Skip to content

CA Final · Direct Tax Laws & International Taxation · Tax Planning, Tax Avoidance and Tax Evasion

Zephyr Ltd, an Indian company, has a subsidiary in a country with which India has a tax treaty. A treaty-shopping structure is suspected. Which statement is correct under the Income-tax Act, 2025 on treaty agreements?

Under section 159, the Act's provisions apply to the extent they are more beneficial to an assessee covered by a treaty, but irrespective of that, the provisions of Chapter XI apply even if they are not beneficial to him. So a treaty does not override Chapter XI.

  1. ATreaty benefit is available over the Act only if the treaty is more beneficial, but the provisions of Chapter XI apply even if not beneficial to the assesseeCorrect
  2. BTreaty always overrides every provision of the Act, including Chapter XI
  3. CThe Act always overrides the treaty even where the treaty is more beneficial
  4. DTreaties may only deal with double taxation relief, not exchange of information

Explanation

Section 159(4) says the Act's provisions apply to the extent they are more beneficial to the assessee. Section 159(6) says Chapter XI applies even if not beneficial. Section 159(3) also permits exchange of information, so D is wrong.

Did you get it right without looking?

One question tells you little. A timed set on Tax Planning, Tax Avoidance and Tax Evasion shows your real accuracy, how long you take and where you lose marks.

Practise Tax Planning, Tax Avoidance and Tax EvasionFree diagnostic mock

More Tax Planning, Tax Avoidance and Tax Evasion questions