AI Drafter 
TaxTMI 
TaxTMI 
2019 (12) TMI 1667
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.... raised by the assessee: "Ground No. 1 - Alleged Permanent Establishment in India of the Appellant under the Article 5(1) and 5(2)(i) of the India UAE Tax Treaty (the Tax Treaty) 1.1 On the facts and in the circumstances of the case and in law, the Assessing Officer ('AO') and the Dispute Resolution Panel ('DRP') erred in concluding that the Appellant has a Permanent Establishment ('PE') in India under Article 5(1) and 5(2)(i) of the Tax Treaty based on the following erroneous conclusions: a. That the Appellant had always a fixed place of business at its disposal throughout the year in the Hotel premises of its Customer in India, including the chambers of Managing Director; b. Its expatriates were continually present in India and are actually operating the Hotels belonging to the owners in each and every manner; c. The Appellant provides Central Reservation System (CRS) which constitutes place of business; and d. The assistance in recruitment of General Manager by the Hotel Owners / Customers and this oversight tantamount to deputation and that the Appellant also has a lien on such employment. 1.2 The Appellant pra....
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....services which is the essence of the arrangement and that the knowhow / intangibles have no independent utility or value. 3.3 The Appellant prays that the conclusion of the AO / DRP in the re-characterization of the services / consultancy income streams under Strategic Oversight Services Agreement to 'Royalty' under the Act and the Tax Treaty and alternative taxation on gross basis be held to be void and un-warranted and as there is no Article in the Tax Treaty taxing 'Fees for Technical Services' in Source Country, it be held that the Appellant is not taxable in India. Ground No. 4 - Mistakes in calculation of income attributable and taxation of the alleged PE of the Appellant in India 4.1 On the facts and in the circumstances of the case and in law and without prejudice to the earlier grounds of appeal, the AO erred in computing the taxable income of the alleged PE in India at gross income (i.e. Rs. 8,51,41,569) instead of the business profits to be attributed at 25% at Rs. 2,12,85,392 (Rs. 8,51,41,569 * 25%) as concluded in the assessment order. 4.2 The AO erred in denying credit for TDS of Rs 87,99,091 while computing the deman....
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....x Treaty ('Tax Treaty') and is eligible and has taken recourse to the beneficial provisions of the Tax Treaty under Section 90(2) of the Act as compared to the provisions of the Income-tax Act 1961 ('The Act'). 3. The Assessee has entered into two Strategic Oversight Services Agreements ('SOSA') both dated 4 September 2008 with Asian Hotels Limited, India ('AHL') - one for AHL's Delhi Hotel and one for AHL's Mumbai Hotel. 4. The Assessee has provided to AHL strategic oversight services with respect to its Hotels in the form of assistance in formulating strategic plans, policies, processes, guidelines and parameters from time to time with respect to various aspects of hotel operations such as branding, marketing development, day-to-day onsite operations and other facets / parameters and received consultancy fees. 5. For the Financial Year ('FY') 2008-09 relevant to Assessment Year ('AY') 2009-10, the Assessee has received income of Rs. 8,51,41,569 on which taxes have been withheld at source by AHL aggregating to Rs. 87,99,091. 6. In the return of income filed on 29 September 2009, the Assessee claimed refund of Rs. 87,99,091 on the ....
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....ng, state through employees or other personnel in the other contracting State, provided that such activities continue for the same project or connected project for a period or periods aggregating more than 9 months within any twelve month period." 9. It was primarily argued that as per Article 5(1), the Permanent Establishment means a fixed place of business in which the business is carried out and in the case of assessee they did not have any fixed place of business, but were present intermittently for execution of the contracts and not stayed more than nine months in any particular year. He also argued that as per Article 5(2)(i), in the case of consultancy services by enterprise, an aggregate period of more than 9 months will only be considered as PE and since the assessee is in the business of consultancy services and not stayed for more than nine months, no Permanent Establishment can be attributed. 10. He also brought us to Article 7, where the taxability of the business profits is discussed as under: "Article 7 Business profits 1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise car....
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.... by the provisions of this Article." 11. He argued that as per clause (7) of Article 7, where profits include items of income which are dealt with separately in other Articles of this Agreement, then provisions of those Articles shall not be affected by the provisions of this Article. Saying so, he argued that consultancy services fall under the category of FTS and hence, Article 7 of the Treaty would not apply to such receipts. 12. The ld. AR has filed the Tax Residency Certificate of the assessee at page No. 9 of the paper book which reads as under: "TAX RESIDENCE CERTIFICATE The Ministry of Finance hereby certifies that, pursuant to the Agreement between The Government of the United Arab Emirates and the Government of the INDIA for Avoidance of Double Taxation and the Prevention of Fiscal evasion with respect to Taxes on Income and on Capital HYATT INTERNATIONAL - SOUTH WEST ASIA LIMITED. - LICENCE No: CL 0501 is qualified to enjoy the benefit of the mentioned Agreement as a resident in the United Arab Emirates. This certificate is valid from the date hereof and continuing for a period of one year. Issued in Dubai on THURSDAY the 29....
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.... * Assistance with respect to the recruitment and development of people * Oversee the payroll management, maximization of employee's productivity, manpower planning 4 Thierry Bertin Director of Sales and Marketing * Assistance in promoting and managing the Brand Hyatt for the hotels within the area * Guidance on the strategies for revenue and market share enhancement, development of sales team, implementation of marketing strategies 5 Sharad Kapur Director Revenue Management * Guidance on strategic planning, setting up pricing and distribution strategies * Guidance to hotels in their forecast process 6 Kamal Atal Internal Auditor * Guidance on internal controls with regard to Internal Audit of the Hotels. 14. The ld. AR reiterated his arguments about the taxability of the income earned in India and the submissions were given before the Revenue Authorities at page Nos. 79, 80, 81 & 82 of the paper book as under: "The Additional Director of Income tax, Range I, (International Taxation) Room No. 404, 4th Floor, Drum Shaped Building, I.P Estate, New Delhi- 110 002 25 August ....
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....Operating Standards. 2. Hyatt Dubai being a tax resident of UAE and the provisions of the Treaty being more beneficial as compared to the Act, for the purpose of this Return, no income is chargeable to tax in India taking the beneficial provisions under the Treaty. Hence, the management fees received are not taxable in the financial year under consideration and reasons for the same are enumerated below. 1) Under Section 90(2) of the Indian Income-tax Act 1961 ('the Act"), a taxpayer is governed by the provisions of the Act only if the same are more beneficial as compared to an applicable Tax Treaty 2) In the absence of any Article dealing with 'Fees for technical services' under the Treaty, the receipt of such services constitutes 'business income' taxable only in accordance with Article 7 of the Tax Treaty read with Article 5 thereof. 3) Further, since Hyatt Dubai has no fixed place of business, office or branch in India and the presence of its employees or other personnel has not exceeded 9 months in India within any twelve month period, it does not constitute a Permanent Establishment in India as contemplated under Article 5 of the Treaty and ....
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....ii.) We are a tax resident of UAE as understood within Article 4 of the India-UAE Tax Treaty ('the Tax Treaty') (copy enclosed as Annexure 1) and eligible to benefits stated therein. Refer our submissions dated 17 May 2011 enclosing copy of our UAE Tax Residency Certificate. iii.) We have entered into two Strategic Oversight Agreements both dated 4 September 2008 with Asian Hotels Limited, India ('AHL') - one for their Delhi Hotel and one for their Mumbai Hotel. iv.) Under the said Agreements, we have provided to AHL strategic services with respect to assistance in formulating strategic plans, policies, processes, guidelines and parameters from time to time with respect to various aspects of hotel operations such as branding, marketing development, day-today onsite operations and other facets / parameters. For details refer our submissions dated 24 June 2011. v.) For the AY 2009-10, we have received income of Rs. 8,51,41,569 on which taxes withheld at source aggregate to Rs. 87,99,091. vi.) In our return of income filed on 29 September 2009, we had claimed refund of Rs. 87,99,091 as the income from the said services were not taxabl....
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....ed as under: "For the purposes of this Agreement, the term "permanent establishment " means a fixed place of business through which the business of an enterprise is wholly or partly carried on " ii.) The above Article is in line with Article 5(1) of the Organisation for Economic Co- Operation and Development Model Convention ('OECD MC'). In view of same, the OECD Commentary of July 2010 on Article 5 of the OECD Model Tax Convention ('OECD Commentary'), can be taken recourse to for guidance. iii.) In terms of Paragraph 2 of the OECD Commentary, the Article 5(1) of the OECD MC contains the following conditions: a) The existence of a 'place of business', i.e. a facility such as premises; b) This place of business must be 'fixed', i.e. it must be established at a distinct place with a certain degree of permanence; c) The carrying on of the business of the foreign enterprise through this fixed place of business. This means usually that persons who, in one way or another, are dependent on the enterprise (personnel) conduct the business of the foreign enterprise in the State in which the fixed place is situated. iv.) As per Pa....
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....oreign enterprise. As long as it is at the disposal of the enterprise in the sense of having right to use the premises for the purpose of its business (and not solely for the purpose of the project undertaken on behalf of the owner of the premises as are the facts in our case), a fixed place PE can be constituted and not otherwise. ix.) In Airlines Rotables vs. JDIT (2010) 131 TTJ 385 (Mum Trib), the Mumbai Tribunal has upheld the above OECD principles and held that, in order for a PE to come into existence under Article 5(1) ("the basic rule"), three criteria have to be satisfied viz. (a) the physical criterion (existence of physical location) (b) subjective criterion (right to use that place) and (c) functional criterion (carrying on business through that place). It is only when the three conditions are satisfied that a PE under the basic rule can be said to have come into existence. x.) In Motorola Inc. v. DCIT (2005) 95 ITD 269 (Del SB) pp 401, the Special Bench of the Delhi Tribunal held that merely demonstrating that certain space is available to the non-resident is not enough and for a PE the non-resident must have a place / premises at its disposal as a ma....
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....1, the Tribunal rejected the contention that frequent visit of the employees to India and provision of office facilities to these employees constituted a fixed place of business for the Assessee. xviii.) Further, keeping in mind that Article 5(2)(i) of the Tax Treaty specifically provides for the 9 months threshold, any period less than that constituting a PE under Article 5(1) of the Tax Treaty, would defeat the very purpose Article 5(2)(i) of the Tax Treaty xix.) During the financial year 2008-09, our employees have travelled to India for rendering services to AHL and number of days of services (part / full days and more than one project at a time) during the year aggregate to 158 days and this cannot be construed to satisfy the degree of permanency test for constituting Fixed Place PE under Article 5(1) of the Tax Treaty. xx.) Further, we submit that what is being carried out in India is the business of AHL and we only render strategic oversight services as may be required to AHL under the agreement and this cannot be construed that we are carrying out any business in India. xxi.) In view of above, we submit that we do not constitute PE under ....
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....g of services by the Indian Hotel Owners from Hyatt Dubai can by no stretch of imagination be construed as a Place of Management of Hyatt Dubai in India. iii.) We also do not have any branch, office, factory, workshop, mine / etc, farm / plantation, construction, etc - thus, Article 5(2)(b) to (h) or Dependant Agent PE under Article 5(4) of the Tax Treaty (in absence of any agency type arrangement in our case) are clearly not applicable to the facts of our case under consideration. Without prejudice to the same we would like to submit that a specific provision should prevail over the general provision and accordingly Hyatt Dubai should not constitute a PE under Article 5(2)(b) to (h) of the India- UAE tax treaty, in view of a specific provision provided on Service PE under Article 5(2)(i) of the India- UAE tax treaty. iv.) We once again invite attention to the decision of High Court of Uttarakhand in M/s BKI/HAM (2011) 15 taxmann.com 102 pursuant to which our coverage under aforesaid Sub-Articles of Article 5 is not warranted due to specific coverage of our case under Article 5(2)(i) of the Tax Treaty. v.) Article 5(2)(i) of the Tax Treaty is reproduced a....
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....e Audited Financial Statements of our Company for the calendar year 2008 and 2009. ii). For both the years 2008 and 2009, we, Hyatt Dubai, have incurred a loss of AED 1,05,63,351 and AED 55,77,305 respectively. iii.) HISWA has earned India sourced income of AED 39,30,711 (out of the total income of AED 1,10,73,562) as reflected in Notes to financial statements- Schedule 14 for the calendar year ending on 31 December 2008. Similarly, for the calendar year ending on 31 December 2009, the Company has earned India sourced income of AED 1,05,63,311 (out of the total income of AED 19,957,643) as reflected in Notes to financial statements- Schedule 14. In view of the same, it may be noted India sourced income approximately accounts for 35% and 52% of the total income earned by the Company for the calendar year ending on 31 December 2008 and 31 December 2009 respectively. iv.) In view of above, keeping in mind the short notice to respond and ongoing holiday season, we submit that any allocation to our alleged PE as per Article 7 of the India- UAE tax treaty, in India could only be of proportionate losses from the aggregate losses incurred by us. We reserve the ri....
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.... does not necessarily mean that that location is at the disposal of that enterprise. These principals are illustrated by the following examples where representatives of one enterprise are present on the premises of another enterprise. A first example is that of a salesman who regularly visits a major customer to take orders and meets the purchasing director in his office to do so. In that case, the customer's premises are not at the disposal of the enterprise for which the salesman is working and therefore do not constitute a fixed place of business through which the business of that enterprise is carried on(depending on the circumstances, however, paragraph 5 could apply to deem a permanent establishment to exist). A second example is that of any employee of a company who, for a long period of time, is allowed to use an office in the head quarter of another company (e.g. a newly acquired subsidiary) in order to ensure that the latter company complies with its obligations under contracts concluded with the former company. In that case, the employee is carrying on activities related to the business of the former company and the office that is at his disposal at the headquar....
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.... under consideration. 24. The activities under the agreement were carried out throughout the year. It is of no relevance that employees came & left restricting their stay in India. But the activities undertaken by them in pursuance of consultancy services were continued throughout the year. Hence, it is also PE as per Article 5(1) (i) of Indo-UAE DTAA. Part of the scope of the activities under the agreement clearly qualifies to be treated as royalties under section 9(i) (vi) of the Act and Article 12 of the DTAA. Considering the narrow scope of the DTAA, the nature of activities may be examined under Article 12 thereof Article 12(3) defines royalties as: "The terms "royalties" as used in this Article means payment of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work, including cinematography films, or films or tapes used for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experienc....
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....s test and the duration test and argued that the employees of the assessee company have been working by placing themselves at the hotel of the Contracting State and hence, it can be said that they have a fixed place of business. He relied on the OECD commentary and Model Tax Convention and also on the judgment in the case of Formula One World Championships regarding fixed place of business. He submitted his arguments in written form which are as under: "PRELIMINARY 1. The assessment order and the DRP directions /order of the CIT(A) are emphatically relied upon. 2. This submission is restricted only to specific aspects. On balance aspects, above orders and oral submissions are relied upon. SUBMISSIONS ISSUE OF PE under Art-5(1): Art.- 5(1). For the purposes of this Convention, the term "permanent establishment" means a fixed place of business through which the business of an enterprise is wholly or partly carried on. A. The geographical location or fixed-ness of the premises of Hotel was never in doubt and it can't be said that the premises are not geographically fixed. The only bone of contention is whether it was a....
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....tate in which the fixed place is situated. 34) The term "place of business" is explained as covering any premises, facilities or installations used for carrying on the business of the enterprise whether or not they are used exclusively for that purpose. It is clarified that a place of business may also exist where no premises are available or required for carrying on the business of the enterprise and it simply has a certain amount of space at its disposal. Further, it is immaterial whether the premises, facilities or installations are owned or rented by or are otherwise at the disposal of the enterprise. A certain amount of space at the disposal of the enterprise which is used for business activities is sufficient to constitute a place of business. No formal legal right to use that place is required. Thus, where an enterprise illegally occupies a certain location where it carries on its business, that would also constitute a PE. Some of the examples where premises are treated at the disposal of the enterprise and, therefore, constitute PE are: a place of business may thus be constituted by a pitch in a market place, or by a certain permanently used area in a customs depot....
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....is Bennion: Statutory Interpretation, p. 461 [Butterworths,1992 (2nd Edn. "Emphasis supplied) This is why a work-bench in a caravan, restaurants on a permanently anchored river boats, a transformer or generator on board a former railway wagon qualify as places. Taking the issue further, I may add, that's why a computer terminal (as in the case of Galilio/Travelport) or a computer server (as in the case of or Areva T&D AAR/876/2010) constitutes a PE whereas a Satellite transponder is not. Hon'ble Supreme Court further elaborated this concept with reference to "another competing enterprise." (para-37, FOWC) 29. The question is whether "at the disposal" denotes an absolute legal right/control over a place /room/cabin/space or it connotes only the right to access and use such place. Once the Hon'ble Supreme Court identified and clarified the dichotomy between the legalistic interpretation of the term 'Place" as a (bundle of rights of ownership to the exclusion of others, use, transfer as allowed by law) as against the interpretation as per OECD/DTAA and the characterization of "Place", (FOWC; Para-37 "The OECD view can hardly be reconciled with the ....
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....el Lang who in his book "The OECD-Model-Convention and its update 2014" (Michael Lang and others, (edited) IFBD, Linde) observes- "In the last decade the tendency to broaden the scope of Article-5(1) by extending the meaning of "at the disposal of" could be observed. The result is lowering of the threshold for the creation of a fixed place, from a right to control a place/ location of business to a more factual based approach, focusing on the ability of the enterprise to use a certain place for its activities. In 2003, the OECD incorporated the painter example in the commentary. According to that example, a painter who, for two years, spends three days a week in the large office building of his main client will constitute a PE. The presence of the painter in that office building where he is performing the most important functions of his business for the client will be enough to establish a PE. That example indeed shows a very broad understanding of the concept of permanent establishment as defined in Article-5(1). It no longer refers to a certain room or location over with the painter can exercise a minimum degree of power or at least can store his equipment. Instead, just....
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.... 31. Thus, the place of disposal should not be tested from the angle of 'exclusion of others' but from the perspective of type and duration of business carried on by the taxpayer from such place. 32. The contracts between the assessee and the owners, when analyzed/looked from the above perspective, reveals the following noteworthy features- "Strategic Oversight Agreement dt. 04/09/2008 i. Art-II, Sec-1 Duration - 20 years [p.17] ii. Art-Ill, Sec-1 - Hotel to be operated as a part of HI chain of hotels.[p.18] - Owner hereby consents to the ownership, management, licensing and operation by HISWA. [p. 19] [This clause need to be read along with Sec-4 of Art-1 which provides that - a. In case owner desires to avail loans/finance or use the hotel as collateral, the lenders must agree to the non-disturbance and attornment terms acceptable to the assessee (p,16) and b. Lenders will adhere to the terms of this agreement and recognize assessee's rights pursuant to this agreement, (p.16- 17) iii. Art-III, Sec-2 - HISWA shall have complete control and discretion in formulating and establishing the ....
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....umber of days for which the access was there would not make any difference. This aspect is discussed by the High Court in the following manner, and rightly so: "52. It is evident that for the duration of the event as well as two weeks prior to it and a week succeeding it, FOWC hand-full access through its personnel, the team contracted to it, both racing as well as spectator teams and could also dictate who were authorized to enter the areas reserved for it. No doubt, in terms of the agreement, i.e. RPC, Jaypee was designated as the promoter or the event host. A look at the RPC and its terms as well as the other terms contained in the agreement between the Jaypee on the one hand and All sports, Beta Prema 2 as well as FOAM show that Jaypee's capacity to act - though it promoted the event, was extremely restricted. At all material times, FOWC had access - exclusively, to the circuit, and all the spaces where the teams were located. Jaypee created the circuit for the purposes of the event and other events; yet, during the event, i.e. the FI Championship, no other event was possible. 53. Having regard to the nature of the preceding discussion, it is evident that ....
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....sales to a Swedish company, which used to compensate him for use of a phone and other facilities. Later, the company discontinued such payments and increased his salary. The Norwegian tax authorities said that the Swedish company had its place of business in Norway. The Norwegian court agreed, holding that the salesman's house amounted to a place of business: it was sufficient that the Swedish Company had a place at its disposal, i.e. the Norwegian individual's home, which could be regarded as 'fixed'. In Joseph Fowler v. Her Majesty the Queen 1990 (2) CTC 2351, the issue was whether a United States tax resident individual who used to visit and sell his wares in a camper trailer, in fairs, for a number of years had a fixed place of business in Canada. The fairs used to be once a year, approximately for three weeks each. The court observed that the nature of the individual's business was such that he held sales in similar fares, for duration of two or three weeks, in two other locales in the United States. The court held that conceptually, the place was one of business, notwithstanding the short duration, because it amounted to a place of management or a branch h....
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....t a "one-off"/ "temporary"/ "occasional"/ "ephemeral"/ "fleeting"/"sporadic" ones. Accordingly, considering the permanency, consistency and frequency of such visits, the temporal aspect of the disposal test is also satisfied. 39. This brings us to the third aspect of the PE i.e. whether it can be said that the business of enterprise is being wholly or partly being carried on through such place. The term "business" is not fully or exhaustively defined; accordingly, it has the meaning that it has under the domestic law of the state applying the tax treaty, plus professional and independent services, as explicitly provided for in article 3(l)(h) of the OECD Model. Coming to the nature of business of the assessee, it describes its role is "to increase the efficiency and effectiveness of the services provided by the Hyatt Group to the Hotel Owners in South Asia and Gulf Co-operation counsel region." (PB, p.6) The terms of the Strategic Oversight agreement clearly brings out the features which ensure that the above objective of the assessee is fulfilled. "Art-III i. Sec-1 Hotel to be operated as a part of HI chain of hotels. Owner consents to the ownership, managemen....
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.... in that context. In that case, the Hon'ble Tribunal had held that "No doubt, manufacturing is an important part of business but the business per se is little more than manufacturing." Furthermore, as per the amended commentary of UN Model to Art-5 as reproduced by Hon'ble High Court in the case of eFunds IT Solution and others, "....the carrying on of the business of the enterprise through this fixed place of business. This means usually that persons who, in one way or another, are dependent on the enterprise (personnel) conduct the business of the enterprise in the state in which the fixed place is situated." In the present case, this is the only conclusion that can be drawn in the light of the terms and conditions of the agreement between the assessee and AHL as discussed above. Such a conclusion further draws its strength from the submissions of the assessee before AO [para-2(v) of letter dt. 26/12/2011, p.97 of PB] where it relied upon the following from the OECD commentary: "A second example is that of an employee of a company who, for a long period of time, is allowed to use an office in the headquarters of another company (e.g. a newly acquired subsidiary) ....
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.... PE. Even a computer servicer and Satellite transponder can be treated as PE. Hence, keeping in view that the entire staff works from the premises from the Hotel in India, it can be safely presumed to be PE and fixed place of business in India. 44. Relying on the judgment in the case of Formula One World Championships Ltd., 394 ITR 80 (SC), it was argued that the assessee need not require to have control over the place but the assessee has got sufficient place at its disposal with unhampered ingress and intress. 45. Regarding as to how the place at the disposal of the assessee, he referred to page No. 17 of the paper book, part of agreement section 1. He argued that though the assessee is harping about the temporary stay of his staff as per Article 2 section 1 of the agreement between the assessee and the owner reveals that the agreement is for a period of 20 years. Quoting Article 3 section (4) at page 21 of the paper book, regarding the operating the bank accounts, he argued that the assessee having established policies with regarding to handling bank accounts for the hotel operation and the assessee will oversee implications and administration on a day-to-day basis. R....
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....ding sanitary, refrigerating, telephone and communications, safety and security, laundry and kitchen installations and systems); (3) all furniture and furnishings, which shall include, without limitation, guest room, office, public area, and other furniture, carpeting, draperies, lamps and similar items; (4) kitchen and laundry equipment; (5) hotel equipment and adequate spare parts therefor, including, without limitation, (a) all equipment required for the operation of (i) guest rooms and suites, including, without limitation, televisions, mini-bars and safes, (ii) banquet rooms, (iii) employee locker rooms, (iv) a spa and (v) a health (fitness) center, (b) office equipment, including, without limitation, computer hardware and software as selected by Strategic Services Provider, (c) dining room wagons, (d) material handling equipment, (e) cleaning and engineering equipment, and (f) motor vehicles as required for guest and employee transportation; (6) dining room accessories, kitchen utensils, engineering tools and equipment, housekeeping utensils and miscellaneous equipment and accessories ("Ancillary Hotel Equipment"'): (7) uniform....
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....of the Hotel through a creditor action) will adhere to the terms of this Agreement following any foreclosure or similar action by the lender or lenders, and will recognize Strategic Services Provider's rights pursuant to this Agreement. Notwithstanding the foregoing, if the performance by Strategic Services Provider of any of its obligations under this Agreement is prevented or interfered by any lender or any lessor (if the Site is subject to a lease) as a result of any default or breach by Owner under the applicable loan or lease documents, respectively, then any such inability of Strategic Services Provider to perform its obligations, arising therefrom, shall not be deemed a default or a breach of this Agreement by Strategic Services Provider. Owner shall timely pay and discharge any ground rents, or other rental payments, concession charges and any other charges payable by Owner in respect of the Hotel and, at its expense, undertake and prosecute all appropriate actions, judicial or otherwise, required to permit the operation of the Hotel as contemplated in this Agreement Owner shall further timely pay all real estate taxes, personal property taxes and assessments that ....
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....ing the foregoing, until such time as this Agreement becomes effective, the Original Management Agreement shall remain in effect and Hyatt shall continue to provide the sales and marketing and management services set forth therein. Upon the effectiveness of this Agreement, the Original Management Agreement shall terminate immediately and the provisions of this Agreement shall supersede the Original Management Agreement and shall have the effect of amending and restating the original Management Agreement. With regard to the approval of the payment of Strategic Fees hereunder and payment of amounts payable under other agreements with affiliates of Strategic Services Provider (including without limitation Service Provider and HI), Owner shall be responsible for obtaining and maintaining all applicable licenses and permits (unless otherwise required by applicable laws) at the sole cost and expense of Owner, and Service Provider shall provide Owner with all requisite assistance and authorizations necessary to obtain such licenses and permits, and upon request by Strategic Services Provider, Owner shall furnish Strategic Services Provider with copies of all such authorizations. ....
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....racter and traditions. Strategic Service Provider shall use its reasonable efforts to comply with the laws of India. Owner shall use reasonable efforts to comply with the laws of India and the performance of its obligations hereunder. Owner acknowledges that it has selected Strategic Services Provider to provide strategic plans, policies, processes, guidelines and parameters in the operation of the Hotel in substantial part because of Strategic Services Provider's expertise in the management and operation of a chain of full service, upscale, international hotels and resorts, and the benefits which Owner expects to derive by including the Hotel as part of the chain of H.I branded hotels. Owner further acknowledges that it has determined, on an overall basis, that the benefits of operation of the Hotel as part of the H.I. chain of Hotels are substantial, notwithstanding that not all H.I. Hotels will benefit equally by inclusion therein. Owner further acknowledges that in certain respects all hotels compete with all other hotels and that conflicts may, from time to time, arise between the Hotel and other H.I. branded hotels. Strategic Services Provider agrees, however, that it shall u....
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....erating Standards at the Hotel shall be subject to the availability of sufficient working capital and as provided in Section 1 of Article VII of this Agreement. The provision of such overall strategic plans, policies, processes, guidelines and parameters will, among other matters, cover: (a) recruiting, interviewing and assistance in hiring the General Manager, and any other Hotel employees, to the extent of any such recruiting, interviewing and hiring needs to be conducted outside of India; (b) formulating and establishing overall human resource policies consistent with Hyatt Operating Standards including, without limitation, selection, employment, training, allocation, transfer and termination of employment of all employees of the Hotel, the establishment of the conditions of employment, staffing list and salary and benefit structures, and formulation and establishment of training and motivational programs for employees such as the "Training for Your Future" program and other training and motivational programs implemented from time to time in hotels managed by subsidiaries of H.I.; (c) establishing overall and strategic purchasing policies with respect ....
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....oped and accumulated over time as operators and managers of similar luxury, full service hotels throughout the world (collectively, "Know-How") subject to the provisions of Article IV below. Owner hereby confirms, acknowledges and agrees that the Know-How and any expertise arising therefrom or relating thereto shall be used only in connection with the Hotel and shall be provided to Service Provider by Owner solely for such purpose. Any use of the Know-How outside the context set forth herein, shall be deemed a default by Owner, subject to the immediate termination of this Agreement by Strategic Services Provider, solely at its discretion. Particular areas of such knowledge, skills, experience, operation and management information and associated technologies that comprise the KnowHow furnished under this Agreement are generally described in Appendix 1, which forms an integral part of this Agreement. From and after the Effective Date, Strategic Services Provider shall provide to Owner, through the General Manager, access to and the right to use the Know-How, solely as required in connection with the operation of the Hotel, in written form, by electronic mail, or in any other....
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.... is understood and agreed to by Owner that Strategic Services Provider, H.I., and their affiliates (other than Service Provider) will perform their duties hereunder from and out of their principal offices outside of India, and further that all duties related to the day-to-day operations management assistance and technical assistance services as appropriate and required to operate and manage the Hotel within India shall be performed by Service Provider, employees of the Hotel, or their designees. It is further understood and agreed to by Owner that employees of Strategic Services Provider, H.I. and their affiliates will be in India only when, in the sole discretion of Strategic Services Provider, H.I. or their affiliates, their presence is required, and then only on a temporary basis. Section 4. Operating Bank Account(s). Strategic Services Provider shall establish certain policies with regard to the handling of operating bank accounts ("Operating Bank Accounts") for the Hotel's operations, which policies will be communicated to Owner, and Service Provider will oversee the implementation and administration of the same on a day-to-day basis. Section 5. Agen....
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....ider shall be entitled to reimbursement, at the then current costs, for certain services, benefits or premiums including, without limitation, the following: * internal audits, management operations reviews ('"M.O.R.s") and specialized training programs based on the executive time involved (averaging two to three (2-3) weeks per audit or M.O.R.) at the Hotel. As of the date of this Agreement, the time to conduct audits and M.O.R.S averages two to three (2-3) weeks per audit or M.O.R. and the per diem charges range from US$200 to US$350 (in 2008 Dollars) dependent upon the seniority of the executives performing the audit, M.O.R. or training. * key executives' (including, without limitation, expatriate personnel's) social benefits, including, without limitation, life, disability and health insurance, incentive compensation and pension benefits arranged by Strategic Services Provider or H.I. * premiums for the worldwide insurance coverage (including, without limitation public liability and crime insurance, such as employee fidelity and cash-in-transit coverage) maintained by Strategic Services Provider or H.I. Reimbursable costs related to the above servi....
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....s Provider (or other member of the H.I. Group) to receive payment thereof in United States Dollars. Section 7. Employees of the Hotel. Strategic Services Provider shall, on behalf of and in consultation with Owner, identity, recruit and assist in appointing any non-local employees of the Hotel, including the General Manager, expatriate personnel, key executives and executive committee members. Notwithstanding the foregoing, Owner shall have the right to approve, which approval shall not be unreasonably withheld or delayed, the appointment of the General Manager. In addition, Strategic Services Provider shall formulate human resources policies to ensure consistency with the Hyatt Operating Standards. Strategic Services Provider or any of its affiliates (including hotels serviced or operated by such entity) may assign its employees temporarily as full-time members of the executive staff of the Hotel, in which case Owner shall, pursuant to a secondment agreement or an arrangement with the sending employer entity or hotel, reimburse the entity or hotel from which the employees were assigned monthly for the total aggregate compensation, including, without limitation, s....
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....requested assistance to H.I. or Strategic Services Provider in connection with such litigation, (ii) be entitled to control any such litigation, (iii) bear the costs and expenses in connection with any such litigation, and (iv) be entitled to all damages, including the attorney's fees and disbursements, awarded or obtained based on such litigation, except for any damages which are awarded in favor of Owner. Owner acknowledges that use of the Trademarks or the Know-How in contravention of the License Agreement and this Agreement may cause irreparable damage to H.I. and Strategic Services Provider and the goodwill associated therewith. Owner further acknowledges that damages may not be an adequate remedy at law for any use in contravention of the License Agreement and this Agreement, and agrees that in the event Owner (i) is in material breach of the License Agreement and this Agreement, (ii) has been notified by H.I. or Strategic Services Provider of the existence of such breach and (iii) has failed to cure such breach within fifteen (15) days of such notice, then H.I. or Strategic Services Provider shall be entitled to equitable relief by way of temporary and permanent inj....
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....actually received and (iii) "Gross Operating Profit" shall be the amount derived from Revenue (as defined below) less the cost and expense of maintaining, conducting and supervising the operation of the Hotel (other than the expense of maintaining any retail or commercial space that is let out or in relation to which Owner has granted a concession to any third party), as such amount is calculated by the accounting staff of the Hotel and reviewed and approved by Strategic Services Provider. Section 2. Payment of Fees. The Strategic Fees shall be determined in Rupee and shall be payable in United States Dollars converted at the official rate of exchange, as quoted by the State Bank of India, prevailing on the date of such fees shall be remitted, which shall be not later than thirty (30) days after the end of each fiscal month. Owner acknowledges that it shall cause Service Provider to withdraw Strategic Fees from the Operating Bank Accounts of the Hotel (or if applicable the Pre-Opening Account) for remittance to Strategic Services Provider. If, for any reason, the Strategic Fees are remitted later than thirty (30) days after the end of the month in which such fees ....
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.... then Owner shall ensure that such difference be paid to Strategic Services Provider from the Operating Bank Accounts within thirty (30) days of the date of receipt by Owner of said profit and loss statement. Section 4. Fiscal Years Fiscal years under this Agreement shall coincide with and be identical to calendar years for all purposes, except that the first fiscal year shall be the period between the date of the Formal Opening of the Hotel and December 31 of the same year, unless the period is three (3) calendar months or less, in which event the first fiscal year shall be the period from the Formal Opening of the Hotel until December 31 in the next succeeding year and the last fiscal year, if the Operating Term shall be terminated prior to its expiry date including any extensions thereof, shall be the period between January 1 of the year of termination and the date of such termination. ARTICLE VI Repairs and Changes Subject to the provision of adequate working capital by Owner pursuant to Section 1 of Article VII and except to the extent prohibited by a Force Majeure Event, Strategic Services Provider shall establish maintenance progr....
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....elected H.I. hotels participate in by mutual agreement, the cost of which programs are allocated amongst the participating H.I. hotels) (collectively, "Chain Marketing Services) IRL shall provide reservations services. Neither Strategic Services Provider, HCSL nor IRL, nor any other affiliate of Strategic Services Provider shall receive any profit for the rendition of Chain Marketing Services or reservations services. HCSL shall, however, be entitled to be reimbursed for the Hotel's share ("Chain Allocation") of all costs incurred by HCSL, Strategic Services Provider or their affiliates, including, without limitation, salaries of officers or employees, in the rendition of said services, and IRL shall be reimbursed for reservations costs. The charges for Chain Marketing Services and for reservation services shall be made on the same basis as to the other hotels operated by H.I., Strategic Services Provider and their affiliates. The present formula (in 2008 Dollars) for Chain Allocation is based on US$394 per Hotel guest room, per annum, plus one percent (1%) of the Room Revenue of the Hotel per annum, during the Operating Term and during any partial operations conducted pri....
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....greement page 18. It is argued that the ld. DR was also wrong to say that the control of the hotel is in the hands of the assessee. In fact, the control of the hotel was in the hands of the owner, but the assessee is only extending contract and strategic planning as observed at page No. 19. Distinguishing the decision of Hon'ble Supreme Court in Formula One World Championships Ltd., 394 ITR 80 (SC), he says that what is to be seen is the real and dominant control whereas in this case, the real and dominant control is with the owner of the hotel and not with the assessee. 48. Hyatt Dubai being a tax resident of UAE and the provisions of the Treaty being more beneficial as compared to the Act, for the purpose of this Return, no income is chargeable to tax in India taking the beneficial provisions under the Treaty. Hence, the management fees received are not taxable in the assessment year under consideration. 49. The company neither has a fixed place of business/office/branch/place of management in India nor the presence of their employees or other personnel has exceeded 9 months (as stated in the Treaty entered into between India and UAE), in India within any twelve mo....
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....s been technically operating the hotel belonging to the owners namely, Asian Hotels Ltd. (AHL) through the employees who are recruited by them. The hotel premises have been at the disposal of the assessee during their period of stay. The employees has stayed for a period of 158 days as per the assessee in India while rendering 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 business i.e. a facility such as premises, and that place was fixed and established as a distinct place with certain degree 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 these requirements stipulated in the OECD commentary under para 2. Further, the assessee is also found to be meeting the requirements specified in para 4 of the OECD MC that the term place of business covers in the premises, facilities, installations used fo....
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....se of Formula One World Championships Ltd. 394 ITR 80, in the case of Azadi Bachao Andolan and also E-funds IT Solutions 86 Taxman 240. The facts on record undisputedly prove that the premises AHL are at the disposal of the assessee for conduct of their business. While coming to the issue of "at the disposal" in the premises is available for the assessee for running of their business even for a limited time it constitutes a PE. Further, we have examined the various clauses of SOA dated 04.09.2008. The SOA itself is for a period of 20 years when an agreement is made for such a long period of 20 years, whether it can be said to be a consultancy provided or use of rights whether intellectual or technical, or know-how or patent or license or otherwise is also examined. 57. The SOA defines that the owner AHL consents to the ownership management, licensing and operation by HISWA (the assessee). The SOA also clearly mentions that the HISWA will have complete control and discretion with regard to all aspects of operations of the hotel. It also mentions that the right of the owner AHL to receive financial returns from the operation of the hotel shall not be deemed to give the owner any r....