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Informist, Friday, Jan. 24, 2025

 

NEW DELHI – The Bombay High Court on Friday directed the Income Tax Department to immediately modify its software utilities and allow assesses to claim rebates under Section 87A of the Income Tax Act, 1961, for the assessment year 2024-25 (Apr-Mar) and subsequent years, including revised returns filed.

 

"The facility to raise a claim, which was very much available till Jul. 5, 2024, could not have been abruptly discontinued simply because the revenue officials, acting in their administrative capacities, felt that such a claim was untenable," the court said.

 

Any attempt that restricts or prohibits an assessee from making a particular claim about the determination of income or tax payable thereon would be contrary to the scheme of the 1961 Act and would also be unconstitutional, the court said.

 

The high court said that whether a rebate under Section 87A can be granted only from the tax arrived at under Section 115BAC of the Act or also from the tax computed under other provisions of Chapter XII is a point of debate. "...we cannot say that the provisions of the Act are so crystal clear as to arrive at a definite conclusion that a rebate under Section 87A cannot be granted from the tax computed under other provisions of Chapter XII," it said.

 

The high court said the tax department cannot restrain or prohibit an assessee from claiming a rebate under Section 87A by modifying its utilities and forbidding the assessee at the threshold itself from making the claim. Whether the claim is eligible or not can be examined in the proceedings under Section 143(1) and Section 143(3) of the Act, the court said. "Therefore, the revenue (department) would not be justified in assuming that its interpretation is open and shut, and based upon such a conclusion, shut out bona fide claims for rebate under Section 87A," said the court.

 

"Respondents (tax department) did not show any provision under the Income Tax Act which expressly debars an assessee to raise or make the claim under Section 87A qua the tax computed at the rates specified in the provisions of Chapter XII other than Section 115BAC," said the court. Insofar as the prayers of the petitioners are concerned, that the utility should permit an assessee to at least make a claim under Section 87A of the Act, it cannot be rejected at the threshold, it said. "The issue of adjudication of eligibility of a claim under Section 87A is left to the authorities under the Act while processing the returns filed by the assessees," it added. 

 

The Chamber of Tax Consultants had initiated public interest litigation against the utilities denying the benefit of claiming a rebate under Section 87A of the Act after Jul. 5 for the assessment year 2024-25 while filing online returns against tax computed under various sections of Chapter XII. Before Jul. 5, the tax department's utility permitted the assessees to make such a claim.

 

Under Section 87A, eligible taxpayers can claim a rebate of up to INR 25,000 under the new tax regime. Under the old regime, a rebate of up to INR 12,500 can be claimed by eligible taxpayers. Many taxpayers who had "special rate" incomes, such as short-term capital gains taxed at 15% for the financial year 2023-24, were denied the rebate on this portion of their income while filing their returns in July.  End

 

Reported by Surya Tripathi

Edited by Rajeev Pai

 

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