Today, CA Chintan Nareshkumar Patel has filed a Public Interest Litigation (PIL) challenging the action of the department for not allowing the rebate guaranteed u/s 87A Of Income Tax Act 1961.
Table of Contents
Object Of PIL
The petition has been filed in the interest of class of the assessees, residing all over India, who are eligible to obtain benefit of the rebate guaranteed u/s 87A of Income Tax Act, 1961.
The assesses are mainly persons belonging to the middle-class segment of the nation, for whom it is difficult to undertake a recourse under law due to financial constraints qua an amount of demand likely to be lesser than the expenses to be incurred.
The PIL stated that w.e.f. 5th July, 2024 the respondent/department have denied the benefit of rebate under section 87A which is otherwise available to the people at large.
By the PIL, the petitioner sought to challenge the action of the department; which is completely high handed, illegal, arbitrary, irrational, illogical & unjust; of the department of not allowing the Rebate Guaranteed U/s 87A Of Income Tax Act, on the income attracting special rates of tax, to the people at large/affected assessees in contravention of the law for the Income Tax Returns filed for A. Y. 2024-25 relevant to the F. Y. 2023-24.
Background
In the Income Tax Act, 1961, section 87 has been amended w.e.f. 01/04/2014 vide Finance Act, 2013 enabling the rebate to be allowed in computing Income Tax.
It is also stated that in furtherance, Section 87A was also inserted w.e.f. 01/04/2014 vide Finance Act, 2013 under the title “Rebate of income- tax in case of certain individuals.”
Section 87A aims on providing relief, from paying taxes, to the assessees who are resident individuals and who fulfil other conditions of the section.
Section 87A was amended from time to time as per the policy of the Government. It is stated that the copy of the section 87A, as applicable for the A. Y. 2024-25 relevant to the F.Y. 2023-24.
For the A. Y. 2024-25 relevant to the F. Y. 2023-24, the resident individuals had also an option to choose a different calculation method for tax under section 115BAC, generally known as the “old regime”. The Default methodology w.e.f A. Y. 2024 -25 for calculation of tax is generally known as “new regime”.
All the resident individuals, whose total income exceeded basic taxable amount but did not exceed Rs. 5,00,000 under old regime & Rs. 7,00,000 in the new regime, were entitled to deduction of certain amount, in the form of rebate, from the tax payable. The limit of Rs. 5,00,000 or Rs. 7,00,000, as the case may be, will now be referred as “eligible limit”.
The rebate available in the old regime is maximum up to Rs. 12,500 and the rebate available in the new regime is maximum up to Rs. 25,000.
It is stated that these eligible limits are in line with section 115BAC of the Act which provides an option to choose either of a regime to the assessee.
Thus, as per the framework of the Act, if the income of the resident individual included any income other than income as referred in section 112A, he would be entitled to the rebate guaranteed in the Section 87A subject to his income falling below the eligible limit even in the new regime. Thus, any income, other than the income specified in the Section 112A of the Act would not bar the benefits ensured qua Section 87A, irrespective of the fact that whether such income is taxed at normal tax rates or at special tax rates.
The assessees who were receiving the benefit of the rebate ensured qua Section 87A, applicable at the relevant time, up to A. Y. 2023-24 relevant to F. Y. 2022-23.
The Central Board of Direct Taxes (CBDT) had made available a schema for filing Income Tax Returns for the A.Y. 2024-25 relevant to the F.Y. 2023-24 in April 2024 under Rule 12 of the Income Tax Rules. The process of filing Income Tax Returns was going on smoothly till 5th July, 2024 as per the provisions of law.
The people at large / affected assessees were rightly receiving the benefit of the rebate ensured qua Section 87A even if the total income of the assessee included the income taxed at special rate of tax, other than the income taxed u/s 112A.
However, on 5th July, 2024, a revised schema was introduced by the CBDT. As per this schema, the eligible assessees were not able to receive benefit of rebate under section 87A on any income which was chargeable to tax at special rate under the new regime.
Several representations were made against this action of the respondents. Looking at the provisions of law, it was assumed by Most of the people at large / the affected assessees that the modus operandi of the new schema is nothing but “a technical error” occurring on the part of the respondents. The multiple Income Tax Filing software were also allowing the people at large / affected assessees to claim the rebate on the incomes taxed at special rate of tax other than the income taxed u/s 112A. Thus, it was also assumed that if the Income Tax Returns were filed as per the provisions of the law, the same shall be processed and rightly accepted.
The PIL states that due to lack of legal knowledge and expertise, many people at large / affected assessees have also foregone their right to receive the rebate u/s 87A.
Relief Sought
Interim Relief
In spite of representations made by multiple people / organisations / institutes / ICAI, the respondents have chosen to not to pay any heed towards the economic loss, sense of injustice and hardship being caused to the people at large / affected assessees.
The people at large / affected assessees cannot engage in lengthy litigation even up to the stage of CIT(A) for the meager amount of demand raised by the respondent department.
The action of the department is causing the people at large / affected assessees to accept their fate as it is which is against the spirit of law. Thus, the action of the department is required to be stayed with immediate effect.
Final Relief – Rebate Guaranteed U/s 87A Of Income Tax Act
The PIL prayed that action of the department, of not allowing the Rebate Guaranteed U/s 87A Of Income Tax Act on the tax calculated at special rates of income (Other than tax calculated on the income referred to section 112A), is absolutely high handed, illegal, arbitrary, irrational & illogical, in violation of the Article 14 of the Constitution of India and hence, untenable in law.
Read More: Direct Tax Weekly Flashback: 06 October To 12 October 2024
