ITAT Delhi held that limited remote maintenance activities and services rendered for less than 90 days do not constitute a Permanent Establishment in India under the India-Canada DTAA.
Saloni Kumari | May 19, 2026 |
ITAT Delhi Rejects Permanent Establishment Allegation Based Solely on LinkedIn Evidence
The ITAT Delhi has held in favour of IMAX Theatre Services Limited in a dispute related to the existence of a Permanent Establishment (PE) in India for the Assessment Year 2022-23.
The assessee, IMAX Theatre Services Limited, is a tax resident of Canada and possesses a valid Tax Residency Certificate issued by the Canadian government as per the India-Canada DTAA (Double Taxation Avoidance Agreement). The assessee had provided maintenance services to an Australian vendor’s customers in India as well as other globally placed entities.
According to the tax authorities, the assessee holds both a fixed-place PE and a service PE in India because it remotely accessed theatre systems installed at customer locations and also used an Australian vendor’s employee, Mr Sunil Kumar, to provide on-site maintenance services. Based on this allegation, the assessing officer attributed income from maintenance services and the sale of glasses to the alleged PE and proposed taxation in India.
However, the Tribunal rejected the department’s stand. It was observed that remote access to theatre systems was given only for limited maintenance activities such as troubleshooting, software updates, and fixing bugs. The Tribunal noted that IMAX neither controlled the customer’s premises nor carried out its own business operations from those locations. Therefore, the essential conditions for constituting a fixed-place PE were not satisfied.
On the dispute of service PE, the tribunal noted that the maintenance services in India during the year in consideration were provided only for 67 days, which was below the 90-day limit prescribed under the India-Canada Double Taxation Avoidance Agreement (DTAA); hence, it was not violated. The tribunal also pulled up the tax authorities for solely relying on a LinkedIn profile to conclude that the engineer was an employee of IMAX, especially when an affidavit from the Australian vendor confirmed otherwise. They should have confronted the appellant about the same; hence, it is an explicit violation of the principles of natural justice.
Accordingly, the tribunal quashed the impugned addition, holding that the assessee does not possess any Permanent Establishment (PE) in India.
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