The Commissioner of Income Tax (Appeals) while correcting the action of the Central Processing Unit (CPC) held that Section 87A rebates on special rate incomes allowed in income tax appeals.

The CIT(A) has allowed the Section 87A Appeal on special rate incomes and noted that “CPC has erred in restricting rebate u/s 87A. The AO is directed to allow the rebate u/s 87A as per provisions.”

The appeal was instituted on 19.10.2024, against the order passed under section 143(1) of the Income-tax Act, 1961 by the AO. CPC Bengaluru for the A.Y. 2024-25 dated 19.09.2024. 

Subsequently, the appeal was allocated to the e-Appeals Scheme 2023 in terms of Notification dated 29th May 2023 issued by the CBDT.

The appellant had filed its return of income for AY 2024-25 on 27.07.2024 declaring total taxable income 5,40,670. The return of income was processed under section 143(1) on 19.09.2024 accepting the total income returned. In the intimation order under section 143(1), the CPC.

The CIT(A) noted that the restriction on income from Long Term capital gain and short term capital gains is that the deductions under Chapter VIA will not be allowed on such income. Since section 87A is incorporated in Chapter VIll the provision is not applicable.

The CIT(A) held that a composite reading of section 87A r.w.s.111A r.w.s. 112A does not bar the appellate from claiming rebate under Section 87A. The appellant has continued the option exercised under Section 115BCA.

It was held that the AO, CPC had erred in restricting the rebate under section 87A. 

The CIT(A) directed the AO is to allow the deduction under section 87A of the Income Tax Act.

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