TaxTMI 
TaxTMI 
2026 (5) TMI 1001
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....es to its customers in India as well as other globally placed entities. 1.2 The main controversy in this case pertains to an allegation that the assessee has a Fixed Place Permanent Establishment (PE). There is also an allegation that there is a services PE of the assessee in India and therefore some profits were proposed by the AO to be attributed on the basis of the said PE as under: i. Maintenance Services - Rs. 590,35,967/-; ii. Sale of glasses etc. 19,69,881/-. Thereafter, the Ld. AO applied a profit rate of 25% on the resultant amount of Rs. 610,05,848/- by invoking Rule 10 of the I.T. Rules and made an addition of Rs. 152,51,462/-. The Ld. DRP upheld the proposal of the Ld. AO regarding the existence of a fixed place PE and also of a supervisory PE in India. However, the DRP reduced the profit rate from 25%, as proposed in the draft order, to 12.5%. This resulted in a total addition of Rs. 76,25,731. 1.3 Aggrieved with this action, the assessee has approached the ITAT with the following grounds: - "Ground No.1: Allegation of Fixed Place Permanent Establishment ('PE') of the Appellant in India: 1.1 On the facts and in the circumsta....
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....or is an employee of the Appellant on the basis of his Linkedin profile without confronting the Appellant about the same to the Appellant which is against the principles of natural justice. 2.5 On the facts and circumstances of the case and in law, the Ld. DRP has grossly erred in holding the Supervisory PE of the Appellant in India-Canada DTAA without appreciating the facts in the case of Appellant as no supervisory activities were performed by the Appellant during the year under consideration. The Ld. DRP, while passing the directions, erred in concluding the Supervisory PE of the Appellant in India by incorrectly considering the facts of the parent entity of the Appellant (Le. IMAX Corporation). Ground No. 3: Attribution of profits to alleged PE of the Appellant in India: 3.1 Without prejudice to the fact that the appellant does not have a PE in India, the Ld. AO and Ld. DRP, have grossly erred in attributing entire revenue from maintenance services to the alleged PE in India on ad-hoc basis. 3.2 Without prejudice to the fact that the appellant does not have a PE in India, the Ld. AO and L4. DRP, have grossly erred in attributing revenue from ....
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....ting the customers' site for providing maintenance services. It was the submission that the "permanence" test for determining the PE was also not fulfilled in this case since there was no "Permanent Establishment" (PE) nor the premises of the Indian customers were at the disposal of the assessee. Lastly, it was the submission that the "business activity" test was also not fulfilled in the case since the presumption of the performance of business activity by a foreign enterprise through an identified place was not happening in this case. For this proposition the Ld. AR relied on the case of Formula One World Championship Limited vs. CIT [2017] 249 taxman 192 (SC) to canvass the point that for a fixed place PE to be inferred the premises needed to be put at the disposal of the enterprise and not merely providing access. 2.1 Regarding the allegation of service PE for performing maintenance services, the Ld. AR read Article 5(2)(1) of the DTAA and stated that neither the test of furnishing of services in India by employees or other personnel of the Canadian entity, nor the test of such services being provided for a period exceeding 90 days in a 12 months period was satisfied. The Ld....
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....activity test are found to be fulfilled in this case. At this stage, we do not deem it necessary to reiterate the non- applicability of such tests to the case under consideration since the argument of the Ld. AR have been extensively recorded (supra) in this regard. Thus, it deserves to be held that there is no fixed place PE under Article 5(1) of the DTAA. 4.1 Regarding allegation of a service PE or a supervisory PE (as per the Ld. DRP) it deserves to be held that the total period of visit by Shri Sunil Kumar on the specific sites of the theatre systems is exactly 67 days. This fact is an admitted one and thus, the only other consideration is whether the services being provided remotely could bring into existence a service PE. In this regard the case of Ernst & Young (EMEIA) Services Limited vs. ACIT reported in [2026] 184 taxmann.com 671 (Delhi - Trib.) would help us to decide this issue. Some relevant extracts are as under: - "11. We find that one of the question of law for consideration before the Hon'ble Delhi High Court in the case CIT vs. Clifford Chance Pte. Ltd. (supra) was: "B. Whether on the facts and in the circumstances of the case, and in law,....
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....would be at variance that the express provisions of the DTAA which we have already interpreted above. 44. At this juncture, we find it necessary to acknowledge that the Revenue may potentially be justified in raising concerns regarding taxability of foreign entities in the increasingly open global virtual economy, and the diminishing requirement of physical presence of non-resident employees to furnish services. However, taxability of entities in such instances, as always, remains subject to the applicable provisions of law-both treaty and domestic. 45. The law insofar as the present controversy is concerned, is clear and unambiguous. The DTAA, which has been carefully drafted and executed after numerous rounds of bilateral deliberations and negotiations at the highest level, must necessarily be interpreted strictly. If something is conspicuous by its absence, the presumption is that it has deliberately been done so. It is not for courts to read in concepts which are not expressly provided for by the treaty. The guiding principle here is that language which is not explicitly included in treaty provisions cannot be artificially read into such provisions by way of j....