Hyatt case ruling marks shift in MNCs taxation

In a crucial ruling with broad implications on how multinational companies are taxed in India, the Supreme Court on Thursday held that UAE-based Hyatt International Southwest Asia, which provides hotel advisory services in India, has a taxable Permanent Establishment (PE) in the country.

- Krishna Yadav

A bench comprising Justices J.B. Pardiwala and R. Mahadevan upheld Delhi high court's earlier ruling that Hyatt’s Indian PE must be treated as a distinct taxable entity.

The judgment is significant as it clarifies that multinational companies can be taxed in India if they exercise substantial operational control here, even without long-term employee presence. The court held that a PE should be treated as a separate taxable entity, meaning India can tax profits attributable to the PE even if the foreign parent company incurs overall global losses, The apex court noted that Hyatt's executives and employees made frequent and regular visits to India to supervise operations and implement business decisions.