ITAT Nagpur Upholds Section 87A Rebate on Short-Term Capital Gains Under Section 111A for AY 2024-25
Overview of the Dispute
The Income Tax Appellate Tribunal, Nagpur, recently delivered a significant ruling in favour of two assessees for Assessment Year 2024-25, addressing a recurring controversy surrounding the denial of rebate under Section 87A of the Income Tax Act, 1961 on short-term capital gains (STCG) included in total income. The Tribunal's order, pronounced on 7 August 2026, directed the respective Jurisdictional Assessing Officers to extend the benefit of Section 87A rebate to both assessees, overturning the position taken by the Centralised Processing Centre (CPC) and the appellate authorities below.
Background: The Two Appeals Before ITAT Nagpur
Two separate appeals were clubbed and disposed of together by the Tribunal, given the common question of law involved.
ITA No. 406/NAG/2026
This appeal was filed by the assessee against the order dated 24.02.2026 passed by the National Faceless Appeal Centre, Delhi (NFAC). The said NFAC order had arisen out of an assessment order dated 24.06.2025 framed under Section 143(3) of the Income Tax Act, 1961. The assessee had claimed rebate under Section 87A in the return of income, wherein the total income comprised income from short-term capital gains. The CPC had denied the Section 87A rebate specifically on the short-term capital gain component.
ITA No. 414/NAG/2026
The second appeal was directed against the order dated 17.02.2026 passed by the Addl./JCIT(A)-1, Delhi, which had arisen out of an assessment order dated 11.09.2025 passed under Section 143(3) of the Income Tax Act, 1961. Here too, the assessee had claimed Section 87A rebate in the return where total income included short-term capital gains, and the CPC had similarly denied the rebate on such gains.
The Core Issue: Interaction Between Section 87A and Section 111A
Key Legal Question: Does any provision under the Income Tax Act, 1961 — whether
Section 87AorSection 111A— expressly bar the grant of rebate underSection 87Aagainst the tax liability arising on short-term capital gains taxable at the special rate underSection 111A?