I have a query on TDS u/s 195. A company is required to pay fees for technical services (FTS) to another company in Dubai. The DTAA with UAE does not cover FTS payment. Also the Dubai company does not have any PE in India in any form, but the services for which FTS is paid will be utilized in India.
Now my query is whether TDS is required from FTS payment? I have been told that if a payment doesnot covered under DTAA then TDS is not required. In the given case, FTS is not covered in DTAA with UAE and therefore it will be treated as Business Income and fall under that clause of DTAA. Since for Business Income, PE in India is essential for TDS and in the absence of PE in India, no TDS is required.
Is this correct? or TDS is required to be deducted as 'Other Income' clause, keeping in view of amendments made by Finance Act 2010 in Section 9 by inserting/substituting the foloowing explanation-
[Explanation.—For the removal of doubts, it is hereby declared that for the purposes of this section, income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) and shall be included in the total income of the non-resident, whether or not,—
(i) the non-resident has a residence or place of business or business connection in India; or
(ii) the non-resident has rendered services in India.]
Please enlighten me on the topic and cases that supports the correct view.