Basty Keshava Shenoy Vs ITO (ITAT Bangalore)
Bangalore ITAT : 87A Rebate Available Even on STCG u/s 111A – CPC’s ‘System Driven’ Denial Quashed
In another important ruling for AY 2024-25, the Bangalore ITAT held that rebate under section 87A cannot be denied merely because part of the assessee’s income consists of short-term capital gains taxable u/s 111A. The assessee had total income below ₹7 lakh under the new tax regime u/s 115BAC(1A), including STCG on listed shares taxable at special rates. CPC restricted rebate only to tax on normal income and denied rebate attributable to STCG tax u/s 111A.
The Tribunal held that section 87A grants rebate based on “total income” and once STCG forms part of total income as defined u/s 2(45), rebate cannot be denied unless there is an express statutory prohibition. The ITAT emphasized that while section 112A(6) specifically restricts rebate against certain capital gains, there was no such restriction under section 111A for AY 2024-25. Hence, the Revenue could not import such limitation through interpretation.
Relying on the Ahmedabad Tribunal ruling in Jayshreeben Jayantibhai Palsana, the ITAT observed that the denial of rebate by CPC appeared to be based purely on “system-driven logic and not on any statutory mandate.” The Tribunal further held that the amendment introduced by the Finance Act, 2025 restricting rebate against special-rate income was prospective in nature and itself indicated that no such restriction existed earlier.
Accordingly, the Bangalore ITAT directed CPC/AO to grant full rebate u/s 87A even against tax payable on STCG taxable u/s 111A and delete the consequential demand.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
