Mrs. Renu Singla vs ITO, Ward 3 (1)

PER S.RIFAUR RAHMAN,AM:

This appeal is filed by the assessee against the order passed by the ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [for short ‘ld. CIT (A)] dated 14.03.2026 for the Assessment Year 2025-26.

At the time of hearing, ld. AR submitted that the issue involved in the present appeal is whether rebate u/s 87A of the Income Tax Act, 1961 (for short ‘the Act’) is allowable on tax attributable to STCG taxable u/s 111A of the Act, for AY 2025-26, where the assessee’s total income i.e. Rs.5,73,610/- is below Rs.7,00,000 and tax is computed u/s 115BAC of the Act.

In this regard, ld. AR submitted that the assessee filed return for the year under consideration i.e. AY 2025-26 declaring total income of Rs.5,38,610/- (House Property Rs.3,51,701/-, Other Sources Rs.18,290/-, STCG u/s 111A Rs.20,36,155). He submitted that while processing u/s 143(1), referred to Annexure 2 of Paper Book, CPC restricted rebate u/s 87A from Rs.25,000/- to Rs.3,500/- by excluding tax on the STCG Component, raising a demand of Rs.25,840/- (incl. interest). He further submitted that ld. CIT(A) vide order dated 14.03.2026 confirmed the intimation.

He submitted that the restriction on Section 87A rebate for special-rate income was introduced only by the Finance Act 2025, prospectively w.e.f. AY 2026-27 and the First proviso to Section 87A (inserted by Finance Act 2023, w.e.f. AY 2024-25) grants rebate to a resident individual under Section 115BAC(1A) whose total income does not exceed Rs.7,00,000/- without carving out any exclusion for income taxable u/s 111A.

In this regard, he relied on the following decisions, which are placed on record :-

 Jayshreeben Jayantibhai Palsana vs ITO, 2025] 177 taxmann.com 411 (Ahmedabad-Trib).

 ITAT, Delhi in Manan Anand vs ITO, ITA No 679/Del/2025

In view of above submissions, he prayed that the order of Ld. CIT(A) dated 14.03.2026 and the intimation u/s 143(1) be set aside and full rebate of Rs.25,000/- u/s 87A be allowed and the demand of Rs.25,840/- (inc. interest) be deleted.

On the other hand, ld. DR of the Revenue relied on the order of the lower authorities.

Considered the rival submissions and material placed on record. I observed that the short question involved is whether rebate u/s 87A of the Act is allowable on tax attributable to STCG taxable u/s 111A of the Act for the year under consideration i.e. AY 2025-26, where the assessee’s total income i.e. Rs.5,73,610/- is below Rs.7,00,000 and tax is computed u/s 115BAC of the Act. I observed that while processing u/s 143(1), CPC restricted rebate u/s 87A from Rs.25,000/- to Rs.3,500/- by excluding tax on the STCG Component, raising a demand of Rs.25,840/- (incl. interest). I further observed that the restriction on Section 87A rebate for special-rate income was introduced only by the Finance Act 2025, prospectively w.e.f. AY 2026-27 and the First proviso to Section 87A (inserted by Finance Act 2023, w.e.f. AY 2024-25) grants rebate to a resident individual under Section 115BAC(1A) whose total income does not exceed Rs.7,00,000/- without carving out any exclusion for income taxable u/s 111A. In this regard, I find force from the decision of ITAT, Ahmedabad Bench in the case of Jayshreeben Jayantibhai Palsana vs. ITO (supra) wherein ITAT held that “section 87A rebate for special-rate income was introduced only by the Finance Act 2025, prospectively w.e.f. AY 2026-27 and Explanatory Memorandum to Finance Bill cannot overide statutory language.” I further observed that the coordinate Bench also decided the issue in favour of the assessee in the case of Manan Anand vs ITO (supra) also relied upon above judgement of ITAT, Ahmedabad. Accordingly, I set aside the intimation u/s 143(1) and full rebate of Rs.25,000/- u/s 87A is allowed and accordingly, the demand so raised is deleted.

In the result, the appeal filed by the assessee is allowed.