BOMBAY HIGH COURT DISPOSED PIL ON 87A REBATE: ISSUE OF ADJUDICATION OF ELIGIBILITY OF REBATE LEFT TO DEPARTMENT.

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BOMBAY HIGH COURT DISPOSED PIL ON 87A REBATE: ISSUE OF ADJUDICATION OF ELIGIBILITY OF REBATE LEFT TO DEPARTMENT

25/01/2025

BOMBAY HIGH COURT DISPOSED PIL ON 87A REBATE: ISSUE OF ADJUDICATION OF ELIGIBILITY OF REBATE LEFT TO DEPARTMENT

High court held that In our view and after hearing the learned senior counsel for the petitioner and the learned ASG, whether rebate under Section 87A is to be allowed only on the tax calculated in accordance with the provisions of Section 115BAC or also on taxes calculated under other provisions of Chapter XII would require interpretation of the interplay of Section 87A and Section 115BAC.

To what extent the overriding provisions contained in Section 115BAC(1A) would result in allowability or denial of rebate under Section 87A will have to be examined by interpretative process. Similarly, the impact of the phrase ‘subject to the provisions of this Chapter’ would also have to be examined along with other provisions for adjudicating the claim under Section 87A of the Act.

What is the purport of the proviso to Section 87A on the claim proposed to be made will have to be interpreted in conjunction with the provisions of Section 115BAC(1A) and other connected sections. How the phrase ‘total income’ should be construed for Section 87A and Section 115BAC along with the definition sections, charging sections and scope of total income and the scheme of the Act, will have to be examined. Whether the provisions of Section 115BAC restrict itself only to tax rates or computation of total income will also have to be examined.

In our view, if the above exercise is required to be undertaken before coming to a definite conclusion as to whether the rebate under Section 87A is to be granted or denied on the tax computed under the provisions of Chapter XII other than Section 115BAC, then this is something which has to be deduced by interpretative and adjudicating process. We cannot accept the submission of the learned ASG that the provisions of Section 87A and Section 115BAC are so crystal clear that there is no conclusion other than what is canvassed by the respondents. Based upon such a conclusion, the revenue was not justified in modifying the utility from 5 July 2024, by which an assessee is debarred at the threshold from making the claim, which claim, according to us, is, at best, a contentious or debatable claim.

Section 87 which provides for rebate under Section 87A from the amount of income-tax uses the phrase ‘there shall be allowed from the amount of income tax….’. The proviso to Section 87A uses the phrase ‘…. assessee shall be entitled to a deduction….’.

In our view, a combined reading of Section 87 and Section 87A would mean an assessee has to make a claim, the entitlement of which is to be examined by processing the return under Section 143(1)/143(3) etc. and the same should be allowed as a deduction from the amount of income-tax. If a claim is not made, then it may well be argued by the revenue that the same cannot be allowed.

The importance of making a claim in the return of income is enunciated by the ratio of the decision of the Supreme Court in the case of Goetze (I) Ltd. Vs CIT 1 wherein the argument of an assessee to permit him to make a claim by way of a letter without making a claim in the return or by filing revised return was rejected. This highlights the importance of making a claim in the return of income itself. Any attempt to deny an assessee to make a claim in the return of income which he believes to be bona fide would deny him to pursue his claim under any provisions of the Act because the starting point is the return of income.

We may also observe that in the course of the hearing, our attention was drawn by both the learned senior counsel and the learned ASG to the subject matter of Writ Petition No.3565 of 2023 in the case of Lupin Ltd. Vs DCIT wherein the assessee was prevented from making the claim of deduction based on the Supreme Court decision since electronic mode of filing the return was not permitting the assessee to do so. On a writ petition being filed and on a direction by this Court, a manual return was permitted to be filed for making the said claim. We were informed that while processing the manual return, the claim of the assessee was accepted. We are referring to this decision for the limited purpose to bring our point in support of our analysis that certainly the utility cannot be designed to prevent an assessee from making a claim which subsequently by adjudication and appeal process may be found to be correct.

Therefore, it is not that an assessee can be debarred from making a claim in the return of income whether online or manual.

We may, however, clarify that if any such claim is made, the revenue would certainly be free to examine the same as per the provisions of the Act. Both the revenue and the assessee have remedies under the Act for testing the validity of such a claim. We, however, refrain from expressing any views on whether the submissions made by the learned senior counsel for the petitioners or the learned ASG are correct since that would be something which has to be examined by the quasi-judicial authorities under the Act in the first instance and not by a writ court in its exercise of extraordinary jurisdiction.

O R D E R

(i) Rule is made absolute in terms of prayer clause (a) which reads as under: -

(a) that this Hon'ble Court be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, direction or order directing the Respondents to modify the utilities for filing of the return of income under section 139 of the Act immediately, thereby allowing assessees to make a claim of rebate under section 87A of the Act read with the proviso to section 87A, in their return of income for the AY 2024-25 and subsequent years including revised returns to be filed under section 139(5) of the Act.

(ii) Since we have allowed prayer clause (a), prayer clause (b) does not survive, which deals with filing a manual return of income for claiming a rebate under Section 87A.

(iii) Prayer clause (c) is not adjudicated upon and would be considered in an appropriate case as and when the need arises.

(iv) 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.

(v) Prayer clause (e) is rejected, with liberty to the assessee to avail of the remedies available under the Act.

(vi) Prayer clauses (f) and (g) deal with interim and adinterim reliefs, and since we have finally disposed of the petition, the same would not survive. The interim orders are now made absolute.

BOMBAY HIGH COURT

The Chamber of Tax Consultants through its President Mr. Vijay Bhatt V/S Director General of Income Tax (systems)

M. S. Sonak & Jitendra Jain, JJ.

PUBLIC INTEREST LITIGATION (L) NO.32465 OF 2024

24.01.2025

READ JUDGEMENT