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Hyatt International Southwest Asia Ltd. v. Additional Director of Income Tax

Civil Appeal · 2025 INSC 891Decided 24 Jul 2025
C.A. No.-009766-009766-2025 (and connected appeals, arising out of SLP(C) No. 5710 of 2024 and others)
Justice J.B. Pardiwala · Justice R. Mahadevan

Background

Hyatt International Southwest Asia Ltd., a UAE tax resident, entered into 20-year Strategic Oversight Services Agreements (SOSA) with Asian Hotels Limited to provide strategic planning, operational, and "know-how" services for hotels in India, without maintaining what it claimed was a fixed office or branch. The Indian tax authorities held across several assessment years (2009-10 through 2017-18) that Hyatt had a Permanent Establishment (PE) in India through the hotel premises, making its fees taxable in India. The Income Tax Appellate Tribunal and the Delhi High Court both ruled against Hyatt on the PE question, leading to this batch of appeals to the Supreme Court.

Decision Breakdown

The Supreme Court dismissed all the appeals and upheld that Hyatt had a Fixed Place Permanent Establishment in India. It found that under the SOSA, Hyatt exercised pervasive and enforceable control over the hotel's operations (appointing and supervising the General Manager, controlling pricing and branding, managing bank accounts, and posting its own personnel) which went well beyond passive consultancy and did not qualify for the "preparatory or auxiliary" exclusion under Article 5(3) of the DTAA. The Court held that exclusive physical possession of space is not required for a PE (following Formula One World Championship), that continuity of business presence in aggregate matters more than any single employee's length of stay, and that legal form (a separate operating company running day-to-day hotel affairs) does not override the economic substance of Hyatt's actual control.

Lesson Learnt

A foreign company can be taxed in India as having a Permanent Establishment even without owning or exclusively occupying office space here, if it exercises real, continuous operational control over a business carried on from Indian premises: the tax law looks at substance and function, not just the formal structure of an agreement.

Official source (sci.gov.in)View Judgment (PDF)

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