for the year the captioned AY offering an income to taxation for Rs. 6,25,580/- only. The income comprised of business income of Rs. 3,942/-, short-term capital gains on sale of listed equity shares of Rs. 1,13,067/- and balance income from other sources/other head. Income tax payable at normal rates on the normal income amounting to Rs. 5,12,513 was Rs. 10,626/- and Income tax payable at special rates on the specified income amounting to Rs. 1,13,067 was Rs. 16,960/-. Therefore, total tax payable was....
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.... and the statute does not distinguish between normal income and income taxable at special rates. 6.1 It was submitted that while section 112A specifically restricts rebate u/s 87A, no such restriction is provided under section 111A of the Act. The assessee further contended that the proposed amendment brought by the Finance Bill, 2025 is prospective in nature and therefore confirms that no such restriction existed for the year under consideration. Accordingly, the assessee prayed for grant of rebate u/s 87A of the Act and deletion of the consequential demand. 6.2 The Ld. CIT(A), after considering the submissions of the assessee and examining the provisions of sections 87A and 115BAC(1A) of the Act, held that rebate u/s 87A is availabl....
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....xable u/s 111A of the Act and neither section 111A nor section 87A contained any express restriction denying rebate u/s 87A of the Act in respect of such gains. It was submitted that the Legislature, wherever it intended to restrict rebate u/s 87A of the Act, has specifically provided so, as evident from section 112A(6) of the Act. However, no similar restriction existed u/s 111A of the Act during the year under consideration. 8.1 The assessee further submitted that the CPC while processing the return of income wrongly restricted rebate u/s 87A only to tax payable on income taxable at normal rates and denied rebate attributable to tax payable on STCG u/s 111A of the Act. It was contended that the expression used in section 87A is "total ....
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....te u/s 87A can be allowed only in respect of tax computed under normal slab rates and not against tax payable on income taxable at special rates. The learned DR also submitted that the amendment brought by the Finance Act, 2025 and CBDT Circular No. 13/2025 merely clarify the original legislative intent that rebate u/s 87A was never intended to be available against tax payable on special rate income such as income taxable u/s 111A of the Act. 9.2 The learned DR further contended that the CPC rightly restricted the rebate while processing the return u/s 143(1) of the Act since the incorrect claim was apparent from the return of income itself. In support of the proposition that a subsequent amendment can be clarificatory and retrospective ....
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.... of the Act, as applicable for the year under consideration, contains any express restriction denying rebate u/s 87A of the Act in respect of tax payable on STCG taxable u/s 111A of the Act. Section 2(45) & Section 5 is reproduced below for the sake of reference: 2(45)"total income" means the total amount of income referred to in section 5, computed in the manner laid down in this Act; Scope of total income. 5. (1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which--- 10.3 We further notice that wherever the Legislature intended to restrict rebate u/s 87A of the Act, it has specifically provided so. Se....
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....n 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 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 upholdin....