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Facts
The assessee claimed a rebate under section 87A of the Income Tax Act for AY 2024-25, which included income from capital gains. The CPC restricted this claim, disallowing the rebate on capital gains. The assessee argued that their total income was below the threshold and thus eligible for the rebate.
Held
The Tribunal held that for AY 2024-25, there was no express bar in Section 87A or Section 111A denying rebate on tax payable on short-term capital gains under the new tax regime. The proposed amendment in the Finance Bill 2025, being prospective, reinforced this interpretation for the relevant year.
Key Issues
Eligibility for rebate under Section 87A on income including capital gains taxable at special rates, especially under the new tax regime and prior to prospective legislative amendments.
Sections Cited
87A, 115BAC, 111A
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Income Tax Appellate Tribunal, SURAT “DB” BENCH, SURAT
Before: DR. B.R.R. KUMAR, VICE- & MS. SUCHITRA KAMBLE
O R D E R PER SUCHITRA KAMBLE, JUDICIAL MEMBER:-
This is an appeal filed against the order dated 28-06-2025 passed by CIT(A)/Addl/JCIT-(A)-2, Pune for assessment year 2024-25.
The issue in the present appeal is related to disallowance u/s. 87A of the Act. The assessee filed return of income for 2024-25 on 26th July, 2024 thereby obtaining for new tax regime u/s. 115BAC. The total income of the assessee was Rs. 4,07,462/- comprising normal income of Rs. 48,435/- tax on regular rate under Income Tax Act, 1961. Income from capital gain of Rs. 3,59,327/- was taxed at special rates as prescribed under the Income Tax new Regime. While filing his return of DhaneshJivabhaiVaishyaVs. ITO Asst.Year : 2024-25 - 2– income the assessee claimed a rebate u/s. 87A of the Act amounting to Rs.21,492/-. The CPC restricted the assessee’s claim of rebate u/s. 87A of the Act on the capital gains income of Rs.3,59,327/- and disallowed the rebate claim of Rs. 21,492/- pertaining to the income from capital gain. At the time of hearing, the ld. A.R. submitted that the assessee’s total income is inclusive of income from capital gains was below the threshold of 7,00,000/- stipulated u/s. 87A of the Act. Thus, the assessee is entitled for rebate u/s. 87A of the Act. The ld. A.R. submitted that the decision of Hon’ble Tribunal in case of Jayshreeben Jayantibhai Palsana vs. ITO vide order dated 12-08-2025.
The ld. D.R. relied upon the assessment order and the order of the CIT(A).
We have heard both the parties and perused the material available on record. It is pertinent to note that as per the Finance Bill 2025, it was proposed to amend section 87A to deny rebate on all incomes taxable under special rates, from A.Y. 2026-27 and the year before us is A.Y. 2024-25. This issue decided by the by the Tribunal as follows:- “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." DhaneshJivabhaiVaishyaVs. ITO Asst.Year : 2024-25 - 3– xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 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 prospective in nature and thereby reinforces that no such restriction was in force during the relevant assessment year. The denial of rebate under section 87A by the CPC, Bengaluru, appears to be based solelyon system-driven logic and not on any statutory mandate. Moreover, the interpretation adopted by the CIT(A) in upholding such denial is, in our considered view, not in consonance with the plain and unambiguous language of the law as applicable for A.Y. 2024-25. 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 under section 111A. The AO is directed to allow rebate of Rs. 13,320/- and recompute tax liability accordingly. The demand of Rs.15,820/- raised in CPC intimation stands deleted. Refund, if any, shall be granted in accordance with law.
In the result, the appeal of the assessee is allowed.”
The present assessee’s case is identical, therefore, the appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed.
Order is pronounced in the open Court on 09.03.2026 (DR. B.R.R. KUMAR) (SUCHITRA KAMBLE) VICE-PRESIDENT JUDICIAL MEMBER Surat; Dated 09/03/2026 ak DhaneshJivabhaiVaishyaVs. ITO Asst.Year : 2024-25 - 4–