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

Under the Income-tax Act, 2025, an Indian resident's assessment is governed by a notified agreement under section 159. Which statement about the interaction between the Act and the agreement is correct?

The Act applies to the extent it is more beneficial to the assessee covered by the agreement, but Chapter XI applies even if it is not beneficial. This follows from section 159(4) read with section 159(6).

  1. AThe agreement always overrides the Act, even where the Act is more beneficial
  2. BThe Act always overrides the agreement
  3. CThe provisions of the Act apply to the extent they are more beneficial to the assessee, but Chapter XI applies even if not beneficialCorrect
  4. DChapter XI applies only where it is more beneficial to the assessee

Explanation

Section 159(4) provides that the Act's provisions apply to the extent more beneficial to the assessee covered by the agreement. Section 159(6) overrides this for Chapter XI, which applies even when not beneficial. The other options misstate one or both rules.

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