Bombay High Court Clears Path for Taxpayers to Claim Section 87A Rebate
Background of the Case
The Bombay High Court has ruled in favor of taxpayers, allowing eligible individuals to claim the Section 87A rebate under the Income Tax Act, 1961, for the assessment year 2024-25 and beyond. This decision comes after a software update on the online income tax filing platform restricted such claims.
What is Section 87A Rebate?
The Section 87A rebate offers tax relief of up to ₹12,500 to individuals with an annual income of ₹7 lakh or less. However, following changes made on July 5, 2024, taxpayers were prevented from claiming the rebate once their income exceeded ₹7 lakh. This restriction led to a Public Interest Litigation (PIL) filed by the Chamber of Tax Consultants and other taxpayers.
Court’s Findings
A Bench of Justices MS Sonak and Jitendra Jain found that restricting rebate claims through software changes violates taxpayers’ rights. The Court ruled that:
- Preventing claims contradicts the Income Tax Act’s purpose, which aims to provide relief to lower and middle-income taxpayers.
- The restrictions infringe upon taxpayers’ rights to access justice, denying them the opportunity for claim review during the assessment process.
- Such actions are unconstitutional and contrary to the Act’s principles.
The Court noted that any ambiguity regarding Section 87A should be addressed during the assessment process, not by denying claims at the filing stage.
Significance of Technology in Tax Compliance
While the Court acknowledged technology’s role in reducing arbitrariness and abuse in tax processes, it emphasized that it should not obstruct taxpayers’ rights to claim benefits. In its words:
“Technology should streamline compliance, not prevent taxpayers from making bona fide claims or raising debatable issues for review.”
Court’s Directives
The High Court directed the Income Tax Department to update the software, allowing taxpayers to claim the Section 87A rebate. However, it rejected the request for manual tax return filings and deferred related issues for future cases.
Conclusion
This ruling reaffirms that taxpayers have the right to claim rebates and benefits provided by law. Any technological or procedural barriers that limit such claims are unconstitutional. Consequently, taxpayers can now claim the Section 87A rebate without unnecessary hurdles. The judgment highlights the need to balance technological efficiency with safeguarding taxpayer rights.
