This article was first published in the monthly journal of Bombay Chartered Accountant Journal for September 2025.
The Supreme Court of India (“SC”) has affirmed the ruling of the Delhi High Court (“Delhi HC”), holding that Hyatt International Southwest Asia Ltd. (“Hyatt International”), a UAE-based company, had a fixed place Permanent Establishment (“PE”) in India under Article 5(1) of the India-UAE Double Taxation Avoidance Agreement (“DTAA”). The SC focused on the substance of the arrangement, concluding that Hyatt International’s pervasive operational control over the Indian hotels, owned by Asian Hotels Limited, India (“AHL”), created a fixed place PE.
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The SC held that the test for a fixed place PE is not merely physical access but whether the premises are operationally ‘at the disposal’ of a foreign enterprise to conduct its business.
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The Court endorsed a substance-over-form approach, looking at the combined effect of (i) the Strategic Oversight Services Agreement (“SOSA”) between AHL and Hyatt International; and (ii) the Hotel Operating Services Agreement (“HOSA”) between AHL and Hyatt India Pvt. Ltd. (“Hyatt India”), Hyatt International’s Indian affiliate to determine the true nature of control.
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Pervasive control through strategic planning, brand standard enforcement, and the discretion to deploy personnel was sufficient to constitute the hotel premises as being ‘at the disposal’ of Hyatt International.
This article discusses the impact of the SC decision and the way forward for multinational companies (“MNCs”) operating in India. It delves into how ‘operational control’ may result in physical presence and outlines the crucial steps MNCs must take to consider the constitution of PE risk under this new precedent.
Please click here for our detailed article.
Authors
- Shiv Singhal, Ipsita Agarwalla and Parul Jain
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