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

Under the Income-tax Act, 2025 text on treaties, where an agreement notified under the section applies to an assessee for granting relief or avoiding double taxation, how do the provisions of the Act apply to that assessee, and what is the exception?

The Act's provisions apply to the extent they are more beneficial to the assessee covered by the treaty, but Chapter XI applies regardless, even if it is not beneficial. This carve-out keeps the anti-avoidance chapter operative despite treaty benefits.

  1. AThe Act always overrides the treaty, with no exception
  2. BThe treaty always overrides the Act, with no exception
  3. CThe Act applies to the extent more beneficial to the assessee, but the provisions of Chapter XI apply even if not beneficialCorrect
  4. DThe Act applies only if the assessee is a domestic company, and Chapter XI never applies

Explanation

Section 159(4) provides that the Act's provisions apply to the extent they are more beneficial to the assessee, and sub-section (6) states that Chapter XI applies irrespective of that, even if not beneficial. Options on absolute override ignore the beneficial-extent rule and the exception. Chapter XI deals with the anti-avoidance provisions in the Act, which is why it is carved out.

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