Multinational companies (MNCs) using various outfits in India or engaging people to promote, operate and grow their businesses from the Indian market will have to pay tax attributable to such setups even if these MNCs report losses in their global balance-sheets.

This was laid down by a three-judge bench of the Delhi High Court in a ruling which would impact several MNCs using liaison office, subsidiary, or a fixed place like a hotel room --- arrangements which are considered as 'permanent establishment' or PEs in tax parlance --- to meet customers, negotiate prices, and market products and services.

The ruling, pronounced on September 19, was in response to a petition by the UAE-based Hyatt International Southwest Asia which had a fixed place or PE in India at the premises of Hyatt Regency hotel in Delhi.

"The fact that a PE is conceived to be an independent taxable entity cannot possibly be doubted or questioned," said the ruling, adding that the source state (i.e, India in this case) cannot be deprived of its right to tax a PE and this is not dependent upon the overall and global financials of an entity.