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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Nature of Business

Under Section 159 of the Income-tax Act, 2025, which statement about a tax treaty entered into by the Central Government is correct?

Under Section 159, where a treaty applies, the Act's provisions apply to the extent they are more beneficial to the assessee, but Chapter XI applies even if it is not beneficial. A non-resident needs a residency certificate, and treaties must not enable non-taxation through avoidance or treaty shopping.

  1. ATreaty provisions always override the Act, even where the Act is more beneficial to the assessee
  2. BThe Act's provisions apply to the extent they are more beneficial to the assessee, but Chapter XI applies even if not beneficialCorrect
  3. CA non-resident may claim treaty relief without any residency certificate
  4. DTreaties may be used to create opportunities for non-taxation through treaty shopping

Explanation

Section 159(4) applies the Act's provisions to the extent more beneficial to the assessee, while 159(6) makes Chapter XI apply even if not beneficial. Section 159(8) requires a residency certificate from a non-resident, and 159(3)(b) aims to avoid double taxation without creating non-taxation through evasion, avoidance or treaty shopping.

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