Tax Treaty Case Law around the Globe 2025

1. Introduction

The Indian jurisdiction has been long known for bringing up various interesting disputes involving business income and permanent establishments (PE). In the context of PEs, cases involve first and second order questions with the former pertaining to determining the existence and the latter delving into profit attribution.

The recent decision in Hyatt International Southwest Asia Ltd. v. Additional Director of Income-tax (Hyatt) delivered by the New Delhi High Court adds to this set of cases with a significant ruling on the second order question.

2. Facts of the case

There are two key facts in this particular dispute.

First, the global enterprise had incurred losses at the entity level while the Indian PE had generated profits in the relevant financial year.

Second, the entity was a resident of United Arab Emirates (UAE) and, thus, the relevant treaty would be the double taxation avoidance agreement (DTAA) between India and UAE. The DTAA was originally signed in 1993 and further amended by protocols entered into in 2007 and 2013 and the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting in 2018.

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