TaxTMI 
TaxTMI 
2026 (9) TMI 1065
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....ed in holding that absence of specific restriction in section 111A permits grant of rebate u/s 87A, without appreciating that rebate provisions cannot be extended to special rate incomes in absence of explicit legislative intent? 3. Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) has erred in interpreting the provisions of section 87A in isolation without considering the scheme of taxation under Chapter XII of the Act, thereby allowing rebate on tax computed at special rates? 4. Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the clarification issued by CBDT vide circular No. 13/2025 dated 19.09.2025, wherein it has been clearly stated that rebate under section 87A is not allowable on income chargeable at special rates ? 5. Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) has erred in relying upon the proposed amendment in the Finance Bill, 2025 to draw inference for the year under consideration, without appreciating that such amendment is prospective and cannot be used to interpret the existing provisions contrary to legislative intent? 6. Wh....
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.... 12,500) or does not exceeds Rs. 7 lakhs under the new tax regime (subject to a maximum rebate of Rs. 25,000). Before adjudicating the issue, it will be apposite to refer here section 87A which provides for allowance of rebate of Income Tax in case of certain individuals- Rebate of income-tax in case of certain individuals. 87A. An assessee, being an individual resident in India, whose total income does not exceed five hundred thousand rupees, 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 with which he is chargeable for any assessment year, of an amount equal to hundred per cent of such income-tax or an amount of twelve thousand and five hundred rupees, whichever is less. 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 f....
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....ever is less, as per the provisions of section 87A of the Act. 6.7 The AO, is, therefore directed to give relief to the appellant by allowing the tax rebate as per the provisions of section 87A of the Act. Thus, as per the above discussion, the grounds of appeal are hereby allowed. ...... 5. I have heard both the parties. The issue of denial of rebate u/s 87A of the Act on the Short Term Capital Gains has been decided in favour of the assessee by the ITAT in a number of decisions. In the recent decision, in the case of ITO Vs. Rajshree Kothariin ITA No.399/JPR/2026 order dated 20.08.2026, the ITAT has held the assessee eligible to claim rebated u/s 87A of the Act on the Short Term Capital Gains holding as under:- ....... 6. Before us, at the outset itself ld. counsel for the assessee pointed out that this issue has been dealt in various decisions of the ITAT ruling consistently in favour of the assessee as under:- 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 S....
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....f Rajiv G Shah supra has held that "...there is no indication in the plain language of Section 87A that any category of income or tax should be excluded from the computation. If the total income is within the threshold prescribed, rebate cannot be denied....". It istrite law that when provisions of the statute granting any benefit to the tax payer are unambiguously clear, no different interpretation thereof can be adopted. Accordingly, we are of the view that the assessee is entitled for claim of rebate u/s 87A. The orders of lower authorities are therefore set aside and the Ld.AO is directed to allow the assessee its claim of rebate u/s 87A. All the grounds of appeal raised by the assessee are therefore allowed." 8. Further, we find support from the decision of the Coordinate Bench in JayshreebenJayantibhaiPalsanaShingala Sheri ITO [ITA No.1014/Ahd/2025, order dated 12.08.2025), where it was held as under:- "5.8 The amended first proviso 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) doe....
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....andum to the Finance Bill 2025, which clarified that rebate under section 87A is not available on tax arising from special rate incomes, including those under section 111A. However, we find this reliance to be misplaced for two reasons: -Firstly, the Finance Bill 2025 itself proposes to insert new restrictions on rebate under section 87A w.e.f. A.Y. 2026-27, which implies that the existing law (i.e., as applicable to A.Y. 2024-25) does not contain such a restriction. -Secondly, the Explanatory Memorandum cannot override the plain language of the statute. It is a tool of interpretation, not a source of substantive law. Therefore, the prospective amendment in the Finance Act 2025 supports the view that under the unamended 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) [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....