In a big win for the Indian tax authority, the Supreme Court today said that the UAE-based Hyatt International Southwest Asia Limited (Hyatt International) has a fixed place permanent establishment (PE) in India under the India-UAE tax treaty.

Hyatt International had concluded two Strategic Oversight Services Agreements (SOSA) with Asian Hotels Limited, India – one for AHL, Delhi and another for AHL, Mumbai. Under the SOSA, Hyatt International 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.

The company maintained before the tax authority 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 tax treaty. However, the Income Tax Appellate Tribunal as well as the Delhi High Court disagreed.

In its decision delivered on July 24, the Supreme Court upheld the decision of the Delhi High Court and concluded that the company has a fixed place PE in India under Article 5(1) of the tax treaty.

The court ruled that the company’s role was not confined to high-level decision making but extended to substantive operational control and implementation.

“The appellant’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 Permanent Establishment under Article 5(1) of the India-UAE DTAA,” the court ruled.

In so far as the regular visits to India by the company’s employees is concerned, the court said that the relevant consideration is the continuity of business presence in aggregate, and not the length of stay of each individual employee.

“Once it is found that there is continuity in the business operations, the intermittent presence or return of a particular employee becomes immaterial and insignificant in determining the existence of a permanent establishment,” the court said.

The court observed that the findings of the Assessing Officer, based on travel logs and job functions, establish continuous and coordinated engagement, even though no single individual exceeded the 9-month stay threshold.

The decision also reinforces the principle that taxability is based on business presence and not the global profitability of the enterprise.