Salary by head office to expatriate employees working in Indian branch is allowable deduction

MUFG Bank Ltd Vs ACIT (ITAT Delhi)

ITAT Delhi held that that the salary paid by the head office to expatriate employees working in Indian branches is allowable as deduction under section 37 of the Income Tax Act.

Facts-

The assessee is a non-resident banking company incorporated in Japan and is a tax resident of Japan. In the year under consideration, the assessee had paid an amount of Rs.45,42,62,938/- towards salaries to the expatriate employees and taxes paid thereon. It was claimed as deduction, being expenditure incurred by the head office for the business operations of Indian Branches.

AO called upon the assessee to justify, how the deduction claimed can be allowed u/s. 37 of the Act. AO disallowed assessee’s claim of deduction. Learned DRP relying upon the direction in assessee’s own case in assessment year 2013-14, endorsed the view expressed by AO.

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