Archive · 14 Sep 2026
ITAT Upholds Section 87A Rebate on Short-Term Gains
Sanjay Kumar Garg earned money from his job, investments and other sources.
He asked for a tax rebate of ₹23,494 under Section 87A.
The tax processing centre refused to give him the rebate.
This created an extra tax demand of ₹16,160.
Garg challenged the decision and initially won before the Commissioner of Income Tax (Appeals).
The Income Tax Department then appealed to the tribunal.
The tribunal said the law for that year did not clearly stop people from using the rebate against certain short-term capital gains.
It therefore allowed Garg to keep the rebate and rejected the department’s appeal.
The Income Tax Appellate Tribunal’s Nagpur bench upheld Sanjay Kumar Garg’s ₹23,494 Section 87A rebate.
Garg reported about ₹6.91 lakh in total income for assessment year 2025-26 under the new tax regime.
The Centralised Processing Centre denied the rebate, creating an additional tax demand of ₹16,160.
The Income Tax Department argued that Section 87A could not offset tax on short-term capital gains taxed under Section 111A.
The tribunal ruled that the relevant law did not expressly restrict the rebate for such gains and dismissed the department’s appeal.
- Who
- Sanjay Kumar Garg, the Income Tax Department, the Centralised Processing Centre and the Income Tax Appellate Tribunal’s Nagpur bench.
- What
- The tribunal upheld a ₹23,494 Section 87A rebate against tax payable on certain short-term capital gains.
- When
- The ruling concerned assessment year 2025-26; the Revenue also cited CBDT Circular No. 13/2025 dated 19 September 2025.
- Where
- The ruling was issued by the Income Tax Appellate Tribunal’s Nagpur bench.
- Why
- The tribunal found that the relevant version of Section 87A did not expressly bar the rebate for short-term capital gains covered by Section 111A.
Taxpayer’s Position
Income Tax Department’s Position
Eligibility for the rebate
Taxpayer’s Position
Garg was entitled to the Section 87A rebate because the relevant law did not expressly exclude tax on short-term capital gains under Section 111A.
Income Tax Department’s Position
The rebate should not apply to tax payable on short-term capital gains taxed at the special rate under Section 111A.
Meaning of later restrictions
Taxpayer’s Position
The subsequent introduction of restrictions supported the view that no equivalent restriction applied during the relevant assessment year.
Income Tax Department’s Position
The department cited CBDT Circular No. 13/2025 and argued that allowing the rebate against special-rate income was never the legislative intent.
Difference from long-term gains
Taxpayer’s Position
Section 112A specifically restricts the rebate for certain long-term capital gains, but no corresponding restriction existed for Section 111A short-term gains.
Income Tax Department’s Position
The department maintained that the rebate should nevertheless be unavailable against income taxed at a special rate.
- Taxpayer
- Sanjay Kumar Garg
- Assessment year
- 2025-26
- Total income declared
- About ₹6.91 lakh
- Rebate claimed
- ₹23,494 under Section 87A
- Additional demand
- ₹16,160 after the rebate was denied
- Tribunal outcome
- The Income Tax Department’s appeal was dismissed
- Relevant provisions
- Section 87A rebate and Section 111A short-term capital gains