The assessee includes a society with over 3800 members comprising Advocates, Chartered Accountants, and tax practitioners, and individual taxpayers who are professionals such as Chartered Accountants, salaried employees, and architects. The issue involved is whether the Income Tax Department is justified in modifying its online filing utility to prevent taxpayers from making claims for rebates under Section 87A while filing their income tax returns online. The specific contention is whether such a modification is constitutional and in accordance with the provisions of the Income-tax Act, 1961.

The revenue contended that the rebate under Section 87A should only be allowed from the tax computed under Section 115BAC and not from the tax computed under other provisions of Chapter XII.  The online utility was designed to reflect this interpretation, and that allowing claims contrary to this would disrupt the digitized system and lead to inconsistencies.

The assessee argued that the rebate under Section 87A should be allowed from the total tax payable, which includes taxes computed under both Section 115BAC and other provisions of Chapter XII. That the utility’s modification to prevent such claims was unconstitutional and contrary to the scheme of the Income-tax Act, which allows taxpayers to make claims based on their interpretation of the law.

The Hon’ble High Court held that the Income Tax Department’s modification of the online filing utility to prevent claims under Section 87A was unconstitutional and contrary to the provisions of the Income-tax Act.  The Hon’ble High Court directed the Department to update the utility, allowing taxpayers to make claims under Section 87A.  The Hon’ble Court emphasized that the validity of such claims should be determined through the assessment process and not be restricted at the filing stage.  The Hon’ble Court also left the issue of adjudicating the eligibility of claims under Section 87A to the authorities under the Act while processing the returns filed by the assessee. (AY. 2024-25)