Venkatachalam Venkatraman Vs ITO (ITAT Chennai)
The assessee appealed against the order dated 27.03.2025 passed by the CIT(A), Udaipur, for Assessment Year 2024-25, challenging the denial of rebate of Rs.12,500 under Section 87A of the Income Tax Act. The assessee argued that the rebate was claimed because total income did not exceed Rs.5 lakhs and that Section 87A does not exclude long-term capital gains (LTCG) from the computation of total income. It was submitted that total income, as defined under Section 2(45), includes all heads of income, and therefore the assessee’s total income of Rs.4,97,220, which included LTCG, qualified for the rebate. Reliance was placed on the Bombay High Court judgment in Rajiv G Shah, which held that Section 87A contains no indication that any category of income or tax should be excluded when total income falls within the prescribed threshold.
The CPC had denied the rebate on the ground that LTCG taxed at special rates is not eligible for rebate, and the CIT(A) concurred, additionally noting that the assessee had filed the return under the new tax regime under Section 115BAC, concluding that rebate under Section 87A was not available. However, the Tribunal found that the CIT(A)’s view regarding Section 115BAC was incorrect. It held that the only issue was whether Section 87A excluded any type of income from the computation of total income for determining rebate eligibility. The Tribunal observed that Section 87A contains no such exclusion. It noted that although the first proviso to Section 87A includes an exemption for total income falling under Section 115BAC(1A), that amendment, introduced by the Finance Act 2024 with effect from 01.04.2025, does not apply to AY 2024-25.
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