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

Under section 159 of the Income-tax Act, 2025, an assessee to whom a notified tax agreement applies faces a situation where the Act's provisions are more beneficial than the agreement, but the case involves the provisions of Chapter XI. Which statement is correct?

The Act applies to the extent more beneficial than the agreement under section 159(4), but section 159(6) overrides this for Chapter XI, which applies to the assessee even if its provisions are not beneficial. The agreement therefore does not always prevail over the Act.

  1. AThe Act applies if more beneficial, but Chapter XI applies to the assessee even if its provisions are not beneficial to himCorrect
  2. BThe agreement always prevails over every provision of the Act, including Chapter XI
  3. CChapter XI applies only if more beneficial to the assessee
  4. DThe Act applies only when the agreement is silent on the income concerned

Explanation

Section 159(4) applies the Act to the extent more beneficial to the assessee, but section 159(6) overrides this: Chapter XI applies even if not beneficial. Hence the stated option alone is correct; the others ignore sub-section (6) or misstate sub-section (4).

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