RAVI BHARATKUMAR BHINDORA,WANKANER, DIST. MORBI vs. THE ITO WARD-1, MORBI, MORBI

When this appeal was called out for hearing, the Ld. Counsel for the assessee invited my attention towards the decision of the Hon’ble ITAT, Rajkot Bench in the case of Kiritkumar Champaklal Bhagat in ITA No.879/Rjt/2025 for AY 2024-25, vide order dated 20.03.2026. The Ld. Counsel submitted that present appeal is squarely covered by the above said judgement of the Tribunal. A copy of the judgement was also placed before the Bench.

On the other hand, the Learned DR for the revenue relied on the findings of the Ld. CIT(A).

I see no reason to take any other view of the matter then the view so taken by the Hon’ble ITAT, Rajkot Bench in the case of Kiritkumar Champaklal Bhagat in ITA No.879/Rjt/2025 for AY 2024-25, vide order dated 20.03.2026. In this order, the Tribunal has inter alia observed as under: “5. We have carefully considered the rival submissions, the impugned order of the CIT(A), the material placed on record, and the applicable statutory provisions. Thus, the core issue for adjudication before us is – “Whether a resident individual who has exercised the option under section 115BAC(1A) and whose total income is below Rs.7,00,000/-, is eligible to claim rebate under section 87A against tax payable on STCG under section 111A, in the absence of any express restriction in section 87A or section 111A.” 5.6 The undisputed facts of the case are that the assessee, a resident individual, filed a revised return of income for A.Y. 2024–25 declaring total income of Rs.6,76,402/-, comprising short-term capital gain on listed equity shares taxable at 15% under section 111A, and opted for taxation under the new regime under section 115BAC(1A). The CPC, Bengaluru, processed the return under section 143(1) and denied rebate under section 87A of Rs.13,320/-, resulting in a demand of Rs.15,820/-. The CIT(A) upheld the denial, primarily relying on – (i) the “subject to” clause in section 115BAC(1A), (ii) provisions of Chapter XII, and (iii) the Explanatory notes to the Finance Bill 2025. 5.7 Having perused the relevant statutory provisions and the arguments advanced by the assessee’s Authorised Representative (AR), we find merit in the claim of the assessee. 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 subsection (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 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 Act. Therefore, the overriding clause in section 115BAC(1A) does not derogate or modify section 87A, unless section 87A itself provides for exclusion, which, in the present case, it does not. Thus, section 87A operates on the total tax computed, whether it includes tax at slab rates or special rates, and applies so long as the total income threshold is met. 5.14 The CIT(A) placed strong reliance on the Explanatory Memorandum 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.

As the issue is squarely covered in favour of the assessee by the decision of the ITAT, Rajkot Bench in the case of Kiritkumar Champaklal Bhagat in ITA No.879/Rjt/2025, and there is no change in facts and law and the revenue is unable to produce any material to controvert the aforesaid findings of the Division Bench (supra). I find no reason to interfere in the said order of the Division Bench. Therefore, respectfully following the binding precedent of the co-ordinate Bench (supra), I allow the appeal of the assessee.

In the result, the appeal of the assessee is allowed.