Supreme Court Landmark Ruling: Hyatt International – Substance Prevails Over Legal Form in PE Determination
Date of Judgment: 25 July 2025
Summary of the Supreme Court Decision (in simple terms)
The Supreme Court of India, in a landmark ruling, has held that Hyatt International Southwest Asia Ltd., a company based in Dubai, UAE, had a Fixed Place Permanent Establishment (PE) in India. This was based on the fact that Hyatt had substantial and continuous control over hotel operations in India, even though it did not maintain any separate or exclusive office in the country.
The Court emphasized that in such cases, economic reality is more important than legal structure. So even if Hyatt was working through agreements and claimed its role was only advisory, its actual conduct showed deep involvement in the day-to-day and strategic operations of Indian hotels.
As a result, income attributable to such PE is taxable in India, regardless of whether the foreign company made profits or losses at the global level.
Background and Facts of the Case
Who is the taxpayer?
Hyatt International Southwest Asia Ltd., a UAE-based company, offering strategic hotel consultancy and oversight services.
Nature of business in India:
Hyatt had entered into Strategic Oversight Services Agreements (SOSA) with multiple hotel owners in India (including in Delhi and Mumbai). Under these agreements, Hyatt:
Gave strategic input on hotel operations
Ensured hotels followed “Hyatt Operating Standards” (HOS)
Helped recruit and assign key personnel like General Managers
Sent employees regularly to India for implementation and supervision
Indian Affiliate:
An Indian company, Hyatt India Consultancy Pvt. Ltd., was affiliated with the taxpayer and handled daily operations through a separate Hotel Operating Services Agreement (HOSA). READ MORE
