Skip to content

CS Professional · Advanced Direct Tax Laws and Practice · Double Taxation Avoidance Agreement (DTAA)

A company incorporated in a specified territory is taxed in India at a rate higher than that for a domestic company, and the notified agreement between specified associations has a non-discrimination clause. Under section 159(5) of the Income-tax Act, 2025, how is the higher rate treated?

It is not regarded as a less favourable charge or levy of tax. Section 159(5)(b) says charging a company incorporated in the specified territory at a higher rate than a domestic company is not discrimination, so no refund arises on that ground.

  1. AIt is a less favourable charge and the excess must be refunded
  2. BIt is a less favourable charge only if the agreement is silent
  3. CIt is not regarded as a less favourable charge or levy of taxCorrect
  4. DIt is valid only if the company has a permanent establishment in India

Explanation

Section 159(5)(b) states that charging a company incorporated in the specified territory at a rate higher than that for a domestic company shall not be regarded as less favourable charge or levy of tax. So the non-discrimination argument fails, whether or not the agreement is silent or a permanent establishment exists.

Did you get it right without looking?

One question tells you little. A timed set on Double Taxation Avoidance Agreement (DTAA) shows your real accuracy, how long you take and where you lose marks.

Practise Double Taxation Avoidance Agreement (DTAA)Free diagnostic mock

More Double Taxation Avoidance Agreement (DTAA) questions