SC's Hyatt Ruling Clarifies When MNCs Must Pay Tax

Profitable India unit can be taxed even if foreign firm with substantial control posts losses

- Krishna Yadav

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.

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.