TaxTMI 
TaxTMI 
2026 (5) TMI 1714
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....ong-term capital gains from sale of listed equity shares of Rs. 47,273/- and income from other sources of Rs. 29,664/- only. The assessee filed the return of income under the new tax regime provided u/s 115BAC(1A) of the Act and claimed rebate u/s 87A of the Act amounting to Rs. 25,000/- on the ground that the total income did not exceed Rs. 7,00,000/- only. 3.1 However, while processing the return of income, CPC denied the rebate claimed u/s 87A of the Act and raised an additional tax demand of Rs. 30,740/- only. Aggrieved by the same, the assessee filed an application u/s 154 of the Act seeking rectification of the mistake. However, the said rectification application was rejected by CPC on the ground that rebate u/s 87A of the Act is not allowable in respect of income taxable at special rates. 4. Aggrieved by the intimation/ rejection issued u/s 143(1)/ 154 of the Act, the assessee filed an appeal before the Ld. CIT(A). 5. Before the Ld. CIT(A), the assessee submitted that rebate u/s 87A of the Act cannot be denied merely because part of the income consists of long-term capital gains taxable u/s 112 of the Act. The assessee relied upon various appellate orders and the de....
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....y the assessee was below Rs. 7,00,000/-. It was contended that there is no express restriction either under section 87A or section 112 of the Act denying rebate u/s 87A in respect of long-term capital gains taxable u/s 112 of the Act. The Ld. AR submitted that while section 112A(6) specifically bars rebate u/s 87A, no such prohibition exists under section 112 of the Act and therefore the benefit cannot be denied by implication. In support of the said contention, reliance was placed on the decision of the Ahmedabad Bench of the Tribunal in the case of Jayshreeben Jayantibhai Palsana vs. ITO reported in 177 taxmann.com 411, wherein it was held that in the absence of an express statutory bar, rebate u/s 87A cannot be denied merely because income is taxable at special rates. 7.1 The assessee further submitted that the amendment brought by the Finance Act, 2025 restricting rebate against special rate income is prospective in nature and itself demonstrates that no such restriction existed during the year under consideration. In support of the said proposition, reliance was placed on the decision of the Hon'ble Supreme Court in the case of CIT vs. Vatika Township Pvt. Ltd. reported in ....
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....erty taxable u/s 112 of the Act. The rebate u/s 87A of the Act was denied by CPC only on the ground that part of the income was taxable at special rate. The Ld. CIT(A) has upheld the said denial by holding that income taxable under Chapter XII of the Act, including income u/s 112 of the Act, would not be eligible for rebate u/s 87A of the Act. 9.2 We are unable to approve the view taken by the Ld. CIT(A). Section 87A of the Act, as applicable for the year under consideration, grants rebate to a resident individual where the total income does not exceed the prescribed limit. The expression used in the section is "total income". The said expression has to be understood as defined u/s 2(45) of the Act. Once the long-term capital gain is included in the total income of the assessee, the same cannot be excluded for the limited purpose of section 87A of the Act unless there is an express statutory exclusion. 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 ....
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.... 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." 9.5 We further note that the Finance Act, 2025 has amended the provisions so as to restrict rebate u/s 87A in respect of income taxable at special rates. The said amendment is applicable prospectively. In our view, if the law already contained such restriction for the year under consideration, there was no need for Parliament to introduce a specific amendment subsequently. A later substantive amendment which restricts a benefit cannot ordinarily be treated as retrospective unless the statute clearly says so. The assessee's reliance on the decision of the Hon'ble Supreme Court in Commissioner of Income-tax (Central)-I, New Delhi vs. Vatika Township (P.) Ltd. reported in [2014] 49 taxmann.com 249 (SC)/[2014] 227 Taxman 121 (SC)/[2014] 367 ITR 466 (SC)/[2014] 271 CTR 1 (SC) dated 15-09-2014 is therefore well placed. The relevant para is reproduced below: Furthermore, an amendment made to a taxing statute can be said ....