Director of Income Tax v. M/s. American Express Bank Ltd., Civil Appl. No. 8291 of 2015, dated 15th December 2025

The Supreme Court held that Section 44C of the Income Tax Act is a special and overriding provision that governs the deduction of head office expenditure incurred by a non-resident taxpayer outside India, irrespective of whether such expenditure is common or exclusively related to the Indian branch. The Court clarified that once the expenditure qualifies as head office expenditure under the Explanation to Section 37, Section 44C is automatically triggered and the deduction must be restricted to the statutory ceiling.

It emphasized that the law does not distinguish between common administrative expenses and expenses incurred solely for Indian operations, so long as they are executive or general administrative in nature and incurred outside India. The Bench laid down that two conditions are essential namely that the assessee must be a non-resident and the expenditure must fall within the defined scope of head office expenditure. Upon satisfaction of these conditions, the allowable deduction is limited to the lower of five percent of adjusted total income or the amount attributable to Indian business.

The Court also observed that the term attributable to has a wider meaning than derived from, covering both direct and indirect nexus. Accordingly, it overturned the ITAT’s view and upheld the Assessing Officer’s application of Section 44C to cap the deduction.