tds on payment to foreign company

our client P is a software development company in India , P is developing a software for Q which is a manufacturing company in Ethiopia , P is also taking technical services from R(Ethiopian consultant) for this purpose

After getting payment from Q in India P paid the fee for technical services to R in Foreign Currency

Now my question is in relation to latest amendment in section 9 is that  1)whether P is required to deduct TDS on Payment made to R  2) R has no any PE(permanent establishment ) in India and not accrued or receive any income in India whether R is taxable in India 3) If tax is deducted what are the provisions of DTAA in this regard 

Replies (2)

Income deemed to accrue or arise in India. Sec 9

 

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

 

 

Clause (vii)

income by way of fees for technical services payable by—

                                (a)           the Government ; or

(b)           a person who is a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India ; or

(c)           a person who is a non-resident, where the fees are payable in respect of services utilised in a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India :

Yes, TDS need to be deducted as Sec 9, Sec 5 and Sec 6 are basic section of the Income Tax Act and if any income is taxable in these sections then TDS deduction should be considered.

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