Whether Section 206AA overrides DTAA or otherway round

[Pavan Namburi]

I have to make a payment to a non-resident vendor towards software license. I do not have the PAN number of the foreign vendor. Would like to know the rate applicable with respect to below

1. Software License is the subject matter of payment. The license key to be received by mail and tool to be downloaded from the website of the vendor.

2. Vendor is located in USA with any permanent establishment in India nor in anyway connected with India.

3. I do not have the PAN number of the vendor so, should i have to take 20% rate straight away irrespective of lower tax benefit available thru DTAA.

4. Also pls advice on grossing up issue as well, is it specific to vendor agreement or is there anything reg grossing up prescribed in the Act or any other direction?

Thanking you in anticipation of a timely response

Pavan Namburi

AI Summary

Clarifying if Section 206AA overrides DTAA rates for software payments to US vendors without PAN and its gross-up implications. A user inquires about the applicability of Section 206AA of the Income Tax Act versus the Double Taxation Avoidance Agreement (DTAA) when making a payment to a non-resident vendor for a software license. The vendor, located in the USA, has no permanent establishment in India. The user lacks the vendor's PAN and questions whether a 20% tax rate should be applied despite lower rates available under DTAA. Additionally, the user seeks advice on whether grossing up is dictated by vendor agreements or specified in the Act.