To understand this, let’s take help of an example. Further we will analyse the example in two situations.

Example: Assessee is Oracle Inc. incorporated in USA. DTAA between India and USA states that non resident (Oracle Inc) will be liable to pay tax in India only when such non resident has a P.E in India and income so accrued to such non resident is somewhere connected with this P.E.

Situation A: India have DTAA with another country(suppose, USA)

Income will be taxable in the hands of Oracle Inc only when it has a P.E in India.

If If Oracle do not have P.E in india and renders service entirely from outside India, then as per DTAA Oracle Inc will not be liable to pay tax in India.

Now if USA do not have DTAA with India.

Then as per Section 9, such income will deemed to accrue or arise in India because for Accrual, Place of Utilisation of service has to be seen irresepective of anything else. Since services are utilized in India, income for such services shall be deemed to accrue or arise in India. Thus Oracle Inc will be liable to pay tax on such income.