TaxTMI 
TaxTMI 
2026 (9) TMI 1033
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....al rates constitute income chargeable at special rates; hence, fall outside the ambit of rebate under section 87A in terms of the statutory scheme read with the binding clarification issued by the CBDT? 2. Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that rebate under section 87A of the Act is allowable from the Income-tax computed in accordance with the provisions of the Act and cannot be applied in a manner that neutralizes or overrides the statutory scheme prescribing special rates of tax u/s 111A and other charging provisions; AND, in holding that in absence of an express restriction in sections 87A, 111A or 115BAC of the Act, rebate is allowable on Short Term Capital Gains, ignoring the settled principle of harmonious construction and the legislative intent underlying taxation at special rates? 3. That the appellant craves to add, amend, alter, delete or modify any or all the above grounds of appeal before or at the time of hearing. 3. The solitary issue in the present appeal relates to denial of rebate of tax claimed by the assessee u/s 87A of the Act, on the taxes paid on income earned on short....
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....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 income is in excess of the amount by which the total income exceeds seven hundred thousand rupees.] 5.5 The contention of the Appellant is correct. Undisputedly, the appellant has not opted out of new tax regime as per section 115BAC of the Act. The returned income included capital gains chargeable at special rates and other income chargeable at normal rates. The appellant has not disputed the tax payable on total income including capital gains. The rebate claimed under section 87A is explicitly disallowed on the Long-Term Capital Gains under section 112A due to the specific provisions enacted by the legislature. Rele....
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.... 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 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 taxable at normal rates and income taxable at special rates. It was accordingly concluded that rebate u/s.87A of the Act is available even in respect of such incomes taxed under special provisions. The relevant findings are extracted below for ease of reference:- "5.0 been concluded that to claim the rebate total income is to be computed after excluding any special rate income so as to determine the final tax liability. We have noted that the view taken by the Ld.CIT(A) of assessee filing return u/s 115BAC and consequently ineligible for rebate is not in order. The only controversy in this case is whether rebate u/s....
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....-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 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 provisions under Chapter XII, such as sections 111A, 112, 112A, etc. This clause governs the computation of tax and does not ipso facto affect eligibility to rebates or deductions unless specifically restricted. Section 87A is not part of Chapter XII; it is an independent rebate provision under Chapter VIII of the Ac....
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....hai 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 decision was taken by the JCIT/AddI.CIT(A) relying on the decision of Beena Manish bhai Fofaria 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. 5.17 In view of the above discussion, we find that the assessee is a resident individual and the total income declared for the assessment year 2024-25 does not exceed Rs. 7,00,000. It is also an admitted position that the assessee has exercised the option to be assessed under the new tax regime in accordance with the provisions of section 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....