PADMABEN KANTILAL RANPARA,RAJKOT vs. INCOME TAX OFFICER WARD 2(1)(2) RAJKOT, RAJKOT

ORDER PerDr. Arjun Lal Saini, Accountant Member: . Arjun Lal Saini, Accountant Member:

The present appeal has been filed by the Assessee, against the order passed The present appeal has been filed by the Assessee, against the order passed The present appeal has been filed by the Assessee, against the order passed by the Learned Commissioner of Income Tax (Appeal), National Faceless Appeal, by the Learned Commissioner of Income Tax (Appeal), National Faceless Appeal, by the Learned Commissioner of Income Tax (Appeal), National Faceless Appeal, Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] [hereinafter referred to as “CIT(A)”] dated dated 26.06.2025 arising in the matter of assessment order passed u/s. arising in the matter of assessment order passed u/s.143(1) of the Income Tax Act, of the Income Tax Act, 1961 (here-in-after referred to as “the Act”) relevant to the Assessment Year 20 after referred to as “the Act”) relevant to the Assessment Year 2024- after referred to as “the Act”) relevant to the Assessment Year 20 25.

Padmaben K. Ranapara “The learned CIT(A) has erred in not allowing rebate u/s. 87A of Rs. 23,653 on short The learned CIT(A) has erred in not allowing rebate u/s. 87A of Rs. 23,653 on short The learned CIT(A) has erred in not allowing rebate u/s. 87A of Rs. 23,653 on short Term Capital Gains of Rs. 3,46,992/ Term Capital Gains of Rs. 3,46,992/- u/s. 111A. The tax on short term capital gains u/s. u/s. 111A. The tax on short term capital gains u/s. 111A @15% is Rs. 23,653 against which reba 111A @15% is Rs. 23,653 against which rebate u/s. 87A was claimed and tax te u/s. 87A was claimed and tax payable was worked out at Rs. NIL was worked out at Rs. NIL. Your petitioner prays that the rebate u/s. 87A be allowed. . Your petitioner prays that the rebate u/s. 87A be allowed. Your petitioner reliance is placed oner reliance is placed on ITAT decision of Jayshreeben J. Palsana v. ITO in on ITAT decision of Jayshreeben J. Palsana v. ITO in ITA No. 1014/Ahd/2025. Your petitioner pra ITA No. 1014/Ahd/2025. Your petitioner prays that rebate may be allowed u/s. 87A for be allowed u/s. 87A for which act of kindness your petitioner is ever bound. It is prayed that the assessee may be ct of kindness your petitioner is ever bound. It is prayed that the assessee may be ct of kindness your petitioner is ever bound. It is prayed that the assessee may be allowed to add, amend to delete or otherwise change any of the grounds at the time of allowed to add, amend to delete or otherwise change any of the grounds at the time of allowed to add, amend to delete or otherwise change any of the grounds at the time of hearing.”

“5. We have carefully considered the rival submissions, the impugned order of the 5. We have carefully considered the rival submissions, the impugned order of the 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 CIT(A), the material placed on record, and the applicable statutory provisions. Thus, the CIT(A), the material placed on record, and the applicable statutory provisions. Thus, the core issue for adjudication before us is core issue for adjudication before us is – “Whether a resident individual who has ex “Whether a resident individual who has exercised the option under section ercised the option under section 115BAC(1A) and whose total income is below Rs.7,00,000/ 115BAC(1A) and whose total income is below Rs.7,00,000/-, is eligible to claim , is eligible to claim rebate under section 87A against tax payable on STCG under section 111A, in the rebate under section 87A against tax payable on STCG under section 111A, in the rebate under section 87A against tax payable on STCG under section 111A, in the absence of any express restriction in section 87A or section 111 absence of any express restriction in section 87A or section 111A.” A.” 5.6 The undisputed facts of the case are that the assessee, a resident individual, filed a 5.6 The undisputed facts of the case are that the assessee, a resident individual, filed a 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 revised return of income for A.Y. 2024–25 declaring total income of Rs.6,76,402/ 25 declaring total income of Rs.6,76,402/-, comprising short-term capital gain on listed equity shares taxable at 15% und term capital gain on listed equity shares taxable at 15% under section term capital gain on listed equity shares taxable at 15% und 111A, and opted for taxation under the new regime under section 115BAC(1A). The CPC, 111A, and opted for taxation under the new regime under section 115BAC(1A). The CPC, 111A, and opted for taxation under the new regime under section 115BAC(1A). The CPC, Padmaben K. Ranapara Bengaluru, processed the return under section 143(1) and denied rebate under section Bengaluru, processed the return under section 143(1) and denied rebate under section 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/ , resulting in a demand of Rs.15,820/-. The CIT(A) upheld . The CIT(A) upheld the denial, primarily relying on – (i) the “subject to” clause in section 115BAC(1A), (i) the “subject to” clause in section 115BAC(1A), (ii) provisions of Chapter XII, and (ii) provisions of Chapter XII, and (iii) the Explanatory notes to the Finance Bill 2025. (iii) the Explanatory notes to the Finance Bill 2025. 5.7 Having perused the relevant statutory provisions and the arguments advanced by the 5.7 Having perused the relevant statutory provisions and the arguments advanced by the 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 assessee’s Authorised Representative (AR), we find merit in the claim of the assessee. 5.8 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. The amended first proviso to section 87A [inserted by the Finance Act, 2023 w.e.f. A.Y. The amended first proviso to section 87A [inserted by the Finance Act, 2023 w. 2024–25] provides: “Where the total income of the assessee is chargeable to tax under subsection “Where the total income of the assessee is chargeable to tax under subsection “Where the total income of the assessee is chargeable to tax under subsection (1A) of section 115BAC and the total income (1A) of section 115BAC and the total income — (a) does not exceed seven hundred thousand rupees, the assessee shall be entitled (a) does not exceed seven hundred thousand rupees, the assessee shall be entitled (a) does not exceed seven hundred thousand rupees, the assessee shall be entitled to a deduction...” to a deduction...” 5.9 This provision applies to any resident individual whose total income does not exceed 5.9 This provision applies to any resident individual whose total income does not exceed 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 Rs.7,00,000 and who is assessed under section 115BAC(1A). The statute does not draw 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 any distinction between normal income and income chargeable at special rates, nor does any distinction between normal income and income chargeable at special rates, nor it contain any express exclusion for tax arising under section 111A. 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 5.10 By contrast, the legislature has inserted an express bar on availability of section 5.10 By contrast, the legislature has inserted an express bar on availability of section 87A rebate in section 112A(6), which states: 87A rebate in section 112A(6), which states: (6) Where the total income of an assessee incl (6) Where the total income of an assessee includes any long-term capital gains referred term capital gains referred to in sub-section (1), the rebate under section 87A shall be allowed from the income section (1), the rebate under section 87A shall be allowed from the income-tax section (1), the rebate under section 87A shall be allowed from the income on the total income as reduced by tax payable on such capital gains. on the total income as reduced by tax payable on such capital gains. 5.11 The absence of a corresponding clause in section 1 5.11 The absence of a corresponding clause in section 111A is legally significant and 11A is legally significant and supports the principle that supports the principle that – when the legislature intended to deny rebate in respect of 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 special income (as in section 112A), it has done so expressly. In contrast, the absence 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 8 any exclusion in section 111A or in section 87A must be construed in favour of the 7A must be construed in favour of the assessee. 5.12 At this point we discuss the interplay of Section 115BAC(1A) with Chapter XII 5.12 At this point we discuss the interplay of Section 115BAC(1A) with Chapter XII 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 where the scope is Confined to Computation of Tax Rates. Section 115BAC(1A) opens where the scope is Confined to Computation of Tax Rates. Section 115BAC(1A) opens with the phrase: “Notwithstanding anythin “Notwithstanding anything contained in this Act but subject to the provisions of this g 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 5.13 The purpose of this clause is to enable the computation of income tax under the 5.13 The purpose of this clause is to enable the computation of income concessional rate regime, subject to existing special rate provisions under Chapter XII, concessional rate regime, subject to existing special rate provisions under Chapter XII, 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 such as sections 111A, 112, 112A, etc. This clause governs the computation of tax and such as sections 111A, 112, 112A, etc. This clause governs the computation of tax and does not ipso facto affect 9 eligibility to re does not ipso facto affect 9 eligibility to rebates or deductions bates or deductions 3 Padmaben K. Ranapara unless specifically restricted. Section 87A is not part of Chapter XII; it is an independent unless specifically restricted. Section 87A is not part of Chapter XII; it is an independent 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 rebate provision under Chapter VIII of the Act. Therefore, the overriding clause in rebate provision under Chapter VIII of the Act. Therefore, the overriding clause in section 115BAC(1A) does not derogate or modify section 87A, section 115BAC(1A) does not derogate or modify section 87A, unless section 87A itself unless section 87A itself provides for exclusion, which, in the present case, it does not. Thus, section 87A operates provides for exclusion, which, in the present case, it does not. Thus, section 87A operates 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 on the total tax computed, whether it includes tax at slab rates or special rates, and 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 m 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 5.14 The CIT(A) placed strong reliance on the Explanatory Memorandum to the Finance 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 Bill 2025, which clarified that rebate under section 87A is not available on tax arising 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 fin from special rate incomes, including those under section 111A. However, we find this from special rate incomes, including those under section 111A. However, we fin reliance to be misplaced for two reasons: reliance to be misplaced for two reasons: - Firstly, the Finance Bill 2025 itself proposes to insert new restrictions on Firstly, the Finance Bill 2025 itself proposes to insert new restrictions on Firstly, the Finance Bill 2025 itself proposes to insert new restrictions on rebate under section 87A w.e.f. A.Y. 2026 rebate under section 87A w.e.f. A.Y. 2026–27, which implies that the existing law 27, which implies that the existing law (i.e., as applicable to A.Y. 2024 (i.e., as applicable to A.Y. 2024–25) does not contain such a restriction. t contain such a restriction. - Secondly, the Explanatory Memorandum cannot override the plain language of Secondly, the Explanatory Memorandum cannot override the plain language of Secondly, the Explanatory Memorandum cannot override the plain language of the statute. It is a tool of interpretation, not a source of substantive law. the statute. It is a tool of interpretation, not a source of substantive law. the statute. It is a tool of interpretation, not a source of substantive law. Therefore, the prospective amendment in the Finance Act 2025 supports Therefore, the prospective amendment in the Finance Act 2025 supports the view that Therefore, the prospective amendment in the Finance Act 2025 supports under the unamended provision applicable for A.Y. 2024 under the unamended provision applicable for A.Y. 2024–25, rebate under section 87A 25, rebate under section 87A cannot be denied merely because tax arises under section 111A. 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 5.15 In the recent judgment dated 24.01.2025 in the case of The Chamber of Tax 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) [TS5026 . Director General of Income Tax (Systems) [TS5026-HC HC-2025(Bombay)- O], the Hon’ble Bombay High Court considered the issue of system O], the Hon’ble Bombay High Court considered the issue of system-based denial of 87A based denial of 87A rebate on STCG under section 111A for rebate on STCG under section 111A for assessee who had opted for 115BAC(1A). While who had opted for 115BAC(1A). While the Hon’ble Court 10 refrained from interpreting the substantive No.1014/Ahd/2025 10 refrained from interpreting the substantive No.1014/Ahd/2025 10 refrained from interpreting the substantive provisions, it held that the assessee must be allowed to claim rebate under section 87A, provisions, it held that the assessee must be allowed to claim rebate under section 87A, 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. judicial authority to decide on merits. Thus, the Hon’ble High Court clearly Thus, the Hon’ble High Court clearly held that the CPC utility or system configuration held that the CPC utility or system configuration cannot override statutory rights, and that each case must be adjudicated on its own cannot override statutory rights, and that each case must be adjudicated on its own cannot override statutory rights, and that each case must be adjudicated on its own merits. We at the Tribunal, being such a quasi merits. We at the Tribunal, being such a quasi-judicial authority, are therefore duty judicial authority, are therefore duty- bound to examine the claim in light bound to examine the claim in light of the statutory framework and not be influenced by of the statutory framework and not be influenced by automated denial or procedural logic adopted by the CPC. 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 5.16 The assessee has also relied on an appellate order dated 27.05.2025 passed by 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 1, Nagpur in the case of Avni Milanbhai Maniya, wherein on identical facts the on identical facts the CIT(A) allowed the claim of rebate under section 87A in respect of STCG taxable under CIT(A) allowed the claim of rebate under section 87A in respect of STCG taxable under 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/Addl.CIT(A) relying section 111A. We also note that such decision was taken by the JCIT/Addl.CIT(A) relying section 111A. We also note that such decision was taken by the JCIT/Addl.CIT(A) relying on the decision of Beena Manishbhai Fofaria for the A.Y. 20 on the decision of Beena Manishbhai Fofaria for the A.Y. 2024-25. While not binding, the 25. While not binding, the said appellate order affirms that divergent views exist and such benefit has been allowed said appellate order affirms that divergent views exist and such benefit has been allowed said appellate order affirms that divergent views exist and such benefit has been allowed in similar factual circumstances. in similar factual circumstances. 5.17 In view of the above discussion, we find that the assessee is a resident individual and 5.17 In view of the above discussion, we find that the assessee is a resident individual and 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 l income declared for the assessment year 2024–25 does not exceed Rs.7,00,000. 25 does not exceed Rs.7,00,000. It is also an admitted position that the assessee has exercised the option to be assessed It is also an admitted position that the assessee has exercised the option to be assessed It is also an admitted position that the assessee has exercised the option to be assessed 4 Padmaben K. Ranapara under the new tax regime in accordance with the provisions of section 115BAC(1A) of the under the new tax regime in accordance with the provisions of section 115BAC(1A) of the 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 Act. On a plain reading of the statutory provisions, there exists no express bar either in 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 section 87A or section 111A for denial of rebate in respect of tax payable on short-term section 87A or section 111A for denial of rebate in respect of tax payable on short capital gains arising from transfer of listed equity shares taxable at spec capital gains arising from transfer of listed equity shares taxable at special rates under capital gains arising from transfer of listed equity shares taxable at spec section 111A. The legislative intent is further clarified by the subsequent amendment section 111A. The legislative intent is further clarified by the subsequent amendment section 111A. The legislative intent is further clarified by the subsequent amendment proposed in the Finance Bill, 2025, which is prospective in nature and thereby reinforces proposed in the Finance Bill, 2025, which is prospective in nature and thereby reinforces proposed in the Finance Bill, 2025, which is prospective in nature and thereby reinforces that no such restriction was in force during the relevant assess that no such restriction was in force during the relevant assessment year. The denial of ment year. The denial of rebate under section 87A by the CPC, Bengaluru, appears to be based solely on system rebate under section 87A by the CPC, Bengaluru, appears to be based solely on system- rebate under section 87A by the CPC, Bengaluru, appears to be based solely on system driven logic and not on any statutory mandate. Moreover, the interpretation adopted by driven logic and not on any statutory mandate. Moreover, the interpretation adopted by driven logic and not on any statutory mandate. Moreover, the interpretation adopted by the CIT(A) in upholding such denial is, in our considered v the CIT(A) in upholding such denial is, in our considered view, not in consonance with iew, not in consonance with the plain and unambiguous language of the law as applicable for A.Y. 2024 the plain and unambiguous language of the law as applicable for A.Y. 2024–25. the plain and unambiguous language of the law as applicable for A.Y. 2024 5.18 Accordingly, we hold that the assessee is eligible for rebate under section 87A for 5.18 Accordingly, we hold that the assessee is eligible for rebate under section 87A for 5.18 Accordingly, we hold that the assessee is eligible for rebate under section 87A for A.Y. 2024–25 even though the income includes STCG taxable un 25 even though the income includes STCG taxable under section 111A. The der section 111A. The AO is directed to allow rebate of Rs.13,320/ AO is directed to allow rebate of Rs.13,320/- and recomputed tax liability accordingly. tax liability accordingly. The demand of Rs.15,820/ The demand of Rs.15,820/- raised in CPC intimation stands deleted. Refund, if any, shall raised in CPC intimation stands deleted. Refund, if any, shall be granted in accordance with law. be granted in accordance with law.

6. The issue is squarely covered in favour of the assessee by 6. The issue is squarely covered in favour of the assessee by the decision of the Co decision of the Co- ordinate Bench in the case of Jayshreeben Jayantibhai Palsana (supra), ordinate Bench in the case of Jayshreeben Jayantibhai Palsana (supra), and there is ordinate Bench in the case of Jayshreeben Jayantibhai Palsana (supra), no change in facts and law and the no change in facts and law and the Ld. DR for the revenue unable to produce any revenue unable to produce any contrary material to the above above-said finding of the Co-ordinate Bench (supra). I find ordinate Bench (supra). I find no reason to interfere in the said order of the Co no reason to interfere in the said order of the Co-ordinate Bench, therefore, ordinate Bench, therefore, respectfully following the binding judgement of the Co respectfully following the binding judgement of the Co-ordinate Bench Bench, I delete the addition, and allow the appeal the addition, and allow the appeal of the assessee.

Order is pronounced in the open court on Order is pronounced in the open court on 11/09/2025