Income Tax Appellate Tribunal - Surat
Nimishaben Laljibhai Ghevariya,Surat vs Ito Ward 3(3)(1) Surat, Surat on 24 March, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
SURAT BENCH "SMC", SURAT
BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
I.T.A. No. 1336/Srt/2025
(Assessment Year: 2024-25)
Nimishaben Laljibhai Ghevariya, Vs. Income Tax Officer,
A-25, Panchdev Society-2, Nr. Ward-3(3)(1),
Shirdi Dham Society, Hirabaug- Surat
Varachha Road, Surat-395006
[PAN No.BAOPG0745H]
(Appellant) .. (Respondent)
Appellant by : Shri Jagdish Hareshbhai Kasodariya, CA
Respondent by : Shri Ajay Uke, Sr. DR
Date of Hearing 18.03.2026
Date of Pronouncement 24.03.2026
ORDER
The present appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), (hereinafter referred to as "CIT(A)"), ADDL/JVIT(A)-4, Delhi order dated 27.11.2025 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the "Act") and relates to Assessment Year (A.Y.) 2024-25.
2. The assessee has raised the following grounds of appeal:
"1. The Learned commissioner of income tax (appeals) has erred in interpretation of law and in the facts of the case by disallowing the claim of rebate of Rs. 13,320/- under section 87A of the Act in respect of tax on short-term capital gain thus such demand is void in law."
3. The solitary issue in the present appeal relates to disallowing the claim of rebate under Section 87A of the Act to the taxes paid on short term capital gains at the rates specified under section 111A of the Act.
ITA No.1336/Srt/2025Nimishaben Laljibhai Ghevariya vs. ITO Asst.Year -2024-25 -2-
4. Section 87A of the Act grants rebate of taxes to assessee's with very low income. Assessees reporting incomes to tax as per the normal provision of law upto Rs 5,00,000/- are provided rebate of taxes up to a maximum amount of Rs. 12,500/-, while those paying taxes in terms of the provision of Section 115BAC of the Act are provided rebate of taxes for incomes up to Rs. 7,00,000/- to the extent of Rs. 25,000/-. The provisions of Section 87A are reproduced hereunder for clarity:
"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:2
[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 3[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 4[twenty-five] thousand rupees, whichever is less;
(b) exceeds 3[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 3[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.]"
5. In the facts of the present case the assessee had returned income to the tax in terms of Section 115BAC of the Act. As per the said provision the incomes are subjected to tax at different slab rates as compared to the normal ITA No.1336/Srt/2025 Nimishaben Laljibhai Ghevariya vs. ITO Asst.Year -2024-25 -3- rates, without grant of any exemption or deduction to the incomes. The provision of Section 115BAC(1A) are reproduced hereunder for clarity:
"1A) Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, the income-tax payable in respect of the total income of a person, being an individual or Hindu undivided family or association of persons (other than a co-operative society), or body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2, other than a person who has exercised an option under sub-section (6), for any previous year relevant to the assessment year beginning on the 1st day of April, 2024, shall be computed at the rate of tax given in the following Table, namely:--
TABLE Sl. No. Total income Rate of tax (1) (2) (3)
1. Upto Rs. 3,00,000 Nil
2. From Rs. 3,00,001 to Rs. 6,00,000 5 per cent
3. From Rs. 6,00,001 to Rs. 9,00,000 10 per cent
4. From Rs. 9,00,001 to Rs. 12,00,000 15 per cent
5. From Rs. 12,00,001 to Rs. 15,00,000 20 per cent
6. Above Rs. 15,00,000 30 per cent;
6. The case of the Revenue is that in terms of the proviso to section 87A of the Act, in case assessee's return income under Section 115BAC sub- section 1(A) of the Act, the rebate provided under sectio87A of the Act is only with respect to the taxes paid as per Section 115BAC of the Act. That taxes paid as per rate specified under section 111A of the Act, on short term capital gain, @ 15%, are not eligible for benefit of rebate under section 87A of the Act.
ITA No.1336/Srt/2025Nimishaben Laljibhai Ghevariya vs. ITO Asst.Year -2024-25 -4-
7. In the facts of the present case, the assessee having paid taxes to the tune of Rs. 13,320/- under section 111A of the Act, the benefit of rebate under section 87A of the Act, to which the assessee was otherwise entitled, was denied.
8. Ld. Counsel for the assessee pointed out that this issue has been dealt with in various decisions of the ITAT who have reiterated time and again that rebate under Section 87A is also available to taxes paid at specified rates under Section 111A of the Act, where the assessee had returned income to tax under Section 115BAC of the Act. Our attention was drawn to the decision of the ITAT Ahmedabad Benches in the case of Jayshreeben Jayantibhai Palsana vs. ITO in ITA No. 1014/Ahd/2025 dated 12.08.2025, wherein the issue was exhaustively dealt with at Para 5 to 5.18 of the order as under:
"5. We have carefully considered the rival submissions, the impugned order of the CIT(A), the material placed on record, and the applicable statutory provisions. Thus, the core issue for adjudication before us is -
"Whether a resident individual who has exercised the option under section 115BAC(1A) and whose total income is below Rs.7,00,000/-, is eligible to claim rebate under section 87A against tax payable on STCG under section 111A, in the absence of any express restriction in section 87A or section 111A."
5.6 The undisputed facts of the case are that the assessee, a resident individual, filed a revised return of income for A.Y. 2024-25 declaring total income of Rs.6,76,402/-, comprising short-term capital gain on listed equity shares taxable at 15% under section 111A, and opted for taxation under the new regime under section 115BAC(1A). The CPC, Bengaluru, processed the return under section 143(1) and denied rebate under section 87A of Rs.13,320/-, resulting in a demand of Rs.15,820/-. The CIT(A) upheld the denial, primarily relying on -
(i) the "subject to" clause in section 115BAC(1A),
(ii) provisions of Chapter XII, and
(iii) the Explanatory notes to the Finance Bill 2025.
ITA No.1336/Srt/2025Nimishaben Laljibhai Ghevariya vs. ITO Asst.Year -2024-25 -5- 5.7 Having perused the relevant statutory provisions and the arguments advanced by the assessee's Authorised Representative (AR), we find merit in the claim of the assessee.
5.8 The amended first proviso to section 87A [inserted by the Finance Act, 2023 w.e.f. A.Y. 2024-25] provides:
"Where the total income of the assessee is chargeable to tax under subsection (1A) of section 115BAC and the total income -- (a) does not exceed seven hundred thousand rupees, the assessee shall be entitled to a deduction..."
5.9 This provision applies to any resident individual whose total income does not exceed Rs.7,00,000 and who is assessed under section 115BAC(1A). The statute does not draw any distinction between normal income and income chargeable at special rates, nor does it contain any express exclusion for tax arising under section 111A.
5.10 By contrast, the legislature has inserted an express bar on availability of section 87A rebate in section 112A(6), which states:
(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.
5.11 The absence of a corresponding clause in section 111A is legally significant and supports the principle that - when the legislature intended to deny rebate in respect of special income (as in section 112A), it has done so expressly. In contrast, the absence of any exclusion in section 111A or in section 87A must be construed in favour of the assessee.
5.12 At this point we discuss the interplay of Section 115BAC(1A) with Chapter XII where the scope is Confined to Computation of Tax Rates. Section 115BAC(1A) opens with the phrase:
"Notwithstanding anything contained in this Act but subject to the provisions of this Chapter..."
5.13 The purpose of this clause is to enable the computation of incometax under the concessional rate regime, subject to existing special rate provisions under Chapter XII, such as sections 111A, 112, 112A, etc. This clause governs the computation of tax and does not ipso facto affect eligibility to rebates or deductions unless specifically restricted. Section 87A is not part of Chapter XII; it is an independent rebate provision under Chapter VIII of the Act. Therefore, the overriding clause in section 115BAC(1A) does not derogate or modify section 87A, unless section 87A itself provides for exclusion, which, in the present case, it does not. Thus, section 87A operates on the total tax computed, whether it includes tax at slab rates or special rates, and applies so long as the total income threshold is met.
ITA No.1336/Srt/2025Nimishaben Laljibhai Ghevariya vs. ITO Asst.Year -2024-25 -6- 5.14 The CIT(A) placed strong reliance on the Explanatory Memorandum to the Finance Bill 2025, which clarified that rebate under section 87A is not available on tax arising from special rate incomes, including those under section 111A. However, we find this reliance to be misplaced for two reasons:
- Firstly, the Finance Bill 2025 itself proposes to insert new restrictions on rebate under section 87A w.e.f. A.Y. 2026-27, which implies that the existing law (i.e., as applicable to A.Y. 2024-25) does not contain such a restriction.
- Secondly, the Explanatory Memorandum cannot override the plain language of the statute. It is a tool of interpretation, not a source of substantive law.
Therefore, the prospective amendment in the Finance Act 2025 supports the view that under the unamended provision applicable for A.Y. 2024-25, rebate under section 87A cannot be denied merely because tax arises under section 111A. 5.15 In the recent judgment dated 24.01.2025 in the case of The Chamber of Tax Consultants vs. Director General of Income Tax (Systems) [TS5026-HC-2025(Bombay)-O], the Hon'ble Bombay High Court considered the issue of system-based denial of 87A rebate on STCG under section 111A for assessees who had opted for 115BAC(1A). While the Hon'ble Court refrained from interpreting the substantive provisions, it held that the assessee must be allowed to claim rebate under section 87A, and it is for the quasi- judicial authority to decide on merits.
Thus, the Hon'ble High Court clearly held that the CPC utility or system configuration cannot override statutory rights, and that each case must be adjudicated on its own merits. We at the Tribunal, being such a quasi-judicial authority, are therefore duty-bound to examine the claim in light of the statutory framework and not be influenced by automated denial or procedural logic adopted by the CPC.
5.16 The assessee has also relied on an appellate order dated 27.05.2025 passed by CIT(A)-1, Nagpur in the case of Avni Milanbhai Maniya, wherein on identical facts the CIT(A) allowed the claim of rebate under section 87A in respect of STCG taxable under section 111A. We also note that such decision was taken by the JCIT/Addl.CIT(A) relying on the decision of Beena Manishbhai Fofaria for the A.Y. 2024-25. While not binding, the said appellate order affirms that divergent views exist and such benefit has been allowed in similar factual circumstances.
5.17 In view of the above discussion, we find that the assessee is a resident individual and the total income declared for the assessment year 2024-25 does not exceed Rs.7,00,000. It is also an admitted position that the assessee has exercised the option to be assessed under the new tax regime in accordance with the provisions of section 115BAC(1A) of the Act. On a plain reading of the statutory provisions, there exists no express bar either in section 87A or section 111A for denial of rebate in respect of tax payable on short-term capital gains arising from transfer of listed equity shares taxable at special rates under section 111A. The legislative intent is further clarified by the subsequent amendment proposed in the Finance Bill, 2025, which is prospective in nature and thereby reinforces that no such restriction was in force during the relevant assessment year. The denial of rebate under section 87A by the CPC, ITA No.1336/Srt/2025 Nimishaben Laljibhai Ghevariya vs. ITO Asst.Year -2024-25 -7- Bengaluru, appears to be based solely on system-driven logic and not on any statutory mandate. Moreover, the interpretation adopted by the CIT(A) in upholding such denial is, in our considered view, not in consonance with the plain and unambiguous language of the law as applicable for A.Y. 2024-25.
5.18 Accordingly, we hold that the assessee is eligible for rebate under section 87A for A.Y. 2024-25 even though the income includes STCG taxable under section 111A. The AO is directed to allow rebate of Rs.13,320/- and recompute tax liability accordingly.
The demand of Rs.15,820/- raised in CPC intimation stands deleted. Refund, if any, shall be granted in accordance with law."
9. He thereafter pointed out that, relying on the decision of the ITAT as above, several other decisions were also passed reiterating the said proposition. Our attention was drawn to the following decisions of the ITAT:
i. Sh. Gurminder Singh vs. ITO in ITA No.887/CHANDI/2025, order dated 10.12.2025 ii. Manojbhai C. Kamdar vs. ITO in ITA No.572/Rjt/2025, order dated 03.11.2025 iii. Padmaben Kantilal Ranpara vs. ITO in ITA No.516/Rjt/2025, order dated 11.09.2025 iv. Pramod Kumar Dubey vs. ITO in ITA No.314/AGR/2025, order dated 03.09.2025 v. Seshank Mahadev vs. ITO in ITA No.2274/Chny/2025, order dated 24.10.2025 vi. Thejaswini Jakkaraju vs. ITO in ITA No.218/Bang/2025, order dated 30.06.2025 vii. Venkatachalam Venkatraman vs. ITO in ITA No.1431/Chny/2025, order dated 20.08.2025 viii. Venkedapathy Venugopal vs. ITO in ITA No.2064/Chny/2025, order dated 09.10.2025 ITA No.1336/Srt/2025 Nimishaben Laljibhai Ghevariya vs. ITO Asst.Year -2024-25 -8-
10. Ld. DR before us unable to controvert to the contention of the Ld. Counsel for the assessee that the issue involved in the present case stood covered in favour of the assessee by several decisions of ITAT as above. He was unable to draw our attention to any contrary decision either of the jurisdictional High Court or the Hon'ble apex court in this regard.
11. In view of the above since the issue before us regarding grant of rebate under section 87A of the Act to taxes paid at the rates specified under section 111A of the Act where the assessee had returned income to tax in terms of the provision of Section 115BAC of the Act stands covered by the various decision of the ITAT as noted above, I have no hesitation in holding that the denial of rebate under section 87A to the assessee on the taxes paid as per the rates specified under Section 111A of the Act amounting to Rs. 13,320/- is unjustified. The Assessing Officer is directed to grant the assessee rebate of the said amount under Section 87A of the Act.
12. In the result, the appeal of the assessee is allowed.
This Order pronounced in Open Court on 24/03/2026
Sd/-
(ANNAPURNA GUPTA)
ACCOUNTANT MEMBER
Ahmedabad; Dated 24/03/2026
TANMAY, Sr. PS TRUE COPY
आदे श की ितिलिप अ े िषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. थ / The Respondent.
3. संबंिधत आयकर आयु / Concerned CIT
4. आयकर आयु (अपील) / The CIT(A)-
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, सूरत / DR, ITAT, Surat
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER, उप/सहायक पं जीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, सूरत / ITAT, Surat