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CMA Final · Direct Tax Laws and International Taxation · Double Taxation Avoidance Agreements (DTAA)

Under section 159 of the Income-tax Act, 2025, when a notified agreement applies to an assessee, how do the provisions of the Act interact with the agreement, and what is the exception?

The Act's provisions apply to the extent they are more beneficial to the assessee, as section 159(4) says. The exception in section 159(6) is that the provisions of Chapter XI apply even if they are not beneficial to the assessee.

  1. AThe Act applies only to the extent more beneficial to the assessee, but the provisions of Chapter XI apply even if not beneficialCorrect
  2. BThe agreement always overrides the Act, including Chapter XI
  3. CThe Act always overrides the agreement
  4. DThe Act applies only where the assessee is a resident, regardless of benefit

Explanation

Section 159(4) provides that the Act's provisions apply to the extent they are more beneficial to the assessee. Section 159(6) provides that, despite this, the provisions of Chapter XI apply even if not beneficial to him. Options stating that the agreement or the Act always prevails ignore the beneficial-extent rule and the Chapter XI exception.

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