Hyatt International Southwest Asia Ltd Vs Additional Director of Income Tax (Delhi High Court)
Source State’s right to attribute income to a Permanent Establishment (PE) based solely on the global income or loss incurred by a cross-border entity – With reference to the Hyatt International Southwest Asia Ltd Case
The Delhi High Court has emphatically held that Article 7 does not restrict the source State’s right to attribute income to a Permanent Establishment (PE) based solely on the global income or loss incurred by a cross-border entity through its judgement in Hyatt International Southwest Asia Ltd v. Additional Director of Income Tax & Others.[1] It has overruled its earlier decision in Nokia Solutions and Networks OY, providing critical clarification on the interpretation of Article 7 of Double Taxation Avoidance Agreements (DTAA).
This case involves a series of appeals filed by Hyatt International Southwest Asia Ltd. (Appellant) against various income tax authorities, challenging the taxability of service charges received by the Appellant under Strategic Oversight Services Agreements (SOSA) as royalty.
Procedural History
The Appellant filed multiple appeals before the High Court of Delhi, challenging the orders passed by the Income Tax Appellate Tribunal (Tribunal) in relation to the Appellant’s tax liability for various assessment years. The key appeals include:
1. ITA 216/2020, ITA 217/2020, ITA 218/2020, ITA 219/2020 – Filed against orders of the Additional Director of Income Tax, Deputy Commissioner of Income Tax, and Assistant Director of Income Tax.
2. ITA 140/2021 – Filed against the order of the Deputy Commissioner of Income Tax.
3. ITA 36/2022 – Filed against the order of the Assistant Commissioner of Income Tax.
4. ITA 201/2023 and ITA 215/2023 – Filed against the orders of the Assistant Commissioner of Income Tax (International Taxation).
Factual Background:
