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Informist, Thursday, Jul. 24, 2025

 

NEW DELHI – Upholding a Delhi High Court order, the Supreme Court on Thursday ruled that Hyatt International Southwest Asia Ltd. has a fixed place of permanent establishment in India and therefore, its income is taxable under the Income Tax Act, 1967. Hyatt was incorporated under the Companies Law, Dubai International Financial Centre in the United Arab Emirates. The top court noted that it was undisputed that Hyatt's executives and employees paid frequent and regular visits to India to oversee operations. 

 

The finding of the assessing officer, based on travelogues and job functions, established continuous and coordinated engagement by Hyatt's employees, even though no single individual exceeded the nine month stay under Article 5(2) of the agreement between the government of India and the United Arab Emirates for avoidance of double taxation. The top court said that the relevant consideration for a permanent establishment was continuity of business presence in aggregate, not the length of the stay of each individual employee.

 

Once it is found that there is continuity in business operations, the intermittent presence or return of a particular employee becomes immaterial and insignificant in determining the existence of a permanent establishment, the top court said. The high court was correct in concluding that Hyatt's role was not confined to high-level decision making, but extended to substantial operational control and implementation, the apex court said.

 

Hyatt's liability to enforce compliance, oversee operations, and derive profit-linked fee from the hotel's earnings, demonstrate a clear and continuous commercial nexus, and control with the hotel's core functions, said a bench of Justices J.B. Pardiwala and R. Mahadevan. This nexus satisfies the condition necessary for the constitution of a fixed place of permanent establishment, it said. 

 

The case has its genesis in various assessment orders passed by the assessing officer against Hyatt International. In 2008, Hyatt had entered into two strategic oversight services agreements with Asian Hotels Ltd. One was in respect of hotel Hyatt Regency, Delhi owned by Asian Hotels, and the other pertained to a hotel in Mumbai. Under the terms of the agreement, Hyatt agreed to provide strategic planning services and "know-how" to ensure that Hyatt Regency was developed and operated as an efficient and a high quality international full-service hotel. Asian Hotels was thereafter reorganised and its name was subsequently changed to Asian Hotels (North) Ltd., which continued to own Hyatt Regency. 

 

Hyatt International argued that its income was not taxable under the Income Tax Act, as there was no specific Article under the agreement between the government of India and the United Arab Emirates for avoidance of double taxation for taxing fees for technical services. The petitioner further claimed that it had no fixed place of business, office or branch in India. Further, the presence of the assessee's employees in India during the relevant previous year did not exceed the specified time of nine months under Article 5(2) of the double taxation avoidance agreement and therefore, the company did not have permanent establishment in India, Hyatt International said.  End

 

Reported by Surya Tripathi

Edited by Avishek Dutta

 

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