Hyatt International Southwest Asia Ltd. v. ADIT

Case snapshot

Sections / provisions: DTAA; PE

Questions before the Court / Tribunal

• Fixed place permanent establishment and disposal/control test: The reported Supreme Court judgment examines when a place is sufficiently at the disposal of a foreign enterprise to constitute a fixed-place permanent establishment, focusing on operational control and supervision rather than formal ownership alone.

Material facts and background

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 9766 OF 2025 (Arising out of SLP (C) No. 5710 of 2024) HYATT INTERNATIONAL SOUTHWEST ASIA LTD.

CIVIL APPEAL NO. 9767 OF 2025 (Arising out of SLP (C) No. 20019 of 2025) (Arising out of SLP(C) Diary No. 14972 of 2024) WITH CIVIL APPEAL NO. 9768 OF 2025 (Arising out of SLP (C) No. 10152 of 2024) WITH CIVIL APPEAL NO. 9769 OF 2025 (Arising out of SLP (C) No. 10157 of 2024) Signature Not Verified Digitally signed by CHANDRESH Date: 2025.07.24 17:47:51 IST Reason:

WITH CIVIL APPEAL NO. 9771 OF 2025 (Arising out of SLP (C) No. 10800 of 2024) WITH CIVIL APPEAL NO. 9772 OF 2025 (Arising out of SLP (C) No. 10796 of 2024) WITH CIVIL APPEAL NO. 9773 OF 2025 (Arising out of SLP (C) No. 10797 of 2024)

22.12.2023 passed by the High Court of Delhi1 in the Income Tax Appeals preferred by the appellant / assessee, in respect of the Assessment Years 2009-10, 2010-11, 2011-12, 2012-13, 2013-14, 2014-15, 2016-17 and 2017-18. The details of the impugned orders before this Court, before the High Court and before the Income

Tax Appellate Tribunal, along with the corresponding tax effect involved in each case, are tabulated below: Case No. SLP (C) No. 5710 of 2024

SLP (C) No. ITA No.219/2020 1762/Del/2015 28.01.2015 10152 of Order dated Order dated AY 2011-12 2024 22.12.2023 04.12.2019

SLP (C) No. ITA No.215/2023 712/Del/2021 13.04.2021 10797 of Order dated Order dated AY 2017-18 2024 22.12.2023 20.12.2022

Appellant / assessee submissions

Section 143(3) of the Income Tax Act, 19616. In response, the appellant submitted a reply dated 25.08.2011, asserting that its income was not taxable under the Act as there was no specific Article under the DTAA for taxing Fees for Technical Services. It further stated that it did not have any fixed place of business, office, or branch in India, and that the presence of its employees in India during the relevant previous year did not exceed the nine-month threshold under Article 5(2) of the DTAA. Therefore, the appellant claimed that it did not have a Permanent Establishment (PE) in India and that its business income was not taxable under Article 7 of the DTAA. 3.4.

Permanent Establishment (PE) in the form of a fixed place of business in India under the Indo-UAE DTAA, the learned Senior Counsel for the appellant / assessee vehemently contended that the appellant is a Dubai based company engaged in rendering hotel consultancy and advisory services from Dubai to hotels in the Hyatt Group of Hotels, including several located in India. These services are rendered under a SOSA entered into with each hotel owner individually. The SOSA explicitly stipulates that the appellant shall render its services from Dubai and is not obligated to send or station any employee in India. However, the agreement permits at the appellant’s sole discretion, occasional and temporary visits by its employees to India. 4.1.

Revenue / respondent submissions

The judgment copy does not separately set out this component in a distinct section; refer to the full order and the reasoning section below.

Court / Tribunal analysis and reasoning

indicating operational presence in line with the terms of the SOSA. In view of the same, it was submitted that the appellant had full and effective control over the hotel premises and that the premises were indeed at its disposal for conducting its business. Therefore, the hotel satisfies the definition of a fixed place of business PE under Article 5(1) of the DTAA. Consequently, in terms of Article 7(1) of the DTAA, the profits attributable to such PE are liable to be taxed in India and the appellant be taxed in India on the income derived from such activities. 5.5.

the decision of this Court in Formula One (supra). In that case, the assessee (FOWC) incorporated in the UK, entered into a Race Promotion Contract (RPC) with Jaypee Sports International Ltd. to host the Formula One Grand Prix in India. The Court had to determine whether Jaypee constituted a fixed place PE of FOWC in India under the terms of the RPC. The Court held in paragraphs 74 and 76.5 of the judgment that for a fixed place PE to exist, two conditions must be met: (a) there must be a fixed place of business, and (b) through that place, the business of the enterprise must be wholly or partly carried on. Although FOWC’s claimed, it only had access to the race circuit for three days a year, the Court noted that the contract term extended to five years (renewable to ten), and FOWC had full control during the race period. Therefore, the premises were held to constitute a PE. The Court also referred to the OECD Commentary [paragraph 40(c) and 40(d)] to clarify that the

distinguishable and therefore, not applicable to the present case. 5.8. In view of the foregoing submissions, particularly the principles laid down in Formula One (supra), the learned Senior Counsel submitted that the appellant’s operation satisfies all conditions for the existence of a fixed place of business PE under Article 5(1) of the Indo-UAE DTAA. The appellant’s plea of lacking day to-day control is untenable given the pervasive control and continuous nature of its involvement.

of business of the appellant in India, and in terms of Article 7(1) of the DTAA, the profits attributable to such PE are liable to tax in India. Therefore, the present appeals are liable to be dismissed. 6.

passed the following interim order: “We have heard learned senior counsel for the petitioner and learned Additional Solicitor General for the respondent-department. It is stated at the Bar that the tax demand has been fully met by the petitioners (under protest). However, the apprehension is with regard to the initiation of penalty proceedings pending consideration of the matter before this Court. It was submitted that the petitioner has a good case on merits and therefore, initiation of penalty proceedings and the demand made thereon would ultimately be prejudicial to the petitioner herein. Per contra, learned Additional Solicitor General submitted that having regard to the fact that three authorities, including the High Court, having held against the petitioner herein on the basis of the judgments of this Court, there is no reason as to why the penalty proceedings should be stayed or frustrated at this stage. However, we find that since notices have been issued in these matters pending consideration of these special leave petitions and bearing in mind the fact that the tax demand has been made by the petitioners herein, the penalty proceedings shall remain stayed till the next...

12.4. From the contractual provisions detailed above, it is evident that the appellant’s role was not confined to mere policy formulation. On the contrary, the SOSA conferred upon the appellant a continuing and enforceable right to implement its policies and ensure compliance in all operational aspects of the hotel. The degree of control and supervision exercised by the appellant clearly transcends a mere advisory capacity and aligns with the criteria for a Fixed Place Permanent Establishment (PE) under Article 5(1) of the India – UAE DTAA.

Operative decision and relief

establishment based on the global income or loss that may have been earned or incurred by a cross border entity.”

that the appellant has a fixed place PE in India within the meaning of Article 5(1) of the DTAA, and that, the income received under the SOSA is attributable to such PE and is therefore taxable in India. 25.

Authorities and precedents appearing in the judgment

• Court in Formula One World Championship Limited v. Commissioner of Income
• New Delhi vs. M/s. E-Funds IT Solutions
• Judge of this Court) in CIT v. Visakhapatnam Port
• CIT v. Visakhapatnam Port Trust
• In Union of India & Anr. v. U.A.E Exchange Centre9
• UAE Exchange Centre Ltd. v. Union of India
• Supreme Court in CIT v. Morgan Stanley & Co. Inc
• CIT v. Morgan Stanley & Co. Inc
• Delhi High Court in Hyatt International Southwest Asia Ltd v. Additional Director
• The decision of the Special Bench in Motorola Inc. v. Dy. CIT 2005 SCC OnLine

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on Fixed place permanent establishment and disposal/control test. The operative result is classified as Dismissed. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Fixed place permanent establishment and disposal/control test. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Map domestic-law provisions against the applicable treaty article separately; PE, FTS/royalty and withholding conclusions depend on functions, control, contract terms and treaty language.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

Read / download the authenticated official judgment PDF

Related Finin2min guidance