Section 87A rebate available for short-term capital gains – ITAT

No restriction that Section 87A rebate is not available for short-term capital gains.

In a recent judgment, ITAT Agra has held that there is no restriction in Section 111A or section 87A itself that for income determined in the form of short-term capital gains, rebate under Section 87A of the Act is not available.

ABCAUS Case Law Citation:
4746 (2025) (09) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A)/ NFAC in denying the claim of rebate under section 87A of the Income Tax Act, 1961 (the Act) on short-term capital gains.

The assessee had filed its return of income under Section 139(1) of the Act showing income under the head salary, long term capital gains, short term capital gains and income from other sources.

The assessee opted for new regime of taxation. As the total income of the assessee for the year under consideration did not exceed Rs. 7 lakhs, the assessee was eligible for tax rebate under Section 87A of the Act. 

The assessee claimed a rebate of Rs. 25,000 under Section 87A of the Act on tax on income other than capital gains and tax on short-term capital gains. However, while processing the return, the CPC denied tax rebate under Section 87A of the Act on short-term capital gains and raised a demand on the assessee. 

The Tribunal observed that there is no restriction in Section 111A of the Act which reflects the tax rate on short term capital gains that the rebate under Section 87A of the Act would not be eligible for short-term capital gains. Similarly, in Section 87A of the Act, there is no restriction that for income determined in the form of short-term capital gains, rebate under Section 87A of the Act shall not be applicable.  Since there is no restriction or prohibition in both the sections, rebate under Section 87A of the Act shall be entitled to the assessee.

The Tribunal noted that the Co-ordinate Bench by placing reliance on the decision of the Hon’ble Bombay High Court had addressed the very same issue in dispute and held that the denial of rebate under section 87A by the CPC, Bengaluru, appeared to be based solely on system-driven logic and not on any statutory mandate. The CPC utility or system configuration cannot override statutory rights.

Following the judicial precedents the Tribunal held that the assessee would be eligible for claim of rebate under section 87A of the Act.

As a result, Tte grounds raised by the assessee were allowed. 

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