Supreme Court rules Hyatt had a ‘Permanent Establishment’ under DTAA, making its India-sourced income taxable despite global losses. Tax liability upheld for operations through Indian hotel partnerships.
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NEW DELHI: In a landmark ruling regarding the implications for international taxation, the Supreme Court of India on July 24, 2025, upheld the taxability of UAE-based Hyatt International Southwest Asia Ltd. in India under the Permanent Establishment (PE) provisions of the India–UAE Double Taxation Avoidance Agreement (DTAA).
The apex court ruled that even if a foreign company incurs global losses, its business presence in India through a PE makes it liable to pay tax in India.
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Background of the Case
The dispute arose when Hyatt International Southwest Asia Ltd., a Dubai-based company and tax resident of the UAE, entered into Strategic Oversight Services Agreements (SOSAs) in 2008 with Indian hotel owners for properties in Delhi and Mumbai.
Under these agreements, Hyatt provided strategic planning, branding, and operational oversight to ensure compliance with global Hyatt standards. For the assessment years 2009–10 to 2017–18, Hyatt declared ‘nil’ taxable income in India, contending it had no Permanent Establishment (PE) as defined under Article 5 of the India–UAE Double Taxation Avoidance Agreement (DTAA).
It argued that it had no fixed place of business in India and that employee visits were occasional and under the nine-month threshold. However, the Income Tax Department disagreed, issuing assessment orders treating Hyatt’s Indian operations as a PE, making its income taxable under Indian law. The ITAT and Delhi High Court upheld this view, leading Hyatt to appeal before the Supreme Court.
Supreme Court’s Observation
The Supreme Court upheld the decisions of the Assessing Officer, ITAT, and Delhi High Court, affirming that Hyatt International Southwest Asia Ltd. had a Permanent Establishment (PE) in India under Article 5(1) of the India–UAE Double Taxation Avoidance Agreement (DTAA).
The Court emphasized that Hyatt exercised crucial operational control over Indian hotels through long-term SOSA agreements. These agreements empowered Hyatt to appoint key personnel, oversee finances, manage strategic planning, and implement operational policies. This level of involvement went far beyond mere advisory services and demonstrated that Hyatt was conducting core business functions in India.
Rejecting Hyatt’s argument that it had no fixed place of business, the Court ruled that exclusive possession is not essential for a PE to exist. Even temporary or shared access to premises is sufficient if substantive business is carried out there. The 20-year duration of the agreements, continuous control, and revenue-linked fees proved the stability, productivity, and dependence required for establishing a PE.
On the issue of global losses, the Court agreed with the High Court’s larger bench and clarified that income attribution to a PE in India is valid regardless of the overall financial losses of the foreign company. The Court held that taxability is based on the source of income and business presence in India, not global profitability.
The Supreme Court concluded that Hyatt International Southwest Asia Ltd. had a Fixed Place Permanent Establishment (PE) in India under Article 5(1) of the India–UAE Double Taxation Avoidance Agreement (DTAA), based on its extensive control over hotel operations through the Strategic Oversight Services Agreement (SOSA).
The Court held that the income earned under the SOSA was attributable to this PE and therefore taxable in India, irrespective of the company’s global financial losses.
“Taxability of a PE depends on its business presence in India, not on the global profitability of the enterprise.”
It firmly stated that the presence and business activities of a PE in India are sufficient grounds for taxation, regardless of the parent company’s overall profitability. Consequently, the Court dismissed all appeals filed by Hyatt and upheld the tax demands raised by the Indian Income Tax Department.
Case Title: Hyatt International Southwest Asia Ltd. vs. Additional Director of Income Tax
CIVIL APPEAL NO. 9766 OF 2025
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