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

Under section 159(4) of the Income-tax Act, 2025, where a notified tax treaty applies to an assessee, which statement is correct?

Where a notified treaty applies to an assessee, the provisions of the Act apply to the extent they are more beneficial to that assessee. So neither the treaty nor the Act automatically prevails; the assessee gets the more favourable treatment, subject to the exception in sub-section (6).

  1. AThe treaty always overrides the Act, even where the Act is more beneficial
  2. BThe Act always overrides the treaty
  3. CThe provisions of the Act apply only to the extent they are more beneficial to the assesseeCorrect
  4. DThe assessee must choose either the treaty or the Act for all income of all years

Explanation

Section 159(4) says that, in relation to an assessee to whom the agreement applies, the Act's provisions apply to the extent they are more beneficial to that assessee. Hence the more beneficial of the two applies, rather than one always overriding the other.

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