Fixed place Permanent Establishment found where contractual control and core business functions made hotel premises taxable in India.

A fixed place Permanent Establishment existed in India where the enterprise had the hotel premises at its disposal under long-term contractual arrangements and exercised continuing control over strategic, operational, staffing, procurement, pricing, branding and financial matters. Applying Article 5(1) of the India-UAE DTAA and the disposal test, the premises were used for core business functions rather than merely auxiliary activities, so the separate management of the Indian entity did not negate the substantive operational nexus. As a result, income received under the Strategic Oversight Services Agreements was attributable to the Permanent Establishment and taxable in India under Article 7(1).

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Issues: Whether the assessee had a fixed place Permanent Establishment in India under Article 5(1) of the India-UAE DTAA, and whether the income earned under the Strategic Oversight Services Agreements was attributable to that Permanent Establishment and taxable in India.

Analysis: Article 5(1) of the DTAA defines Permanent Establishment as a fixed place of business through which the enterprise carries on business, and Article 7(1) permits source-state taxation only to the extent profits are attributable to such Permanent Establishment. The contractual arrangement under the Strategic Oversight Services Agreements conferred continuing control over strategic, operational, staffing, procurement, pricing, branding, and financial matters, together with a long-term and functional presence at the hotel premises. Applying the disposal test and the settled principles governing fixed place Permanent Establishment, the premises were found to be at the disposal of the assessee for carrying on its business, and the functions performed were core business functions rather than merely auxiliary activities. The existence of a separately managed Indian entity did not displace the substantive control and operational nexus established by the agreements and the factual record.

Conclusion: The assessee had a fixed place Permanent Establishment in India under Article 5(1) of the DTAA, and the income received under the Strategic Oversight Services Agreements was attributable to that Permanent Establishment and taxable in India.

Ratio Decidendi: For a fixed place Permanent Establishment to exist, the enterprise must have a place of business at its disposal through which its core business is carried on, and long-term contractual control coupled with substantive operational functions may satisfy that test even without exclusive possession of separate physical premises.

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