ITO Vs Shashi Kant Tulsian (ITAT Jaipur)
Special Rate, Same Rebate: ITAT Upholds Section 87A Relief on Short-Term Capital Gains
Revenue’s Appeal Against Rebate Dismissed
The Jaipur Bench of the Income Tax Appellate Tribunal upheld the assessee’s entitlement to rebate under Section 87A on tax attributable to short-term capital gains under Section 111A for Assessment Year 2024-25. The Tribunal dismissed the Revenue’s appeal and affirmed the appellate order allowing the rebate of ₹19,857.
The decision reinforces the distinction between taxing income at a special rate and excluding that tax from rebate. Following earlier Tribunal decisions, the Bench held that the provisions applicable to the relevant year did not contain an express exclusion for tax payable under Section 111A.
CPC Denial Followed by Unsuccessful Rectification
The assessee filed his return on 20 June 2024, declaring total income of ₹4,32,280, which included short-term capital gains of ₹2,12,152. He claimed rebate of ₹19,857 under Section 87A.
While processing the return under Section 143(1), the CPC denied the rebate. The assessee subsequently filed a rectification application under Section 154, but that application was also rejected.
He then appealed against the rejection of rectification. The first appellate authority allowed his claim by following Jayshreeben Jayantibhai Palsana v. ITO, ITA No. 1014/Ahd/2025, concerning the same issue for Assessment Year 2024-25.
The Revenue challenged this relief before the Jaipur Tribunal.
Revenue Relied on Special Rates and the CBDT Circular
The Revenue contended that Section 87A rebate was unavailable on income tax payable at special rates, including tax on short-term capital gains under Section 111A.
Its grounds also expressly invoked CBDT Circular No. 13/2025, arguing that the circular established that allowing such rebate had never been the statutory intention and that erroneous claims required rectification.
Thus, the appeal placed before the Tribunal both the special-rate argument and the Revenue’s reliance on the circular. Nevertheless, the Bench upheld the rebate by following the existing judicial precedents. The assessee was not represented at the hearing, but the Tribunal examined the appellate order and the applicable decisions.
“Total Income” Does Not Exclude Section 111A Gains
The reasoning adopted through the precedents was that Section 87A, as applicable to Assessment Year 2024-25, granted rebate to an eligible resident individual assessed under Section 115BAC(1A) whose total income did not exceed ₹7 lakh, subject to the statutory ceiling.
The provision referred to income tax on total income, without distinguishing between income taxable at ordinary slab rates and short-term capital gains taxable under Section 111A.
The fact that Section 111A prescribes a separate tax rate does not, by itself, create a restriction on rebate. A special rate determines the tax computation; an exclusion from rebate requires statutory support.
On that interpretation, the assessee’s Section 111A income did not disqualify him from claiming Section 87A relief.
Section 112A Contains the Express Restriction
The decisions reproduced in the order drew attention to Section 112A(6), which expressly restricts Section 87A rebate in relation to tax on long-term capital gains covered by that provision.
There was no corresponding exclusion in Section 111A for the relevant year. The contrast supported the conclusion that Parliament had expressly restricted rebate where it intended to do so.
This distinction also defines the scope of the present ruling. The decision concerns short-term capital gains under Section 111A; it does not remove the express restriction applicable to Section 112A gains.
Subsequent Amendment Cannot Rewrite the Relevant Year
The Ahmedabad Tribunal’s reasoning, reproduced and followed in the order, also addressed the Finance Act, 2025 amendment applicable from Assessment Year 2026-27.
It treated the prospective introduction of restrictions as supporting the absence of such a restriction in the provisions applicable to Assessment Year 2024-25. The explanatory memorandum could assist interpretation but could not override the statutory language.
Similarly, the “subject to” wording in Section 115BAC(1A) preserved the operation of special tax rates under Chapter XII. It did not automatically modify the independent rebate provision in Chapter VIII.
Consistent Tribunal Decisions Supported the Assessee
The Bench also followed its earlier decision in ITO v. Rajshree Kothari, ITA No. 399/JPR/2026, dated 20 August 2026.
That decision referred to favourable rulings in Pranay M. Kothari, Manojbhai C. Kamdar, Jayshreeben Jayantibhai Palsana and Basty Keshava Shenoy v. ITO, ITA No. 3134/Bang/2025.
The Departmental Representative could neither distinguish the precedents nor identify a contrary decision of the jurisdictional High Court or Supreme Court. Consequently, the Tribunal found no infirmity in the appellate relief and dismissed the Revenue’s grounds.
Author’s Comments
This is a useful favourable decision because the Revenue expressly relied on CBDT Circular No. 13/2025, yet its appeal failed. However, accuracy requires noting that the Tribunal did not separately analyse or declare the circular invalid; it decided the appeal by following earlier rulings.
The statutory distinction remains crucial: Section 111A prescribes a special rate, while Section 112A expressly restricts rebate. Treating every special-rate income alike overlooks that difference.
For Karnataka practitioners, the reference to Basty Keshava Shenoy of the Bangalore Bench is particularly relevant. The present ruling directly concerns Assessment Year 2024-25; any reliance for another year must be matched to the statutory provisions applicable to that year.
Cases Discussed
- Jayshreeben Jayantibhai Palsana Vs ITO, ITA No. 1014/Ahd/2025 (ITAT Ahmedabad) — followed by the first appellate authority and reproduced in the impugned order; held that for AY 2024-25 there was no express bar in Section 87A or Section 111A against rebate on tax payable on STCG under Section 111A.
- ITO Vs Rajshree Kothari, ITA No. 399/JPR/2026, order dated 20.08.2026 (ITAT Jaipur) — followed; held the assessee eligible for Section 87A rebate on short-term capital gains and reproduced the supporting line of Tribunal authorities.
- Pranay M Kothari Vs DCIT, ITA No. 3469/Chny/2025 (ITAT Chennai) — relied upon in Rajshree Kothari; its findings on Section 87A rebate over “total income” were reproduced.
- Manojbhai C. Kamdar Vs ITO, ITA No. 572/RJT/2025 — cited as a favourable Tribunal decision on Section 87A rebate.
- Basty Keshava Shenoy Vs ITO, ITA No. 3134/Bang/2025 (ITAT Bangalore) — cited as a favourable Tribunal decision on Section 87A rebate.
- Venkatachalam Venkatraman Vs ITO, ITA No. 1431/Chny/2025, order dated 20.08.2025 (ITAT Chennai) — considered in the reproduced reasoning for the proposition that Section 87A rebate operates on the entire tax liability computed on total income without an exclusion merely because income is taxable at special rates.
- The Chamber of Tax Consultants Vs Director General of Income Tax (Systems), judgment dated 24.01.2025 (Bombay High Court) — considered in the reproduced Ahmedabad decision; the High Court required the system to permit the rebate claim to be made while leaving substantive eligibility for quasi-judicial determination.
- Rajiv G Shah (Bombay High Court) (WP No.3193 of 2022)— referred to in the findings reproduced through Pranay M Kothari on the absence of an exclusion from the plain language of Section 87A.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT JAIPUR
1. The present appeal has been filed by the Revenue against the order passed by the Office of the Commissioner of Income Tax, Appeal Addl./JCIT(A) Bhubaneswar (hereinafter referred to as “Ld. CIT(A)”), dated 20.01.2026 under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
2. The grounds raised read as under:-
1. Whether on the facts and circumstances of the case and in law, the Ld. Addl.CIT(A), Bhubneswar is justified in allowing the rebate U/s 87A of the Act, on STCG, when rebate U/s 87A of the Act is not available in respect of Income Tax payable on income chargeable to tax on special rates, which includes Short Term Capital Gain U/s 111A of the Act
2. Whether on the facts and circumstances of the case and in law, the order of the Ld. Addl.CIT(A), Bhubneswar is justified in view of the CBDT Circular No. 13/2025 dated 19.09.2025, which has made is expressly clear that it was never the statutory intent to allow rebate in cases WHARE income is chargeable to tax U/s 115BAC(1) of the Act and any such cases WHARE rebate is erroneously claimed are to be rectified, thereby having no doubt that such claim was statutorily never permissible
3. The appellant craves leave OR reserves right to amend, modify, alter, add OR forego any ground(s) of appeal at any time before OR during the hearing of this appeal.
3. The solitary issue in the present appeal relates to denial of rebate of tax claimed by the assessee u/s 87A of the Act, on the taxes paid on income earned on short term capital gain. The denial of rebate was made by the CPC while processing the return of income filed by the assessee, in the intimation made u/s 143(1) of the Act. The assessee had filed return of income on 20.06.2024 declaring total income at Rs.4,32,280/-. The total income consists of short term capital gain to the tune of Rs.2,12,152/- and claimed tax rebate of Rs.19,857/- u/s 87A of the Act, which was denied by the CPCin the intimation made u/s 143(1) of the Act. The assessee filed a rectification application u/s 154 of the Act which was also dismissed by the AO. Against the order of the AO rejecting assesses rectification application, the assessee filed appeal to the Ld.CIT(A) who allowed assessee’s claim of rebate holding at para 4 of his order as under:-
…….
4. Consideration of issues under appeal and reasons for decision:-
4.1. In the present appeal, the appellant has contested the exclusion of short term capital gain u/s 111A of the Act from the scope of rebate u/s 87A of the Act. The rebate under section 87A, as amended by the Finance Act, 2023 applicable for AY 2024-25, is available where the total income does not exceed Rs. 7,00,000/- and is chargeable under section 115BAC(1A) and the appellant for the impugned assessment year has not opted out also.
4.3. On perusal of the above grounds of appeal, it is found that the contention of the appellant is that it is eligible for 87A rebate on special rate income as well which has been disallowed by the CPC.
Section 87A as amended from 01.04.2023 w.e.f 2024-25 is as below:
[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 for any assessment year, of an amount equal to one hundred per cent of such income-tax or an amount of twenty-five thousand rupees, or an amount whichever is less;
(b) exceeds seven hundred thousand rupees and the income-tax payable on such total income exceeds the amount by which the total income is in excess of seven hundred thousand rupees, the assessee 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, of an amount equal to the amount by which the income-tax payable on such total income is in excess of the amount by which the total income exceeds seven hundred thousand rupees.]
4.4. Further, on following the order passed by the Hon’ble ITAT, AHMEDABAD, in case of JayshreebenJayantibhai Palsana vs. ITO, Ward-1(9) Ahmedabad for AY 2024-25 (ITA No. 1014/Ahd/2025). In that order, the Hon’ble ITAT, on identical facts and issues, ruled unequivocally in favour of the Appellant. Here it is stated that this decision is applicable to the present case of the appellant and the above mentioned ITAT order is reproduced as below:-
“5. We have carefully considered the rival submissions, the impugnedorder 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.”
5.4. 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. 4,65,440/-, 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. 23,237/-, resulting in a demand of Rs. 15,820/-. The CIT(A) upheld the denial, primarily relying on-
(0) the “subject to clause in section 115BAC(1A), provisions of Chapter XII, and
(ii) the Explanatory notes to the Finance Bill 2025.
5.5. Having perused the relevant statutory provisions and the arguments advanced by the assessee’sAuthorised Representative (AR), we find merit in the claim of the assessee.
5.6. 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 (IA) of section 115BAC and the total income.
(a) does not exceed seven hundred thousand rupees, the assessee shall be entitled to a deduction.
5.7. 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.
5.8. 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 gain referred to in sub-section (1), the rebate under section 87Ashall be allowed from the income-tax on the total income as reduced by tax payable on such capital gain.
5.9 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 jas in section 112A), it has done expressly. In contrast, the absence of any exclusion in section 111A or in section 87A must be construed in favour of the assessee.
5.10. At this point we discuss the interplay of Section 115BAC(1A) with Chapter XII where the soupe is Confined to Computation of Tax Rates. Section 115BAC(1A) opens with the phrase
“Notwithstanding anything contained in this Act but subject to the proussions of this Chapter…
5.11. The purpose of this clause is to enable the computation of income-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 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
5.12. The CITA) placed strong r reliance the Explanatory Memorandum to the Finance Bill 2025, which clarified that rebate under section 87A is not available tax arising from special rata 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 (ie, 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.Υ. 2024-25, rebate under section 87A cannot be denied merely because tax arises under section 111A
5.13. 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 who had opted for 115BAC (1A). While the Hon’ble Court refrained from interpreting the substantive 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.
Thus, the Hon’ble High Court clearly held that the CPC utility or system configuration cannot override statutory rights, and that each case must be adjudicated on its own merits. We at the Tribunal, being such quasi-judicial authority, are therefore duty-bound to examine the claim in light of the statutory framework and not be influenced by automated denial or procedural logic adopted by the CPC
5.14. 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 Manya, wherein on identical facts the CIT(A) allowed the claim of rebate under section 87A respect of STCG taxable under section 111A. We also note that such decision was taken by the JCIT/AddI.CITIA) relying on the decision of Beena ManishbhaiFofaria for the A.Y. 2024-25. While not binding, the said appellate order affirms that divergent views exist and such benefit has been allowed in similar factual circumstances.
5.15. 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 restriction was in force during the relevant assessment year. The denial of rebate under section 87A by the CPC, Bengaluru, appears to be based solely such on system-driven logic and not on any statutory mandate. Moreover, the interpretation adopted by the CIT(A) in upholding such denial is, in ourconsidered view, not in consonance with the plain and unambiguous language of the law as applicable for A.Y. 2024-5
5.16. 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.
6. In the result, the appeal of the assessee is allowed.”
4.5. Therefore, the AO is directed to allow the claim of the appellant by following the above ITAT order, which is squarely applicable to the case of the appellant.
……
4. None appeared on behalf of the assessee.
5. We have gone through the order of the Ld.CIT(A) who , we have noted, has allowed assessee’s claim of rebate u/s 87A of the Act on short term capital gains following the decision of the ITAT in the case of Jayshreeben Jayantibhai Palsana vs. ITO, Ward 1(9) ITA No. 1014/Ahd/2025. Further the ITAT Jaipur Bench in the case of ITO Vs. Rajshree Kothari in ITA No.399/JPR/2026 order dated 20.08.2026, has held the assessee eligible to claim rebate 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 Shenoy Vs. ITO in ITA No.3134/Bang/2025
7. Before us, ld. DR was unable to distinguish the decisions, referred to by ld. Counsel for the assessee as above, nor she was able to draw my attention to any contrary decision of either the Jurisdictional High Court or the Hon’ble Apex Court in this regard.
8. We have gone through the orders of the ITAT, referred to by the ld. Counsel for the assessee, and have noted that it has been consistently held that the provisions of Section 87A of the Act provide rebate on the entire tax liability computed on the “total income” without drawing any distinction between income taxable at normal rates, and income taxable at special rates, i.e. short term capital gain taxable at rates specified u/s 111A of the Act. The findings of the ITAT in the case of Pranay M Kothari Vs. DCIT in ITA No.3469/Chny/2025 dated 23.03.2026 at para 7 to 9 of the order as under:-
……….
7. We note that an identical issue came up for consideration before this Tribunal in the case of Venkatachalam Venkatraman v. ITO [ITA No.1431/Chny/2025, order dated 20.08.2025]. The Tribunal therein held that the provisions of section 87A of the Act provide rebate on the entire tax liability computed on the “total income” without drawing any distinction between income taxable at normal rates and income taxable at special rates. It was accordingly concluded that rebate u/s.87A of the Act is available even in respect of such incomes taxed under special provisions. The relevant findings are extracted below for ease of reference:-
“5.0 been concluded that to claim the rebate total income is to be computed after excluding any special rate income so as to determine the final tax liability. We have noted that the view taken by the Ld.CIT(A) of assessee filing return u/s 115BAC and consequently ineligible for rebate is not in order. The only controversy in this case is whether rebate u/s 87A is available on all the incomes or there is any exclusion. We have noted that the provisions of section 87A do not provide for such an exclusion. The first proviso to section 87A includes an exemption qua total income falling u/s 115BAC (1A) however the impugned amendment has been brought by Finance Act 2024 w.e.f 01.04.2025. The present AY-2024 25 would not be hit by the same. We have noted that Hon’ble Bombay High Court in the case of 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) 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 doesnot 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.
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 assessees who had opted for 115BAC(1A). While the Hon’ble Court refrained from interpreting the substantive 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.
Thus, the Hon’ble High Court clearly held that the CPC utility or system configuration cannot override statutory rights, and that each case must be adjudicated on its own merits. We at the Tribunal, being such a quasi-judicial authority, are therefore duty-bound to examine the claim in light of the statutory framework and not be influenced by 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 CIT(A)-1, Nagpur in the case of Avni Milanbhai Maniya, wherein on identical facts the 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/AddI.CIT(A) relying on the decision of Beena ManishbhaiFofaria for the A.Y. 2024-25. While not binding, the said appellate order affirms that divergent views exist and such benefit has been allowed in similar factual circumstances.
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 solely on 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.”
9. Respectfully following the ratio laid down in the above cases, we hold that the assessee in the instant case is entitled to rebate u/s.87A of the Act for the impugned assessment year, notwithstanding that the total income includes taxable long term capital gains chargeable at special rates. The AO is accordingly directed to allow the rebate of Rs.25,000/- claimed by the assessee u/s.87A of the Act and recompute the tax liability. Thus, the grounds of appeal raised by the assessee are allowed.
9. The ITAT in the other decisions has also reiterated the proposition of law as above. The decision rendered by the ITAT in the cases above, squarely applies to the facts of the present case, following which, we hold that there is no infirmity in the order of the Ld.CIT(A) holding the assessee entitled to rebate u/s 87A of the Act on the taxes paid on short term capital gain.
…….
6. Before us, ld. DR was unable to distinguish the decisions referred to above, nor was she able to draw our attention to any contrary decision of either the Jurisdictional High Court or the Hon’ble Apex Court in this regard.
7. We therefore hold that Ld. CIT(A) had rightly found the assessee to be eligible to claim rebate u/s 87A of the Act on the taxes paid on short term capital gain of Rs.19,857/-.
8. Grounds raised by the Revenue are dismissed.
9. In effect, the appeal of the Revenue is dismissed.
Order pronounced in the Open Court on 06.10.2026
