The ITAT Delhi deleted additions of Rs 7.28 Crore holding the taxpayer had no Permanent Establishment (PE) in India.
Saloni Kumari | Jun 5, 2026 |
ITAT Delhi Deletes Rs 7.28 Crore Income Tax Addition Over Alleged Permanent Establishment in India
The Income Tax Appellate Tribunal (ITAT) Delhi held that the assessee company, Imax Corporation, did not have a Permanent Establishment (PE) in India during Assessment Year 2022-23; hence, the impugned additions were deleted.
The tax authorities had alleged that the assessee had a fixed place PE and an installation/supervisory PE in India in connection with agreements for the sale and installation of its theatre systems. Based on this allegation, the Assessing Officer (AO) proposed certain additions: Rs 3.53 crore on Sale of Theatre System, Rs 34.95 lakh on Sale of Glasses and Others, Rs 3.02 crore on Installation Services, and Rs 38.34 lakh on Theatre Design Services.
The assessee argued that it only sold theatre systems to Indian customers and provided limited installation-related support. The company pointed out that it did not own, lease, or control any premises in India. It further explained that only one employee visited India during the relevant financial year for five days to inspect a customer’s site, while the actual installation work took place in the following financial year.
After examining the facts, the Tribunal held that the essential conditions for a fixed place PE were not satisfied. The customer’s theatre premises were not at the disposal of the assessee, and the company had no continuous business presence or control over those locations.
The Tribunal also rejected the allegation of an installation or supervisory PE. Under the India-Canada Double Taxation Avoidance Agreement (DTAA), such a PE would arise only if installation or supervisory activities continued for more than 120 days. The Tribunal noted that the employee’s visit lasted only five days and the later installation activities lasted merely 17 days, far below the required threshold.
Accordingly, the ITAT held that the assessee had no Permanent Establishment (PE) in India and deleted the impugned additions made by the tax authorities. The appeal of the assessee was allowed.
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