Manojbhai C. Kamdar Vs ITO (ITAT Rajkot)
System Logic Can’t Override Statute: ITAT Allows 87A Rebate on STCG u/s 111A for AY 2024-25 under New Tax Regime Rebate u/s 87A – No Bar in Law – Finance Bill 2025 Restriction Held Prospective
Assessee, a resident individual, filed return for AY 2024-25 declaring total income of ₹6.76 lakh (including short-term capital gains on listed equity shares taxable u/s 111A) & opted for the new regime u/s 115BAC(1A). CPC while processing u/s 143(1) denied rebate u/s 87A of ₹13,320 & raised demand of ₹15,820, reasoning that rebate is not available against STCG taxed at special rate u/s 111A.
CIT(A) (NFAC) upheld CPC’s adjustment relying on the “subject to” clause in s.115BAC(1A), provisions of Chapter XII, & explanatory memorandum to Finance Bill, 2025, implying that rebate cannot be claimed against tax on special rate income.
Before ITAT, Assessee relied on the coordinate bench ruling in Jayshreeben Jayantibhai Palsana Vs ITO (ITA No.1014/Ahd/2025, order dt. 12.08.2025) which held that:
- Section 87A does not contain any bar for STCG u/s 111A.
- Absence of restriction (unlike express denial in s.112A(6) for LTCG) shows legislative intent to allow rebate.
- Prospective amendment proposed in Finance Bill, 2025 (effective AY 2026-27) confirms that for AY 2024-25 no such bar existed.
- CPC’s denial was system-driven, not based on statute.
The Bench noted that facts & law were identical & the Revenue could not controvert the coordinate Bench decision. Respectfully following the Ahmedabad ITAT’s ruling, it held that the Assessee, being a resident individual with total income below ₹7,00,000 under the new regime, is entitled to the rebate u/s 87A even if income includes STCG taxable u/s 111A.
