TaxTMI 
TaxTMI 
2026 (9) TMI 998
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.... 2. Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) has erred in allowing rebate u/s 87A on Short Term Capital Gains u/s 111A merely on the ground that no explicit restriction exists similar to section 112A(6), without appreciating that statutory interpretation cannot be based on absence of prohibition and that the scheme of special rate taxation inherently excludes such income from general rebate provisions? 3. Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) has erred in relying upon the decision of the Hon'ble ITAT, Ahmedabad in the case of JayshreebenJayantibhai Palsana, which is not binding precedent and has been rendered without considering the binding CBDT Circular No. 13/2025 dated 19.09.2025 and the correct statutory scheme, thereby rendering the impugned order unsustainable in law? 4. Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) has erred in not considering and giving effect to the binding clarification issued by the CBDT vide Circular No. 13/2025 dated 19.09.2025, which categorically provides that rebate under section 87A is not allowable on income chargeable at....
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.... the contention of the appellant is that it is eligible for 87A rebate on special rate income as well which has been disallowed by the CPC. Section 87A as amended from 01.04.2023 w.e.f 1-4-2024 is as below: Provided that where the total income of the assessee is chargeable to tax under sub-section (1A) of section 115BAC, and the total income- (a) does not exceed seven hundred thousand rupees, the assessee shall be entitled to a deduction from the amount of income-tax (as computed before allowing for the deductions under this Chapter) on his total income with which he is chargeable for any assessment year, of an amount equal to one hundred per cent of such income-tax or an amount of twenty-five thousand rupees, whichever is less; (b) exceeds seven hundred thousand rupees and the income-tax payable on such total income exceeds the amount by which the total income is in excess of seven hundred thousand rupees, the assessee shall be entitled to a deduction from the amount of income-tax (as computed before allowing the deductions under this Chapter) on his total income, of an amount equal to the amount by which the income-tax payable on such total inc....
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....nt individual whose total income does not exceed Rs. 7,00,000 and who is assessed under section 115BAC(1A) The statute does not draw any distinction between normal income and income chargeable at special rates, nor does it contain any express exclusion for tax arising under section 111A. 5.8. 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 gain 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 gain. 5.9 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 jas in section 112A), it hasdone expressly. In contrast, the absence of any exclusion in section 111A or in section 87A must be construed in favour of the assessee. 5.10. At this point we discuss the interplay of Section 115BAC(1A) with Chapter XII where the soupe is Confined to Computation of Tax Rates. Sect....
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....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 CPC utility or system configuration cannot override statutory rights, and that each case must be adjudicated on its own merits. We at the Tribunal, being such quasi-judicial authority, are therefore duty-bound to examine the claim in light of the statutory framework and not be influenced by automated denial or procedural logic adopted by the CPC 5.14. The assessee has also relied on an appellate order dated 27.05.2025 passed by CIT(A)-1, Nagpur in the case of Avni Milanbhai Manya, wherein on identical facts the CIT(A) allowed the claim of rebate under section 87A respect of STCG taxable under section 111A. We also note that such decision was taken by the JCIT/AddI.CIT(A) relying on the decision of Beena ManishbhaiFofaria for the A.Y. 2024-25. While not binding, the said appellate order affirms that divergent views exist and such benefit has been allowed in similar factual circumstances. 5.15. In view of the above discussion, we find that the assessee is a resident individual and the total income declared for the assessm....
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....:- i) Pranay M Kothari Vs. DCIT in ITA No.3469/Chny/2025 ii) Manojbhai C. Kamdar Vs. ITO in ITA No.572/RJT/2025 iii) Jayshreeben Jayantibhai Palsana Vs. ITO in ITA No.1014/Ahd/2025 iv) Basty Keshava Shenoy Vs. ITO in ITA No.3134/Bang/2025 7. Before us, ld. DR was unable to distinguish the decisions, referred to by ld. Counsel for the assessee as above, nor she was able to draw my attention to any contrary decision of either the Jurisdictional High Court or the Hon'ble Apex Court in this regard. 8. We have gone through the orders of the ITAT, referred to by the ld. Counsel for the assessee, and have noted that it has been consistently 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 taxable at normal rates, and income taxable at special rates, i.e. short term capital gain taxable at rates specified u/s 111A of the Act. The findings of the ITAT in the case of Pranay M Kothari Vs. DCIT in ITA No.3469/Chny/2025 dated 23.03.2026 at para 7 to 9 of the order as under:- .......... 7. We note that a....
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....roviso 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 sub section (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 not exceed Rs. 7,00,000 and who is assessed under section 115BAC(1A). The statute does not draw any distinction between normal income and income chargeable at special rates, nor does 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 t....
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.... of Tax Consultants vs. Director General of Income Tax (Systems) [TS 5026-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 CPC utility or system configuration cannot override statutory rights, and that each case must be adjudicated on its own merits. We at the Tribunal, being such a quasi-judicial authority, are therefore duty-bound to examine the claim in light of the statutory framework and not be influenced by automated denial or procedural logic adopted by the CPC. 5.16 The assessee has also relied on an appellate order dated 27.05.2025 passed by CIT(A)-1, Nagpur in the case of Avni Milanbhai Maniya, wherein on identical facts the CIT(A) allowed the claim of rebate under section 87A in respect of STCG taxable under section 111A. We also note that such ....