ITAT Jaipur Allows Section 87A Rebate on Section 111A STCG for AY 2024-25

1. Overview of the Dispute

The Jaipur Bench of the Income Tax Appellate Tribunal, in the case of ITO Vs Shashi Kant Tulsian (ITAT Jaipur), has confirmed that for Assessment Year 2024-25, a resident individual opting for the regime under Section 115BAC(1A) is entitled to claim rebate under Section 87A even on income tax computed at the special rate on short-term capital gains (STCG) taxable under Section 111A, provided the statutory conditions of Section 87A are met.

The Tribunal dismissed the Revenue’s appeal and upheld the order of the Ld. CIT(A) granting rebate of ₹19,857 under Section 87A on tax attributable to STCG covered by Section 111A.

This ruling is consistent with a growing line of Tribunal decisions that:

• Treat “total income” for Section 87A purposes as including income taxed at special rates, unless the statute expressly excludes such income; and
• Distinguish between:
  • provisions prescribing special tax rates (such as Section 111A), and
  • provisions that expressly restrict rebate (such as Section 112A(6)).

2. Brief Facts and Procedural History

2.1 Return, Processing and Denial of Rebate

• The assessee, an individual resident, filed the return of income on 20.06.2024 declaring total income of ₹4,32,280.
• The total income included short-term capital gain of ₹2,12,152 taxable under Section 111A.
• The assessee claimed rebate of ₹19,857 under Section 87A.
• While processing the return under Section 143(1), the CPC did not allow the rebate under Section 87A.

2.2 Rectification under Section 154 and First Appeal

• The assessee moved a rectification application under Section 154, challenging the denial of Section 87A rebate in the Section 143(1) intimation.
• The Assessing Officer rejected the rectification request.
• The assessee preferred an appeal before the Ld. CIT(A) against the order rejecting rectification.
• The Ld. CIT(A) allowed the appeal and directed that rebate under Section 87A be granted. In doing so, the appellate authority followed the decision of Jayshreeben Jayantibhai Palsana Vs ITO, ITA No. 1014/Ahd/2025 (ITAT Ahmedabad), which dealt with the same legal issue for AY 2024-25.

2.3 Revenue’s Appeal before ITAT Jaipur

The Revenue challenged the relief granted by the Ld. CIT(A) before the ITAT Jaipur, resulting in the present appeal in ITO Vs Shashi Kant Tulsian (ITAT Jaipur).

No one appeared for the assessee at the Tribunal hearing; however, the Bench examined:

• The order of the Ld. CIT(A), and
• The judicial precedents cited therein and in other connected cases.

3. Revenue’s Grounds and Reliance on CBDT Circular

3.1 Revenue’s Principal Contentions

The Revenue’s grounds of appeal, in substance, were:

1. Rebate under Section 87A is not available on income tax computed on income chargeable to tax at special rates, which, according to the Revenue, includes STCG taxable under Section 111A.
2. The order of the Ld. CIT(A) is stated to be contrary to CBDT Circular No. 13/2025 dated 19.09.2025, which, according to the Revenue, clarifies that:
   • It was never the legislative intention to permit Section 87A rebate where income is chargeable under Section 115BAC(1), and
   • Any such rebate, if erroneously granted or claimed, must be rectified.

On this basis, the Revenue contended that Section 87A relief should not extend to tax on STCG taxed under Section 111A where the assessee is governed by Section 115BAC(1A).

3.2 Tribunal’s Approach to the Circular

In the present case, the ITAT Jaipur:

• Noted the Revenue’s reliance on CBDT Circular No. 13/2025;
• Did not undertake a detailed, independent analysis of the validity or scope of the circular;
• Instead, followed earlier coordinate Bench decisions interpreting the plain language of the statute and applied that law to AY 2024-25 as it then stood.

The ruling thereby proceeds on the basis that:

• Circulars and explanatory memoranda cannot override express statutory language; and
• Subsequent legislative amendment effective from a future assessment year indicates that the earlier law did not contain the restriction being newly introduced.

4. Findings of the CIT(A) and Reliance on ITAT Ahmedabad

4.1 Statutory Framework of Section 87A post Finance Act 2023

The Ld. CIT(A) examined Section 87A as amended by the Finance Act, 2023, applicable for AY 2024-25. Under the first proviso inserted for assessees chargeable under Section 115BAC(1A):