TaxTMI 
TaxTMI 
2026 (6) TMI 300
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....sale and related services of theatre systems. Under such agreements the assessee carries out the following broad activities: - i. Sale of the theatre system; ii. Installation of the system, provision of related services and training services also; iii. Grant of license to use the "IMAX" trademark. 1.2 In this case, the AO had proposed to the DRP additions on the basis of an alleged existence of a fixed place Permanent Establishment (hereafter as "the PE") and installation PE in India, as under: i. Sale of theatre system - Rs. 353,65,542/-; ii. Sale of glasses and others - Rs. 34,95,704/-; iii. Installation services - Rs. 302,42,051/-; iv. Theatre Design Services - Rs. 38,34,000/-. The resultant amount of Rs. 729,37,297/- was subjected to a profit rate of 25% by invoking Rule 10 of IT Rules, resulting in a proposed addition of Rs. 182,34,324/-. However, following the DRP's directions, the Ld. AO made the following additions in the final assessment order: i. **Sale of glasses and others - Rs. 34,95,704/- ; ii. Installation services - Rs. 57,51,000/-; iii. Theatre Design Services - Rs. 38,3....
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....he Appellant. 2.3 On the facts and in the circumstances of the case and in law, the Id. AO and Id. DRP failed to appreciate that I employee of the Appellant visited India in February 2022 for a total of 5 days only for preparatory activities. 2.4 On the facts and in the circumstances of the case and in law, the Id. AO has erred in proposing and the DRP has further erred in upholding/ confirming the date (i.e. February 2022) of visit of employee for preparatory activities which included inspection of the Theatre to ensure optimum design of theatre prior to import of theatre system as the date for commencement for computing the threshold period of Installation/Supervisory PE instead of September 2022 when the installation of Theatre system was executed. 2.5 On the facts and in the circumstances of the case and in law, the Id. AO and Id. DRP have has erred considering the date (i.e. February 2022) of visit of employee for preparatory activities as the date for commencement for computing the threshold period of Installation / Supervisory PE without appreciating the fact that the Theatre system arrived in India on 02 April 2022, hence the installation/supervis....
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....in initiating the penalty proceedings under section 270A of the Act on account of underreporting of income by way of misreporting. 7 The above grounds of appeal are independent and without prejudice to one another. 8 That the Appellant reserves its right to add, alter, amend and/or modify any ground of appeal before or at the time of hearing of this appeal." 1.4 The assessee also filed additional grounds of appeal vide letter dated 17.09.2025, but decided not to press the same. This fact has been clearly recorded in the order-sheet entry dated 2.4.2026. Accordingly, the same are dismissed as not pressed. 2. Before us the Ld. AR argued with the help of extensive paper books and written submissions. The Ld. AR requested that his arguments may be considered on the basis of themes in the grounds of appeal pertaining to fixed place PE, installation/supervisory PE and the attribution of profits on these alleged PEs. It was argued by the Ld. AR that the allegation of a fixed place PE in India was made on the premise that the installation activities at the multiplex sites are being carried out under the instructions and supervision of the assessee. It was the submis....
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....igning of agreement) and culminating in the installation of theatre system [between 13.9.2022 to 29.2.2022]. It was stressed by the Ld. AR that the DRP's finding that installation related activities continued for a number of months was not borne out by the facts on record. Thereafter, the Ld. AR provided counter-points to the AO's contention that the four essential tests for determining a PE could be attributed to the assessee. It was stated that "place of business test" was not fulfilled since the assessee did not have any place of business (owned or leased in India). It was stated that the title of ownership of the theatre system is transferred to the customers and remains with them. Regarding the "disposal test" it was stated that the theatre system is not at the disposal of the assessee and there are no rights or control over the premises by the assessee. The owners/clients provide access to the assessee for installation related services only and at no stage are such premises at the disposal of the assessee. The Ld. AR argued that the "permanence test" is also not fulfilled in the assessee's case since there is neither any fixed place in India nor are the premises of Indian cus....
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..... AR pointed out that since the Revenue was booked on mercantile basis in the assessment year under consideration but actually the supply and installation happened only in AY 2023-24. Thus, on this basis alone there could be no installation/supervisory PE in India in the year under consideration. It was the submission that the 120 days have been computed from the first visit of employee between 28.2.2022 and thereafter considering September, 2022 as the end period for this activity. It was the submission that the theatre system arrived in India only on 2.4.2022 and it was installed between 13.9.2022 to 29.9.2022. As a further fact it was pointed out that one Mr. Neil Robbins, an employee of the Australian Vendor-ESPM installed the theatre system between the period 13.9.2022 to 28.9.2022. In support of this contention a number of documents, including the passport of Mr. Neil Robbins, were pointed out to the Bench. It was the submission that by no stretch of imagination was the 120 days threshold breached in this case. The Ld. AR relied on a number of orders of coordinate benches of ITAT to canvass the point that the number of days of stay of employees counted together should be more....