Section 87A Rebate Alllowed from Special Rate Income AY 2024-25 . Order u/s 250 by CIT (appeals)

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Section 87A Rebate Alllowed from Special Rate Income AY 2024-25 . Order u/s 250 by CIT (appeals)

Order under Section 250 of the Income Tax Act, 1961:

Order Under Section 250 of Income Tax Act, 1961

Case Details:

  • Appellant: SUNITA GUPTA
  • Assessment Year: 2024-25
  • Order Date: 27/02/2025
  • Appeal No.: ADDL/JCIT (A)-6 MUMBAI/10003/2023-24
  • Status: Individual (Resident)
  • Appeal against: Order under section 143(1) dated 19/09/2024
  • DIN & Order No :  ITBA/APL/S/250/2024-25/1073780811(1)
  • Date of the Order 27/02/2025

Case Background:

  • The appellant filed her income tax return for AY 2024-25 on 27/07/2024 declaring total taxable income of ₹5,40,670.
  • The return was processed under section 143(1) on 19/09/2024, accepting the declared income.
  • However, CPC Bengaluru restricted the rebate under section 87A to ₹5,917 against the claimed rebate of ₹22,339.
  • Aggrieved by this, the appellant filed an appeal on 19/10/2024.

Issue in Dispute: The appellant challenged the rejection of ₹16,422 rebate under section 87A on Short-Term Capital Gains (STCG) of ₹1,09,842.

Appellant’s Contention:

  • Total income was less than ₹7,00,000, making her eligible for rebate on her whole income of ₹5,40,668 as per proviso (a) to section 87A.
  • Referenced Supreme Court decision in Sunil Bakht v. Asst. Director of Income-tax [2024] 167 taxmann.com 267 (SC) which held that technological impediments cannot be a reason for harassing taxpayers.

Decision:

  1. The appellant’s total income included ₹1,09,842 of STCG under section 111A and ₹12,853 of LTCG under section 112A.
  2. Section 87A provides rebate to resident individuals whose income does not exceed specified limits.
  3. For taxpayers under section 115BAC(1A) with income up to ₹7,00,000, a rebate of 100% of income tax or ₹25,000 (whichever is less) is allowed.
  4. While section 112A(6) restricts rebate on LTCG, no such restriction exists for STCG under section 111A.
  5. Section 111A(2) only restricts Chapter VI-A deductions on STCG, but section 87A falls under Chapter VIII.

Order:

  • The appeal was allowed.
  • The Assessing Officer was directed to allow the deduction under section 87A as per provisions.
  • The grounds of appeal were consequently allowed for statistical purposes.

Order Passed By: UODAL RAJ SINGH ADDL/JCIT (A)-6 MUMBAI

 

Key Extract of the Order

GOVERNMENT OF INDIA

MINISTRY OF FINANCE INCOME TAX DEPARTMENT

OFFICE OF THE COMMISSIONER OF INCOME TAX, APPEAL ADDL/JCIT (A)-6

MUMBAI

To, SUNITA GUPTA

DELHI 110087 ,Delhi India

AY: 2024-25 Dated: 27/02/2025 DIN & Order No: ITBA/APL/S/250/2024-25/1073780811(1)

Order u/s 250 of Income Tax Act,1961

Instituted on 19/10/2024 from the order of DEL-W-(56)(3) dated 19/09/2024

Appeal No: ADDL/JCIT (A)-6 MUMBAI/10003/2023-24

Status/Deductor Category: Individual Residential Status:

Resident Nature of Business: Others Section under which the order appealed against was passed: 143(1)

Date of Order under which the order appealed against was passed: 19/09/2024

Income/Loss Assessed (in Rs.): 0

Tax/Penalty/Fine/Interest Demanded (in Rs.): 0

Date of Hearing(s): As per record(s) Present for the appellant: Not Applicable Present for the Department: Not Applicable

 

  • DIN- Document identification No.

This appeal was instituted on 19.10.2024, against the order passed under section 143(1) of the Income-tax Act, 1961 (hereinafter, referred as ‘the Act’) by the AO, CPC Bengaluru for the A.Y. 2024-25 dated 19.09.2024. Subsequently the appeal was allocated to the e-Appeals Scheme 2023 in terms of Notification dated 29th May 2023 issued by the CBDT.

  1. Facts of the case: The appellant had filed its return of income for AY 2024-25 on 27.07.2024 declaring total taxable income 5,40,670/-. The return of income was processed u/s 143(1) on 19.09.2024 accepting the total income returned. In the said intimation order u/s 143(1), the CPC Bengaluru had restricted the rebate at Rs. 5,917/- against the total rebate 22,339/- u/s 87A of the Act. Being aggrieved, the appellant has filed this appeal on 19.10.2024.
  2. Statement of facts:

[Note: Pages 3-14 contain the grounds of appeal and appellant’s submissions ]

  1. Decision: I have considered the facts of the case, grounds of appeal and submissions made by the appellant. It is seen that all the grounds raised relate to disallowance of rebate u/s 87 of the Income Tax Act hence all are adjudicated together.

6.1.2 In these grounds the appellant has challenged the rejection of the claim of Rs.16,422/- u/s 87A on STCG of Rs.1,09,842/-. The appellant has submitted that her total income was less than Rs.7,00,000/- and hence as per with clause (a) to proviso to section 87A the appellant was eligible for rebate on her whole income of Rs.5,40,668/-. The appellant has also referred to the decision of Hon’ble Supreme Court in the case of Sunil Bakht v. Asst. Director of Income-tax [2024] 167 taxmann.com 267 (SC) wherein it was held that the technological impediment cannot be a reason for harassing an assessee year after year and that the government should upgrade its software to correct the mistake.

6.1.3 The submission made is considered. It is seen form the return that the total income of the appellant, inter-alia, comprised of Rs. 1,09,842/- of STCG u/s 111A and Rs. 12,853/- of LTCG u/s 112A. The appellant had claimed the rebate of Rs.22,339/- on such STCG income of Rs.1,09,840/- However, the AO, CPC had restricted the rebate to 5,917/-. Before adjudicating the issue it will be apposite to refer here section 87A which provides for allowance of rebate of Income Tax in case of certain individuals-

Rebate of income-tax in case of certain individuals. 87A. An assessee, being an individual resident in India, whose total income does not exceed five hundred thousand rupees, shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions under this Chapter) on his total income with which he is chargeable for any assessment year, of an amount equal to hundred per cent of such income-tax or an amount of twelve thousand and five hundred rupees, whichever is less:

[Provided that where the total income of the assessee is chargeable to tax under sub-section (1A) of section 115BAC, and the total income— (a) does not exceed seven hundred thousand rupees, the assessee shall be entitled to a deduction from the amount of income-tax (as computed before allowing for the deductions under this Chapter) on his total income with which he is chargeable for any assessment year, of an amount equal to one hundred per cent of such income-tax or an amount of twenty-five thousand rupees, whichever is less; (b) exceeds seven hundred thousand rupees and the income-tax payable on such total income exceeds the amount by which the total income is in excess of seven hundred thousand rupees, the assessee shall be entitled to a deduction from the amount of income-tax (as computed before allowing the deductions under this Chapter) on his total income, of an amount equal to the amount by which the income-tax payable on such total income is in excess of the amount by which the total income exceeds seven hundred thousand rupees.]

6.1.4 Further section 112A(6), which reads as under, restricts the allowance of any rebate on any income from LTCG. In the case of the appellant the LTCG is Rs 12,853/- which is below 1 lac hence exempted.

112A. (6) Where the total income of an assessee includes any long-term capital gains referred to in sub-section (1), the rebate under section 87A shall be allowed from the income-tax on the total income as reduced by tax payable on such capital gains.

6.1.5 It may also be mentioned that no such restriction is there in section 111A which provides for tax on STCG. Section 111A reads as under-

“111A (2) where the gross total income of an assessee includes any short-term capital gains referred to in sub-section (1), the deduction under Chapter VI-A shall be allowed from the gross total income as reduced by such capital gains”

Thus the restriction on income from Long Term capital gain and short term capital gains is that the deductions under Chapter VIA will not be allowed on such income. Since section 87A is incorporated in Chapter VIII the above provision is not applicable in this case.

6.1.6 Thus, a composite reading of section 87A r.w.s.111A r.w.s. 112A does not bar the appellant from claiming rebate u/s 87A. In view of the above discussion and also for the fact that the appellant has continued the option exercised u/s 115BAC, it is held that the AO, CPC had erred in restricting the rebate u/s 87A. The AO is directed to allow the deduction u/s 87A as per provisions. These grounds of appeal are consequently allowed for statistical purpose.

  1. In the result, the appeal stands allowed.

UODAL RAJ SINGH ADDL/JCIT (A)-6 MUMBAI

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