Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 Supreme(SC) 1110

SUPREME COURT OF INDIA
J.B. PARDIWALA, R. MAHADEVAN, JJ.
Hyatt International Southwest Asia Ltd. – Appellant
Versus
Additional Director of Income Tax – Respondent
Civil Appeal No. 9766 of 2025 [Arising Out of SLP (C) No. 5710 of 2024], Civil Appeal No. 9767 of 2025 [Arising Out of SLP (C) No. 20019 of 2025] [Arising Out of SLP (C) Diary No. 14972 of 2024], Civil Appeal No. 9768 of 2025 [Arising Out of SLP (C) No. 10152 of 2024], Civil Appeal No. 9769 of 2025 [Arising Out of SLP (C) No. 10157 of 2024], Civil Appeal No. 9770 of 2025 [Arising Out of SLP (C) No. 10798 of 2024], Civil Appeal No. 9771 of 2025 [Arising Out of SLP (C) No. 10800 of 2024], Civil Appeal No. 9772 of 2025 [Arising Out of SLP (C) No. 10796 of 2024], Civil Appeal No. 9773 of 2025 [Arising Out of SLP (C) No. 10797 of 2024]
Decided On : 24-07-2025

Advocates appeared:
For the Petitioner(s): Mr. S. Ganesh, Sr. Adv. Mr. Ujjwal A. Rana, Adv. Mr. Himanshu Mehta, Adv. For M/s. Gagrat And Co, AOR
For the Respondent(s): Mr. N Venkatraman, A.S.G. Mr. Arijit Prasad, Sr. Adv. Mr. Rupesh Kumar, Sr. Adv. Mr. Raj Bahadur Yadav, AOR Mr. Shashank Bajpai, Adv. Mr. V Chandrashekhara Bharathi, Adv. Mr. Santosh Kumar, Adv. Mr. Diwakar Sharma, Adv.

The court affirmed that a foreign enterprise holds a Permanent Establishment in India if it has operational control through a fixed place, enabling it to derive income subject to local taxation under the Double Taxation Avoidance Agreement.

Headnote:(A) Income Tax Act, 1961 - Sections 142(1), 143(3), 144C - Article 5(1) of Indo-UAE DTAA - Permanent Establishment (PE) - Assessment Years 2009-10 to 2017-18 - Appellant claimed no PE in India; High Court ruled against, establishing a PE based on activities and agreements under Strategic Oversight Services Agreement. (Paras 3.2, 3.9, 10, 12, 24)

(B) Permanent Establishment - Definition and conditions under Article 5; essential criteria includes a fixed place of business ‘at the disposal’ of the enterprise engaged in business activities - Court reiterated that mere presence of personnel does not constitute a PE; operational control and business function connection are determinative. (Paras 13 - 24)

Facts of the case:
The appellant, a UAE tax resident, entered into Strategic Oversight Services Agreements with an Indian company to provide oversight services for hotels. The Assessing Officer framed assessments determining the appellant operated a PE in India which the ITAT and High Court upheld, asserting tax liability on derived income.

Findings of Court:
The High Court correctly concluded that appellant had a PE in India, with sufficient operational control and business activities based on its agreements.

Issues: The core issue was whether the appellant constituted a PE in India under the DTAA based on its business agreements and activities.

Ratio Decidendi: The court held that the appellant’s functions transcended advisory services, establishing a fixed place of business under Article 5 of the DTAA due to operational control and ongoing financial interest in the hotel’s business activities, satisfying the criteria for taxability in India.

Result: Appeals dismissed.

Table of Content
1. overview of the appeals and their background. (Para 1)
2. factual background of appeals and assessments. (Para 2 , 3)
3. arguments presented by both parties. (Para 4 , 5)
4. court's rationale for defining pe. (Para 6 , 11 , 16 , 18 , 21)
5. establishment of pe under article 5 of dtaa. (Para 12 , 14 , 20 , 22 , 24)
6. analysis of permanent establishment criteria under dtaa. (Para 15)
7. conclusion regarding dismissal of appeals. (Para 25 , 26)

JUDGMENT :

R. MAHADEVAN, J.

1. Leave granted.

2. All these appeals arise out of the common judgment and order dated 22.12.2023 passed by the High Court of Delhi¹ [For short “the High Court”] in the Income Tax Appeals preferred by the appellant/assessee, in respect of the Assessment Years 2009-10, 2010-11, 2011-12, 2012-13, 2013-14, 2014-15, 2016-17 and 2017-18. The details of the impugned orders before this Court, before the High Court and before the Income Tax Appellate Tribunal, along with the corresponding tax effect involved in each case, are tabulated below:

Case No.	High Court	ITAT	AO	Tax effect evolved
SLP (C) No. 5710 of 2024	ITA No. 216/2020 Order dated 22.12.2023	579/Del/2013 Order dated 04.12.2019	21.11.2012 AY 2009-10	85,14,156/-
SLP (C) No. 10152 of 2024	ITA No. 219/2020 Order dated 22.12.2023	1762/Del/2015 Order dated 04.12.2019	28.01.2015 AY 2011-12	2,98,96,262/-
SLP (C) No. 10157 of 2024	ITA No. 217/2020 Order dated 22.12.2023	957/Del/2016 Order dated 04.12.2019	18.12.2015 AY 2012-13	2,85,75,313/-
SLP (C) No. 10796 of 2024	ITA No. 201/2023 Order dated 22.12.2023	6363/Del/2019 Order dated 20.12.2022	19.06.2019 AY 2016-17	4,05,14,966/-
SLP (C) No. 10797 of 2024	ITA No. 215/2023 Order dated 22.12.2023	712/Del/2021 Order dated 20.12.2022	13.04.2021 AY 2017-18	4,05,14,966/-
SLP (C) No. 10798 of 2024	ITA No. 140/2021 Order dated 22.12.2023	727/Del/2017 Order dated 12.03.2021	24.11.2016 AY 2013-14	2,91,07,664/-
SLP (C) No. 10800 of 2024	ITA No. 36/2022 Order dated 22.12.2023	6179/Del/2017 Order dated 27.07.2021	28.07.2017 AY 2014-15	3,05,12,883/-
SLP (C) Diary No. 14972 of 2024	ITA No. 218/2020 Order dated 22.12.2023	779/Del/2014 Order dated 04.12.2019	28.11.2013 AY 2010-11	2,98,96,262/-

3. The necessary facts leading to the filing of the present appeals, as culled out from the impugned orders, are as follows:

3.1. The appellant is a company incorporated under the Companies Law, Dubai International Financial Centre Law No. 3 of 2006, in the United Arab Emirates.² [For short “UAE”] It is a tax resident of the UAE under Article 4 of the Agreement between the Government of India and the UAE for the avoidance of Double Taxation.³ [For short “DTAA”]

3.2. On 04.09.2008, the appellant entered into two Strategic Oversight Services Agreements⁴ [For short “SOSA”] with Asian Hotels Limited⁵ [For short “AHL”] India - one for AHL, Delhi and another for AHL, Mumbai. Under the SOSA, the appellant agreed to provide strategic planning services and “know-how” to ensure that the hotel was developed and operated as an efficient and a high-quality international full-service hotel. Subsequently, AHL underwent reorganization and its name was changed to Asian Hotels (North) Limited, which continued to own the hotel. On 18.07.2010, the SOSA was partially amended.

3.3. For the Assessment Year 2009-10, the appellant filed its return of income declaring ‘Nil’ income and claiming a refund of Rs. 87,99,091/-. After scrutiny, the Assessing Officer issued a notice dated 20.08.2010 under Section 142(1) read with Section 143(3) of the Income Tax Act, 1961.⁶ [For short “the Act”] In response, the appellant submitted a reply dated 25.08.2011, asserting that its income was not taxable under the Act as there was no specific Article under t

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Judicial Analysis

2025 Supreme(SC) 1110

The court affirmed that a foreign enterprise holds a Permanent Establishment in India if it has operational control through a fixed place, enabling it to derive income subject to local taxation under the Double Taxation Avoidance Agreement.

Cases Referred (6)

Judicial Analysis

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