Case Law Details
Sarikaben Gopalbhai Polekar Vs ITO (ITAT Surat)
The assessee filed her return of income for AY 2024-25 on 15.07.2024 under the new tax regime under section 115BAC of the Income Tax Act, declaring total income of Rs.4,30,020. The income included Long Term Capital Gains (LTCG) arising from the sale of immovable property, which was taxable under section 112 of the Act. Since her total income was below Rs.7,00,000, she claimed a rebate of Rs.25,000 under section 87A against the tax payable on the LTCG.
However, while processing the return under section 143(1) through an intimation dated 15.04.2025, the CPC accepted the returned income but denied the rebate claimed under section 87A. The assessee challenged the denial, contending that section 87A did not prohibit granting rebate against tax payable on LTCG taxable under section 112. It was argued that wherever the legislature intended to restrict such rebate, it had expressly done so, and no such restriction existed in the relevant provisions applicable to the assessee. The assessee also contested the levy of interest under sections 234B and 234C.
The Department relied upon the orders of the lower authorities and argued that rebate under section 87A was not available where LTCG exceeded Rs.1,00,000, referring to section 112A(6). According to the Department, since the assessee had declared LTCG exceeding Rs.1,00,000, the denial of rebate was justified.
The Tribunal examined the provisions of section 112A(6) and observed that the section clarifies that rebate under section 87A is to be allowed from the income tax on the total income after reducing the tax payable on specified capital gains. The Tribunal held that the interpretation adopted by the lower authorities was incorrect. It noted that the relevant consideration was the amount of income tax calculated on such LTCG and not merely the amount of LTCG itself. Although the assessee had declared LTCG exceeding Rs.1,00,000, the tax computed on such gains did not cross the threshold contemplated by the provision.
Accordingly, the Tribunal held that the Commissioner (Appeals) was not justified in confirming the denial of rebate under section 87A. Grounds relating to the rebate claim were allowed in favour of the assessee. The ground relating to levy of interest under sections 234B and 234C was treated as consequential and was not separately adjudicated. Consequently, the appeal of the assessee was allowed.
FULL TEXT OF THE ORDER OF ITAT SURAT
The appeal filed by the assessee is against the order passed by the Learned Commissioner of Income Tax (Appeals), ADDL/JCIT(A)-4, [in short “Ld. CIT(A)”], Bengaluru, dated 19.08.2025 for the Assessment Year (in short “AY”) 2024-25.
2. The assessee has raised the following grounds of appeal:
“) The Appellant objects to the erroneous demand of Rs. 30,880/- determined vide intimation u/s 143(1).
2) The Appellant objects to non-grant of rebate in the intimation u/s 143(1) while computing the Total Tax payable by the Appellant.
3) Both lower authorities erred in not granting rebate u/s 87A of the Act of Rs. 25,000/-claimed against tax payable on long term capital gains u/s 112, even though the Act permits the said rebate of tax against tax payable on long term capital gains u/s 112.
4) Having regard to the facts and circumstances of the lower authorities be directed to grant rebate u/s 87A of the Act.
5) Both lower authorities erred in misreading and misinterpreting the provisions of section 87A rws 112 and 115BAC
6) Both lower authorities erred in levying interest under section 234B and ”
3. The assessee filed return of income on 15.07.2024 declaring total income of 4,30,020/- under the new regime u/s 115BAC of the Income Tax Act, 1961 (in short “the Act”). The assessee offered to tax Long Term Capital Gains (in short “LTCG”) of Rs.1,30,020/- on sale of immovable property which was taxable to tax u/s 112 of the Act. Since the total income was below Rs.7,00,000/-, the assessee claimed rebate u/s 87A of the Act against the tax on LTCG of Rs.25,000/-. The assessee was in receipt of intimation order u/s 143(1) of the Act dated 15.04.2025 for AY 2024-25. In the said intimation, the return of income of Rs.4,30,020/- was accepted by CPC, Bengaluru/AO, but was not granted rebate u/s 87A of the Act to that of Rs.25,000/- which was claimed by the assessee in the return of income.
4. The Ld. Authorised Representative (in short “Ld. AR”) for the assessee submitted that the assessee has offered to tax LTCG of Rs.1,30,020/- on sale of property which was chargeable to tax u/s 112 of the Since the assessee has opted new regime u/s 115BAC of the Act the total taxable income was below Rs.7,00,000/- and therefore she claimed rebate u/s 87A of the Act against the tax payable on LTCG of Rs.25,000/- which is not barred by law. The Ld. AR submitted that section 87A of the Act does not mention that rebate cannot be claimed against LTCG tax. It only provided that where the total income of the assessee is chargeable to tax under sub clause (1A) of section 115BAC of the Act, and the total income does not exceed Rs.7,00,000/-, the assessee is eligible for a rebate of 100% of tax or Rs.25,000/- whichever is lower. While filing the return of income, the income tax authorities also permitted the claim of said rebate u/s 87A of the Act against tax payable on LTCG u/s 112 of the Act. The Ld. AR further submitted that wherever the Act denies claim of rebate u/s 87A of the Act, like section 112A(6) of the Act, the same restriction is specifically mentioned in the said section. However, section 111A of the Act does not provide for any bar or restriction against claim of rebate u/s 87A of the Act. Section 115BAC(2) of the Act does not provide for non availability of rebate u/s 87A of the Act. The Ld. AR further submitted that the CPC/AO also erred in levying interest u/s 234B & 234C of the Act despite the assessee’s tax liability is below Rs.10,00,000/-.
5. The Ld. Departmental Representative (in short “Ld. DR”) relied upon the assessment order and the order of the Ld. CIT(A). The Ld. DR further pointed out that the provisions of section 112(6) of the Act categorically denies rebate u/s 87A of the Act on the LTCG earned from any capital gains if it exceeds Rs.1,00,000/-. In the instant case, the assessee has declared LTCG of Rs.2,76,858/-. Therefore, the AO/CPC has rightly denied rebate u/s 87A of the Act as per the provisions of section 112A(6) of the The adjustment made by the CPC/AO was rightly confirmed by the Ld. CIT(A).
6. Heard both the parties and perused all the relevant materials available on record. It is pertinent to note that section 112A(6) of the Act categorically mentions that where the total income of an assessee includes any LTCG referred to in sub section (1), the rebate u/s 87A of the Act shall be allowed from the Income Tax Act on the total income as reduced by tax payable on such capital gains. This categorically clarifies that the assessee is entitled to claim the rebate where the assessee’s income includes LTCG. The interpretation of section 112A(6) of the Act is that the amount of income tax calculated on such LTCG exceeding Rs.1,00,000/- @ 10% fails in the assessee’s case, as the assessee declared LTCG of Rs.2,76,858/-, but the amount of income tax calculated on such LTCG does not exceed Rs.1,00,000/- threshold as it is not the entire LTCG which has to be taken into account but the tax on that entire capital gain (LTCG).
Thus, the Ld. CIT(A) was not right in confirming the addition, thereby denying the rebate. Thus, the Grounds No.1 to 5 are allowed.
7. As regards Ground 6, the same is consequential and hence not adjudicated.
8. In result, appeal of the assessee is
Order pronounced in the open court on 03.06.2026
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