Shevgoor Namratha Kamath Vs ITO (ITAT Bangalore)
Bangalore ITAT : Rebate U/s 87A Allowed on LTCG U/s 112 – CPC Cannot Deny Relief Merely Because Income is Taxed at Special Rate
In a significant 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 long-term capital gains taxable u/s 112. The assessee had opted for the new tax regime u/s 115BAC(1A), declared total income below ₹7 lakh, and claimed rebate of ₹25,000/-. CPC denied the rebate on the ground that income taxable at special rates does not qualify for rebate and even rejected rectification u/s 154.
The Tribunal disagreed with the Revenue and held that section 87A uses the expression “total income”, and once LTCG forms part of total income as defined u/s 2(45), it cannot be artificially excluded unless the statute specifically provides so. The ITAT noted that while section 112A(6) expressly bars rebate against certain LTCG, there is no similar restriction under section 112 for the relevant assessment year. Therefore, such restriction cannot be imported into the law by implication.
The ITAT relied on the Ahmedabad Tribunal ruling in Jayshreeben Jayantibhai Palsana and observed that the subsequent amendment made by the Finance Act, 2025 restricting rebate against special-rate income was prospective in nature and itself demonstrated that no such restriction existed earlier. The Tribunal further remarked that the denial by CPC appeared to be based on “system-driven logic and not on any statutory mandate.”
Accordingly, the Tribunal held that where total income does not exceed ₹7 lakh, rebate u/s 87A is allowable even against tax payable on LTCG taxable u/s 112 for AY 2024-25, and directed CPC/AO to grant the rebate and delete the consequential demand.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal has been instituted by the assessee against the order of the Ld. CIT(A) passed u/s 250 of the Act dated 08.10.2025.
