Supreme Court dismisses Hyatt International Southwest Asia's appeal in tax case

In a ruling that has significant implications for MNCs operating in India, the Supreme Court Thursday held that UAE-headquartered Hyatt International Southwest Asia, which provides hotel advisory services in India as part of its business operations, will be a considered as a Permanent Establishment (PE) in India for tax purposes.

A bench led by Justice JB Pardiwala dismissed the appeals filed by Hyatt against the Delhi High Court decision which held that the Indian PE of Hyatt International must be treated as a distinct entity for tax purposes.

The apex court said that on the basis of all the materials available on record, Hyatt is a permanent establishment, so tax procedures are applicable to it.

The particulars of the SC order:

• It is undisputed that the appellant's (Hyatt) executives and employees paid frequent and regular visits to India to oversee operations and implement these so and so.
• The finding of the assessing officer, based on travelogues and job functions, established continuous and coordinated engagement, even though no single individual exceeded the nine month stay the threshold under article 521.
• The relevant consideration is 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 the business operations, the intermittent presence or return of a particular employee becomes immaterial and An insignificant in determining the existence of a permanent establishment.
• The High Court was correct in concluding that the appellant's role was not confined to high level decision making, but extended to substantial operational control and implementation.
• The appellant's ability 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.
• This nexus satisfies the condition necessary for the constitution of a fixed place. Permanent establishment.
• In view of the foregoing analysis, we affirm the finding of the High Court that the appellant has a fixed place of permanent establishment in India within the meaning of Article 51, and that the income received under the zone so attributable to such be and is therefore taxable in India.