ITO Vs Sanjay Kumar Garg (ITAT Jaipur)
The Jaipur Bench of the ITAT has held that, for AY 2025-26, a resident individual governed by the new tax regime and having total income not exceeding ₹7 lakh was entitled to rebate u/s 87A even against tax payable on short-term capital gains u/s 111A. Neither section 87A nor section 111A, as applicable to the year, contained any express restriction denying the rebate.
The assessee, Sanjay Kumar Garg, filed his return u/s 139(1) on 15.09.2025 under the new tax regime u/s 115BAC. He declared income under the heads salary, capital gains and other sources, aggregating to approximately ₹6.91 lakh.
Since the total income did not exceed ₹7 lakh, the assessee claimed rebate of ₹23,494 u/s 87A. The tax included tax payable upon short-term capital gains chargeable at the special rate u/s 111A.
While processing the return u/s 143(1), CPC denied the rebate against the tax attributable to the special-rate capital gains. The CIT(A), however, allowed the assessee’s claim. The Revenue challenged that relief before the Tribunal.
The Revenue contended that rebate u/s 87A was unavailable against tax payable on income chargeable at special rates, including STCG u/s 111A. Reliance was also placed upon CBDT Circular No. 13/2025 dated 19.09.2025, which, according to the Department, clarified that it was never the legislative intention to allow the rebate against tax on special-rate income and that cases involving an erroneous allowance could be rectified.
