Bombay HC Left Adjudication of Section 87A Rebate Eligibility to Tax Authorities

In a significant ruling by the Bombay High Court, the Chamber of Tax Consultants, through its president, Mr. Vijay Bhatt, challenged the interpretation of Section 87A of the Income Tax Act, particularly in relation to Section 115BAC. The petitioners argued that the rebate under Section 87A should be applicable not only to the tax calculated under Section 115BAC but also to taxes computed under other provisions of Chapter XII, unless expressly prohibited by the Act. According to the petitioners, the total income for tax computation includes income from all heads, and taxes should be determined based on the aggregate income, not segregated into parts.

On the other hand, the Additional Solicitor General contended that Section 87A rebate should only be applicable to the tax calculated under Section 115BAC, as the section deals with simplified tax rates for those giving up exemptions and deductions. The respondent’s argument emphasized that Section 87A rebate is meant exclusively for tax determined under Section 115BAC, which is considered a special provision. The Court, after hearing extensive arguments, found that the provisions were ambiguous and insufficiently clear, prompting it to rule that the assessee should not be precluded from making a claim for the rebate, which could be adjudicated during the assessment process under Sections 143(1) and 143(3).