IMAX Virtual PE allegation dismissed

The Delhi Bench of the Income Tax Appellate Tribunal allowed the appeal filed by IMAX Theatre Services Ltd. and held that the Canadian entity did not constitute either a Fixed Place Permanent Establishment or a Service Permanent Establishment in India under the India-Canada Double Taxation Avoidance Agreement. 

The Tribunal ruled that remote access provided by Indian customers for maintenance and troubleshooting of IMAX theatre systems did not satisfy the “disposal test,” “place of business test,” or “permanence test” required for constituting a PE. 

The Bench also rejected the Revenue’s attempt to create a “virtual PE” concept through remote maintenance access and held that the 90-day threshold for Service PE under the DTAA had not been breached.