Loss-Making MNCs Must Pay Tax on India Setups: Delhi HC

The Delhi High Court ruled that multinational corporations (MNCs), even if reporting global losses, are liable to pay taxes on earnings attributable to their Indian operations. This applies when they have a "permanent establishment" (PE) in India, such as a liaison office or subsidiary. The ruling arose from Hyatt International's case, where its PE in India was the Hyatt Regency Hotel in Delhi. The court emphasized that the PE must be treated as a distinct taxable entity, and profits attributed to it in India cannot be nullified by the MNC's overall financial losses globally. The judgment referenced both OECD and UN model conventions and is seen as significant for setting a precedent that many other MNCs might be affected by. It opens the door for potential future litigation concerning how profits are attributed to PEs in India.