An Indian Company is required to make payment of Technical Fees of Rs. 5 Lakh to a foreign Company. Indian TDS rate is 10%. That Foreign Company does not have PE in India.
This Technical Fee is in the nature of Business income for that foreign Company.
Now as per Article 7 of DTAA – Business Profit: Business Income is taxable in India if that foreign company has PE in India and that income is attributable to that PE.
And As per Article 13 of DTAA - ROYALTIES AND FEES FOR TECHNICAL SERVICES AND PAYMENTS FOR THE USE OF EQUIPMENT: TDS rate is 5%.
Now my query is :
Is the Indian Company required to deduct TDS @ 5% as per Article 13 or no TDS deduction required as per Article 7 since that Fee is business income for that Foreign Company?