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

Under Section 159(4) of the Income-tax Act, 2025, where a notified agreement applies to an assessee for granting relief of tax or avoiding double taxation, which statement is correct?

Under Section 159(4), the provisions of the Act apply to an assessee covered by the agreement only to the extent they are more beneficial to that assessee. So the assessee gets the more favourable of the two, not an automatic override either way.

  1. AThe Act applies only to the extent it is more beneficial to the assesseeCorrect
  2. BThe agreement always overrides the Act, even where the Act is more beneficial
  3. CThe Act always overrides the agreement, whatever the benefit
  4. DThe assessee must apply the agreement and the Act cumulatively, taking both reliefs

Explanation

Section 159(4) provides that in relation to the assessee to whom the agreement applies, the provisions of this Act apply to the extent they are more beneficial to that assessee. This is the beneficial-provision rule. The option saying the agreement always overrides is wrong because the Act can be chosen when it is more favourable.

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