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CS Professional · Advanced Direct Tax Laws and Practice · Double Taxation Avoidance Agreement (DTAA)

Which statement is correct under section 159 of the Income-tax Act, 2025 about the effect of the beneficial-provision rule?

Chapter XI applies to the assessee even if it is not beneficial to him. Section 159(6) overrides the beneficial-provision rule of sub-section (4) for that chapter, so the treaty cannot be used to avoid it.

  1. AChapter XI applies to the assessee even if its provisions are not beneficial to him, despite the beneficial-provision ruleCorrect
  2. BThe beneficial-provision rule overrides every chapter of the Act without exception
  3. CA higher rate of tax on a foreign company than on a domestic company is treated as a less favourable charge under the agreement
  4. DThe beneficial-provision rule applies only to specified associations and not to Central Government agreements

Explanation

Section 159(6) says that, irrespective of sub-section (4), Chapter XI applies to the assessee even if its provisions are not beneficial. Section 159(5) says a higher rate on a foreign company is not regarded as less favourable, so that option is wrong. Sub-section (4) covers agreements under both sub-sections (1) and (2).

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