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Final judgement on 87A tax rebate claim: The 67-page Bombay High Court judgement says yes taxpayers should be given the option to file their ITR with Section 87A rebate claim and the income tax department wrongly prevented this by modifying the tax utility post July 5, 2024. However, whether to honour such Section 87A tax rebate claims or not the Bombay HC said we need to decide this as and when scrutiny cases arise.
In a highly anticipated final judgment, the Bombay High Court gave its order on 24 January, 2025, that the Income Tax Department is wrong in arbitrary modification of utility software for denial of Section 87A tax rebate on special rate incomes, post July 5, 2024. The HC directed the Income Tax Department to fix the ITR utility software and accept all Section 87A tax rebate claims. Eligible taxpayers who have a taxable income up to Rs 5 lakh under the old tax regime or up to Rs 7 lakh under the new tax regime can claim Section 87A tax rebate to bring their tax liability to nil.
The Bombay High Court also criticised the Income Tax Department for preventing taxpayers from claiming benefit of Section 87A tax rebate on special rate incomes. The HC said no taxpayer can be prevented from claiming any benefit outlined in the Income Tax Act, 1961. If the tax department has any issue with the claim of the said benefit by the taxpayer, it should be taken for scrutiny assessment under Section 143(1)/143(3). It cannot happen that the tax department prevents the taxpayer from claiming any benefit under the law because the department “thinks” it's incorrect.
The Bombay High Court cited a classic analogy in this regard. “This is almost like some court registry declining to accept a filing because, in the opinion of the filing clerk, the suitor’s suit was untenable on merits.”
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