The Supreme Court of India, in Hyatt International Southwest Asia Ltd. v. Additional Director of Income-tax (Civil Appeal Nos. 9766–9773 of 2025), examined whether the appellant, a company incorporated in Dubai and a tax resident of the United Arab Emirates, had a Permanent Establishment (PE) in India within the meaning of Article 5(1) of the India–UAE Double Taxation Avoidance Agreement (DTAA), and whether income earned under Strategic Oversight Services Agreements (SOSA) was taxable in India under Article 7.

The appellant had entered into long-term SOSAs with Indian hotel owners for providing strategic planning, brand oversight, operational policies, and managerial supervision to ensure that the hotels were developed and operated in accordance with Hyatt’s international standards. The agreements were for a period of twenty years and entitled the appellant to strategic fees linked to hotel revenues and operating profits. The Assessing Officer held that the appellant had a fixed place PE in India, characterising the hotel premises as being at the disposal of the appellant, and brought the income to tax. The findings were affirmed by the ITAT and partly by the Delhi High Court.

Before the Supreme Court, the appellant contended that it merely provided advisory and consultancy services from Dubai, that it did not have any office or fixed place of business in India, and that occasional visits by its employees to India did not result in a PE. It was further argued that operational control vested with an Indian affiliate under a separate hotel operating services agreement and that the High Court erred in applying the ratio of Formula One World Championship Ltd. v. CIT.

The Supreme Court undertook an extensive examination of the SOSA, the scope of activities undertaken by the appellant, and the jurisprudence governing fixed place Permanent Establishment. Reiterating the principles laid down in Formula One World Championship Ltd. and Visakhapatnam Port Trust, the Court held that for a fixed place PE to exist, the premises need not be owned or exclusively occupied by the foreign enterprise; it is sufficient if the premises are at its disposal and are used for carrying on its business.

On facts, the Court found that the SOSA conferred pervasive and enforceable rights upon the appellant, including authority over strategic planning, branding, pricing, marketing, human resources, appointment of key managerial personnel, financial oversight, and assignment of employees to the hotel without the owner’s consent. The long duration of the agreement, the continuous presence of the appellant’s personnel, and the linkage of remuneration to hotel performance demonstrated stability, productivity, and dependence—core attributes of a fixed place PE.

The Court rejected the contention that absence of a designated or exclusive physical space negated the existence of a PE, holding that shared or temporary use of premises is sufficient where core business functions are carried on through such premises. It further held that the appellant’s reliance on E-Funds IT Solutions Inc. was misplaced, as that case involved mere back-office support activities, whereas the appellant in the present case exercised substantive operational and managerial control over the hotel’s core functions.

Accordingly, the Supreme Court affirmed the findings of the High Court and held that the hotel premises constituted a fixed place Permanent Establishment of the appellant in India under Article 5(1) of the Indo–UAE DTAA. It further held that the income earned under the SOSA was attributable to such PE and taxable in India under Article 7.
The appeals were dismissed.

Source- https://api.sci.gov.in/supremecourt/2024/9277/9277_2024_9_1502_62468_Judgement_24-Jul-2025.pdf

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