ITO Vs Mahima Sahu (ITAT Jaipur)
Section 87A Rebate on STCG: ITAT Jaipur Upholds Full Claim for AY 2025–26
The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT), in Income Tax Officer, Tonk v. Mahima Sahu, upheld the allowance of a Section 87A rebate of ₹24,995 for Assessment Year 2025–26. The Assessing Officer/Centralised Processing Centre had restricted the rebate to ₹4,329. The Revenue challenged the appellate relief, contending that the rebate was unavailable against tax on short-term capital gains under Section 111A. Dismissing the appeal, the Tribunal relied on the assessee’s total income of ₹4,89,910, which was below the ₹7 lakh threshold, and affirmed the first appellate authority’s order.
Case Details
The decision was delivered in ITA No. 1359/JPR/2026 on 22 October 2026, following a hearing on 7 October 2026. The Bench comprised Judicial Member Kuldip Singh and Accountant Member Prakash.
The Revenue’s appeal arose from the order dated 12 March 2026 passed by the Additional/Joint Commissioner of Income Tax (Appeals), Mysore. The dispute concerned the extent of rebate available under Section 87A while computing the assessee’s tax liability for AY 2025–26.
Background of the Dispute
The assessee, a salaried employee, claimed a rebate of ₹24,995 under Section 87A. However, the AO/CPC allowed only ₹4,329, restricting the claim by ₹20,666.
Aggrieved by this restriction, the assessee approached the first appellate authority. The appellate authority allowed her appeal and deleted the disallowance, thereby accepting the rebate claim.
The Revenue subsequently challenged that relief before the Tribunal. Its objection focused on the availability of the rebate where the tax liability included income taxable at a special rate, specifically short-term capital gains falling under Section 111A.
Thus, the appeal concerned the restriction of a rebate already claimed by the assessee, rather than any addition to her disclosed income.
Revenue’s Objection to Rebate on Special-Rate Income
The Revenue argued that the first appellate authority was not justified in allowing the rebate against tax payable on short-term capital gains.
According to its grounds of appeal, Section 87A rebate was unavailable in respect of income tax payable on income chargeable at special rates, including short-term capital gains under Section 111A.
The Revenue also relied on CBDT Circular No. 13/2025 dated 19 September 2025. In its grounds, it contended that the circular clarified the statutory intention concerning rebate claims and required rectification where such claims had been erroneously allowed.
These assertions formed part of the Revenue’s challenge. The Tribunal’s order records the circular-based objection but does not reproduce the circular or undertake a separate, detailed examination of its contents.
Appeal Decided on Available Material
The assessee did not appear before the Tribunal despite service of notice. The Bench therefore proceeded to decide the appeal on the basis of the material available on record, with the assistance of the Revenue’s departmental representative.
The order records that the Tribunal heard the departmental representative and examined the available record before considering whether the appellate authority’s decision required interference.
The absence of the assessee did not prevent adjudication of the dispute. The Tribunal examined the merits of the Revenue’s challenge and ultimately sustained the relief already granted.
Tribunal Relies on Income Below ₹7 Lakh
The Tribunal observed that the first appellate authority had considered the issue in light of the rebate provision applicable where total income was chargeable to tax under Section 115BAC(1A).
It noted that an assessee whose total income did not exceed ₹7,00,000 was entitled to the rebate under Section 87A in the circumstances considered.
In the present case, the assessee’s total income was ₹4,89,910. Since this amount was below the stated threshold, the Tribunal concluded that she was entitled to claim the rebate.
The Bench accepted the reasoning of the first appellate authority and described its order as well reasoned. Its conclusion centred on the assessee’s total income and her entitlement to the rebate for the assessment year in dispute.
Restriction to ₹4,329 Held Unsustainable
The Tribunal expressly held that restricting the rebate to ₹4,329, against the assessee’s claim of ₹24,995, was not sustainable in law.
Consequently, it declined to interfere with the appellate order allowing the claim. The Revenue’s appeal was dismissed, leaving the full rebate relief intact.
The result was that the reduction of ₹20,666 made by the AO/CPC did not survive the appellate proceedings. The Tribunal affirmed the assessee’s entitlement to the amount claimed.
Scope of the Ruling
The ruling concerns AY 2025–26 and the facts recorded in this appeal. Although the Revenue specifically raised the issue of Section 111A short-term capital gains, the Tribunal’s reasoning is brief and rests principally on total income remaining below ₹7 lakh.
The order does not provide a separate computation of the capital gains or an extended interpretation of the CBDT circular cited in the grounds.
Accordingly, the decision is best understood as affirming the full Section 87A rebate in this particular appeal, while preserving the distinction between the Revenue’s arguments and the reasons actually recorded by the Tribunal.
Cases Discussed
- Kavita Paras Shah Vs ITO (ITAT Rajkot)
- Lisha Gajendra Marlecha Vs Income Tax Department (ITAT Mumbai)
- Kapish Hariprasad Poddar Vs ITO (ITAT Nagpur)
- Jayshreeben Jayantibhai Palsana Vs ITO (ITAT Ahmedabad)
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT JAIPUR
The Appellant, Income Tax Officer by filing the present appeal, sought to set aside the impugned order dated 12.03.2026 passed by the Additional/Joint Commissioner Income Tax (Appeals), Mysore [hereinafter referred to as the ‘Addl./JCIT(A)’] qua assessment year 2025-26 on the grounds inter-alia that:-
“1. Whether on the facts and circumstances of the case and in law, the Ld. Addl CIT(A)-Mysore is justified in allowing the rebate u/s 87A of the Act, on STCG, when rebate u/s 87A of the Act, 1961 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)-Mysore is justified in view of the CBDT Circular No. 13/2025, dated 19.09.2025 which has made it expressly clear that it was never the statutory intent to allow rebate in cases where income is chargeable to tax u/s 115BAC(1) of the Act, 1961 and any such cases where 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.”
2. The assessee has not come present despite service, do the Bench has decided to dispose off the appeal on the basis of material available on record with the assistance of the Ld. DR for the Revenue.
3. Briefly stated, facts necessary for consideration and adjudication of the issues at hand are : Assessee is a salaried employee claimed a rebate u/s 87A of the Act to the tune of Rs. 24,995/-, which was restricted to Rs. 4,329/- by the AO/CPC.
4. Assessee carried the matter before the Ld. CIT(A) by way of filing appeal, who has deleted the disallowance by allowing the appeal. Being aggrieved with the impugned order passed by the Ld. CIT(A), assessee has come up before the Tribunal by way of filing the present appeal.
5. We have heard Ld. DR for the Revenue and perused the record available on file.
6. Bare perusal of the impugned order under challenge goes to prove that Ld. CIT(A) has duly thrashed the issue in the light of the proviso to section 87 of the Act, where the total income of the assessee is chargeable to tax u/s 115BAC(1A) of the Act and if the total income of the assessee does not exceed Rs. 7,00,000/- he/she shall be entitled for deduction u/s 87A of the Act from the amount of income tax. Since the income of the assessee does not exceed Rs. 7,00,000/- (having total income of Rs. 4,89,910/- she is entitled to claim rebate u/s 87A of the Act.
7. We are of the considered view that Ld. CIT(A) has passed a well reasoned order as the restriction of rebate u/s 87A of the Act to the tune of Rs. 4,329/- against the claim of Rs. 24,995/- is not sustainable in the eyes of law.
8. Resultantly, the appeal filed by the Revenue is hereby dismissed.
Order pronounced in the open court on 22-10-2026 .
