Hyatt Had Fixed Place PE in India Due to Operational Control | SC

Case Details: Hyatt International Southwest Asia Ltd. vs. Additional Director of Income-tax - [2025] 176 taxmann.com 783 (SC)

Judiciary and Counsel Details

• J.B. Pardiwala & R. Mahadevan, JJ.
• S. Ganesh, Sr. Adv., Ujjwal A. Rana & Himanshu Mehta, Advs. for the Petitioner.
• N. Venkatraman, A.S.G., Arijit Prasad, Rupesh Kumar, Sr. Advs., Shashank Bajpai, V. Chandrashekhara Bharathi, Santosh Kumar, Diwakar Sharma, Advs. & Raj Bahadur Yadav, AOR for the Respondent.

Facts of the Case

Assessee-Hyatt International was engaged in rendering consultancy services in the hotel sector. It entered into two Strategic Oversight Services Agreements (SOSAs) with an Indian company regarding the hotels in Delhi and Mumbai. For the relevant assessment years, the Assessing Officer passed assessment orders taxing the hotel-related services rendered by the assessee on the ground that it has a Permanent Establishment (PE) in India in the form of a place of business under Article 5(1) of the DTAA.

The matter reached before the High Court. The High Court held that the assessee exercised pervasive and enforceable control over the hotel’s strategic, operational, and financial dimensions. The High Court held that the assessee’s role was not confined to high-level decision making but extended to substantive operational control and implementation.

The assessee’s ability to enforce compliance, oversee operations, and derive profit-linked fees from the hotel’s earnings demonstrates a clear and continuous commercial nexus and control with the hotel’s core functions. This nexus satisfies the conditions necessary for the constitution of a Fixed Place PE under Article 5(1) of the India-UAE DTAA.

Aggrieved by the order, the assessee preferred an appeal to the Supreme Court.

Supreme Court Held

The Supreme Court held that the assessee exercised pervasive and enforceable control over the hotel’s strategic, operational, and financial dimensions. Specifically, the agreement vested the assessee with powers to appoint and supervise the General Manager and other key personnel, implement human resource and procurement policies, control pricing, branding, and marketing strategies, manage operational bank accounts, and assign personnel to the hotel without requiring the owner’s consent. These rights extend well beyond mere consultancy, indicating that the assessee was an active participant in the hotel’s core operational activities.

The actual role of the assessee was not just advisory but extended to various other administrative roles. The 20-year duration of the SOSA, coupled with the assessee’s continuous and functional presence, satisfied the tests of stability, productivity, and dependence. From the nature of functions carried out by the assessee, it cannot be said that they were performing merely “auxiliary” functions. Rather, the functions performed by the assessee, through its staff operating from the hotel premises, were not just limited to setting up a pattern of activities for the hotel but were core and essential functions, clearly establishing their control over the day-to-day operations of the hotel.

Therefore, the hotel premises clearly satisfy the criteria required to be classified as a “fixed place of business” or PE.

List of Cases Reviewed

• Hyatt International-Southwest Asia Ltd. vs. Additional Director of Income-tax [2024] 158 taxmann.com 136/297 Taxman 497/464 ITR 508 (Delhi) (para 24) affirmed
• Formula One World Championship Limited. v. CIT, International Taxation [2017] 80 taxmann.com 347/248 Taxman 192/394 ITR 80 (SC) (para 18) followed
• Asstt. DIT v. E-Funds IT Solutions Inc. [2017] 86 taxmann.com 240/251 Taxman 280/399 ITR 34 (SC) (para 20) distinguished

List of Cases Referred to

• Formula One World Championship Limited. v. CIT, International Taxation [2017] 80 taxmann.com 347/248 Taxman 192/394 ITR 80 (SC) (para 3.6)
• Asstt. DIT v. E-Funds IT Solutions Inc. [2017] 86 taxmann.com 240/251 Taxman 280/399 ITR 34 (SC) (para 4.2)
• Union of India v. U.A.E Exchange Centre [2020] 116 taxmann.com 379/273 Taxman 122/425 ITR 30 (SC) (para 14)
• Hyatt International Southwest Asia Ltd v. ADIT [2024] 166 taxmann.com 466/[2025] 472 ITR 53 (Delhi) (FB) (para 23).