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

Which statement about section 159 of the Income-tax Act, 2025 is correct?

The Act applies to a treaty-covered assessee only to the extent it is more beneficial, but Chapter XI applies regardless of whether it is beneficial. A higher rate on foreign companies is not treated as a less favourable charge.

  1. ATreaty provisions always override Chapter XI, including where they are less beneficial to the assessee
  2. BA higher rate of tax on a foreign company than on a domestic company is regarded as a less favourable charge
  3. CThe Act applies to a treaty-covered assessee only to the extent it is more beneficial to him, but Chapter XI applies even if not beneficialCorrect
  4. DThe Act's provisions can never be applied to a treaty-covered assessee

Explanation

Section 159(4) applies the Act to a treaty assessee to the extent more beneficial. Section 159(6) overrides this for Chapter XI, which applies even if not beneficial. Section 159(5) says a higher rate on foreign companies is not to be regarded as less favourable, so the other statements are wrong.

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