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.

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:

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 the DTAA for taxing Fees for Technical Services. It further stated that it did not have any fixed place of business, office, or branch in India, and that the presence of its employees in India during the relevant previous year did not exceed the nine-month threshold under Article 5(2) of the DTAA. Therefore, the appellant claimed that it did not have a Permanent Establishment (PE) in India and that its business income was not taxable under Article 7 of the DTAA.

3.4. On 28.12.2011, the Assessi