Hyatt International Southwest Asia Ltd., Gurgaon v. DCIT (International Taxation), New Delhi

ITA 727/DEL/2017 | 2013-2014
Pronouncement Date: 12-03-2021 | Result: Partly Allowed

Appeal Details

RSA Number 72720114 RSA 2017
Assessee PAN AACCH2598H
Bench Delhi
Appeal Number ITA 727/DEL/2017
Duration Of Justice 4 year(s) 1 month(s) 4 day(s)
Appellant Hyatt International Southwest Asia Ltd., Gurgaon
Respondent DCIT (International Taxation), New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 12-03-2021
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 12-03-2021
Last Hearing Date 22-02-2021
First Hearing Date 22-02-2021
Assessment Year 2013-2014
Appeal Filed On 08-02-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SH. K. N. CHARY JUDICIAL MEMBER DR. B. R. R. KUMAR ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 727/DEL/2017 : ASSTT. YEAR : 2013-14 HYATT INTERNATIONAL SOUTHWEST ASIA LTD. OFFICE 301 LEVEL 3 PRECINCT 3 DUBAI INTERNATIONAL FINANCIAL CENTRE (DIFC) PO BOX -506727 DUBAI UAE VS DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-2(1)(1) INTERNATIONAL TAXATION NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. A A CCH2598H ASSESSEE BY : SH. AJIT KUMAR JAIN REVENUE BY : DR. PRABHA KANT CIT DR DATE OF HEAR ING: 22 . 02 .20 2 1 DATE OF PRONOUNCEMENT: 12 .03 .20 2 1 ORDER PER DR. B. R. R. KUMAR ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 24.11.2016 PASSED BY THE AO U/S 144C(5)/143(3) OF THE INCOME TAX ACT 1961. GROUND NO. 1 - ALLEGED PERMANENT ESTABLISHMENT ('PE ) IN INDIA OF THE APPELLANT UNDER THE ARTICLE 5(1) AND 5 (2)(I) OF THE INDIA - UAE TAX TREATY (TAX TREATY): 2. AT THE OUTSET IT WAS BROUGHT TO THE NOTICE OF T HE BENCH THAT THE GROUNDS RAISED IN THE APPEAL OF THE ASSESS EE FOR THE ASSESSMENT YEAR 2013-14 STANDS ADJUDICATED BY THE O RDER OF THE CO-ORDINATE BENCH OF THE ITAT FOR THE ASSESSMEN T YEARS 2009-10 TO 2012-13. ITA NO. 727/DEL/2017 HYATT INTERNATIONAL SOUTHWEST ASIA LTD. 2 3. THE LD. DR HAS NOT DISPUTED THE FACTUAL POSITION . 4. FOR THE SAKE OF READY REFERENCE AND CONVENIENCE OPERATIVE PART OF THE ORDER DATED 04.12.2019 IN ITA NO. 579/D EL/2013 779/DEL/2014 1762/DEL/2015 AND 957/DEL/2016 IS BEI NG REPRODUCED HEREWITH. 56. WE FIND THAT FROM THE CONCURRENT READING OF TH E STRATEGIC OVERSIGHT AGREEMENTS (SOA) THE ASSESSEE HAS BEEN TECHNICALLY OPERATING THE HOTEL BELONGING TO T HE OWNERS NAMELY ASIAN HOTELS LTD. (AHL) THROUGH THE EMPLOYEES WHO ARE RECRUITED BY THEM. THE HOTEL PREM ISES HAVE BEEN AT THE DISPOSAL OF THE ASSESSEE DURING TH EIR PERIOD OF STAY. THE EMPLOYEES HAS STAYED FOR A PERI OD OF 158 DAYS AS PER THE ASSESSEE IN INDIA WHILE RENDERI NG THE SERVICES. IN TERMS OF OECD COMMENTARY ON ARTICLE 5( 1) THE ASSESSEE CAN BE SAID TO BE HAVING A PERMANENT ESTABLISHMENT OWING TO EXISTENCE OF A PLACE OF BUSI NESS I.E. A FACILITY SUCH AS PREMISES AND THAT PLACE WA S FIXED AND ESTABLISHED AS A DISTINCT PLACE WITH CERTAIN DE GREE OF PERMANENCE AND THE FOREIGN ENTERPRISE (THE ASSESSEE ) IS CARRYING THE BUSINESS THROUGH THIS FIXED PLACE I.E. THE PREMISES OF THE HOTEL. THE ASSESSEE CAN BE SAID TO BE DEPENDENT ON THE PERSONNEL TO CONDUCT THE BUSINESS OF THE FOREIGN ENTERPRISE IN THE STATE IN WHICH THE FIXED PLACE SITUATED. THE ASSESSEE IS FOUND TO BE MEETING ALL T HESE REQUIREMENTS STIPULATED IN THE OECD COMMENTARY UNDE R PARA 2. FURTHER THE ASSESSEE IS ALSO FOUND TO BE M EETING THE REQUIREMENTS SPECIFIED IN PARA 4 OF THE OECD MC THAT THE TERM PLACE OF BUSINESS COVERS IN THE PREMISES FACILITIES INSTALLATIONS USED FOR CARRYING ON THE BUSINESS OF THE ENTERPRISE WHETHER OR NOT THEY ARE USED EXCLUSI VELY FOR THAT PURPOSE. IN THE INSTANT CASE THE ASSESSEE HAS BEEN USING PERMANENTLY THE PREMISES BELONGING TO THE HOT EL FOR DOING THEIR BUSINESS. THE PLACE OF BUSINESS MAY ALS O EXIST WHERE NO PREMISES ARE AVAILABLE REQUIRED FOR CARRYI NG ON THE BUSINESS OF THE ENTERPRISE. IT IS SUFFICIENT TO HAVE CERTAIN AMOUNT OF SPACE AT THEIR DISPOSAL TO CONDUC T THEIR BUSINESS OPERATIONS. FURTHER THE PLACE OF BUSINESS MAY ALSO BE SITUATED IN THE BUSINESS FACILITIES OF ANY OTHER ENTERPRISE TOO. THUS IT CAN BE SAID THAT THE ASSES SEE WHO ITA NO. 727/DEL/2017 HYATT INTERNATIONAL SOUTHWEST ASIA LTD. 3 IS RUNNING THE BUSINESS OPERATIONS AT THE PREMISES AVAILABLE FOR CONSTANT DISPOSAL IN THE HOTEL CAN BE SAID TO BE A PLACE OF BUSINESS. THE AVAILABILITY OF AN OFFI CE PREMISES TO A FOREIGN COMPANY IN THE PREMISES OF TH E CONTRACTING PARTY IN ORDER TO ENSURE THAT BOTH THE PARTIES COMPLY WITH THEIR OBLIGATIONS TO THE CONTRACT FOR A LONG PERIOD OF TIME WILL CONSTITUTE A PERMANENT ESTABLIS HMENT. AS LONG AS THE PREMISES IS AT THE DISPOSAL OF THE ASSESSEE AND HAVING THE RIGHT TO USE THE PREMISES FOR THE PU RPOSE OF THE ASSESSEES BUSINESS ON BEHALF OF THE PARTY T O THE AGREEMENT CAN CONSTITUTE A FIXED PLACE PE. WE ALSO FIND THAT THE PHYSICAL CRITERIA (EXISTENCE OF A GEOGRAPH ICAL LOCATION) SUBJECT TO CRITERIA (RIGHT TO USE THE PL ACE) AND THE FUNCTIONAL CRITERIA (CARRYING ON THE BUSINESS T HROUGH THAT PLACE) AS MENTIONED IN THE OECD PRINCIPLES WIT H RELATION TO THE EXISTENCE AND DETERMINATION OF PE A S HELD BY THE MUMBAI TRIBUNAL IN THE CASE OF AIR LINES ROT ABLES VS JDIT 131 TTJ 385 HAVE BEEN FOUND TO BE MET BY TH E ASSESSEE BEFORE US SO AS TO TREAT THEM AS HAVING A PE IN INDIA. THOUGH IT WAS ARGUED THAT THE ASSESSEE HAS GOT NO RIGHT TO USE THE PREMISES AND NO PREMISES OF AHL WA S AT THEIR DISPOSAL WE FIND ON GOING TO THE AGREEMENTS AND THE WORK EXECUTED THAT THE PREMISES OF AHL WAS VERY MU CH AT THE DISPOSAL OF THE ASSESSEE FOR CARRYING ON THEIR BUSINESS. THUS WE FIND THAT THE ASSESSEE HAS MET THE TWIN CR ITERION OF EXISTENCE OF A FIXED PLACE OF BUSINESS AND CARRY ING OUT OF BUSINESS FROM SUCH FIXED PLACE OF BUSINESS AS ENUNCIATED OF THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF MORGAN STANLEY & CO. 292 ITR 416 (SC). THE CLAIM OF THE ASSESSEE THAT THEY DID NOT HAVE A PLAC E AT THEIR DISPOSAL CANNOT BE ACCEPTED IN VIEW OF THE JU DGMENT OF HONBLE SUPREME COURT IN THE CASE OF FORMULA ONE WORLD CHAMPIONSHIPS LTD. 394 ITR 80 IN THE CASE OF AZADI BACHAO ANDOLAN AND ALSO E-FUNDS IT SOLUTIONS 86 TAX MAN 240. THE FACTS ON RECORD UNDISPUTEDLY PROVE THAT TH E PREMISES AHL ARE AT THE DISPOSAL OF THE ASSESSEE FO R CONDUCT OF THEIR BUSINESS. WHILE COMING TO THE ISSU E OF AT THE DISPOSAL IN THE PREMISES IS AVAILABLE FOR THE ASSESSEE FOR RUNNING OF THEIR BUSINESS EVEN FOR A LIMITED TI ME IT CONSTITUTES A PE...... ITA NO. 727/DEL/2017 HYATT INTERNATIONAL SOUTHWEST ASIA LTD. 4 GROUND NO. 2- ERRONEOUSLY ATTRIBUTION OF PROFITS TO ALLEGED PE OF THE APPELLANT IN INDIA INSPITE OF ENTITY LEVE L OPERATING LOSSES: GROUND NO. 3 - ERRONEOUS ALTERNATIVE TAXATION OF IN DIA SOURCE INCOME AS ROYALTY UNDER SECTION 9(1)(VI) O F THE INCOME TAX ACT 1961 (THE ACT) AND ARTICLE 12 OF THE TAX TREATY: 5. AT THE OUTSET IT WAS BROUGHT TO THE NOTICE OF T HE BENCH THAT THE GROUNDS RAISED IN THE APPEAL OF THE ASSESS EE FOR THE ASSESSMENT YEAR 2013-14 STANDS ADJUDICATED BY THE O RDER OF THE CO-ORDINATE BENCH OF THE ITAT FOR THE ASSESSMEN T YEARS 2009-10 TO 2012-13. IT WAS SUBMITTED THAT THE ASSES SEE INCURRED OPERATING LOSSES DURING THE YEAR. 6. THE LD. DR HAS NOT DISPUTED THE FACTUAL POSITION . 7. FOR THE SAKE OF READY REFERENCE AND CONVENIENCE OPERATIVE PART OF THE ORDER DATED 04.12.2019 IN ITA NO. 579/DEL/2013 779/DEL/2014 1762/DEL/2015 AND 957/DEL/2016 IS BEI NG REPRODUCED HEREWITH. 60. BASED ON THE CLAUSES OF THE STRATEGIC SERVICE AGREEMENT AND STRATEGIC OVERSIGHT AGREEMENTS WE HOLD THAT THE RE VENUES EARNED BY THE ASSESSEE ARE TAXABLE UNDER ARTICLE 12 OF THE DTAA. REGARDING THE DETERMINATION OF THE PROFIT TAKEN UP AT GROUND NO. 4 BY THE ASSESSEE WE HEREBY HOLD THAT THE TAXABLE PROFITS M AY BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 44DA O F INDIAN INCOME TAX ACT AND ARTICLE 12 OF INDO-UAE DTAA. DURING TH E ARGUMENTS IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAS INCURRED L OSSES IN THE ASSESSMENT YEAR 2008-09. THE ASSESSED BE GIVEN AN O PPORTUNITY OF SUBMITTING THE WORKING OF APPORTIONMENT OF REVENUE LOSSES ETC ON FINANCIAL YEAR BASIS WITH RESPECT TO THE WORK DONE IN ENTIRETY BY FURNISHING THE GLOBAL PROFITS EARNED BY THE ASSESSE SO THAT THE PROFITS ATTRIBUTABLE TO THE WORK DONE BY THE PE CA N BE DETERMINED JUDICIOUSLY. THE SAME MAY BE CONSIDERED WHILE DETER MINING THE TAXABLE PROFITS IN INDIA IN ACCORDANCE WITH THE PRO VISIONS OF SECTION 90(2) OF INDIAN INCOME TAX ACT 1961. ITA NO. 727/DEL/2017 HYATT INTERNATIONAL SOUTHWEST ASIA LTD. 5 GROUND NO. 4 - ERRONEOUS ADDITION OF REIMBURSEMENT OF EXPENSES OF RS. 2 27 576 TO THE INCOME 8. THIS GROUND IS NOT PRESSED BY THE ASSESSEE. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12/03/2021. SD/- SD/- (K. N. CHARY) (D R. B. R. R. KUMAR) JUDICIAL MEMBER ACCOU NTANT MEMBER DATED: 12/03/2021 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR