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

Where an agreement under the Income-tax Act, 2025 applies to an assessee, how do the provisions of the Act apply to him, ignoring Chapter XI (GAAR)?

The Act applies to the assessee only to the extent it is more beneficial to him than the treaty. The assessee therefore gets the more favourable of the Act and the agreement, and neither one automatically excludes or overrides the other, subject to the GAAR provisions of Chapter XI.

  1. AOnly the agreement applies and the Act is entirely excluded
  2. BThe Act applies to the extent it is more beneficial to the assessee than the agreementCorrect
  3. CThe Act always overrides the agreement
  4. DThe agreement applies only if the Act is silent on the matter

Explanation

Section 159(4) says that for an assessee to whom the agreement applies, the provisions of the Act apply to the extent they are more beneficial to him. So the assessee gets the more favourable of the Act and the treaty. Saying the agreement alone applies, or the Act always prevails, is wrong.

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