Payment to non resident requires compliance of section 195 of the Income Tax Act , that requires that before remitting , tax at source ( withholding tax) must be deducted and deposited. It is also a fact that there are double tax avoidance agreement signed with many countries under which government of India has agreed on a different rates. So confusion in minds of deductor as well as tax authorities remain whether to adopt the provision under Income Tax Act or DTAA .
Even CBDT was aware of this dilemma and had issued a circular to clarify the confusion . But ultimately , because of the tax authorities misinterpretation matter wento to courts and they have clarified the legal position.