Director of Income Tax Vs American Express Bank Ltd. (Supreme Court of India)
The Supreme Court has authoritatively interpreted section 44C of the Income-tax Act, 1961 and held in favour of the Revenue. The Court ruled that once an assessee is a non-resident and the expenditure qualifies as “head office expenditure” as defined in the Explanation to section 44C, the statutory ceiling applies irrespective of whether such expenditure is “common” or incurred “exclusively” for Indian branches. Rejecting the long-drawn distinction between common & exclusive expenditure adopted by certain High Courts, the Court held that section 44C is a non-obstante provision overriding sections 28 to 43A, including section 37(1), and its language does not permit reading in any exception for exclusive expenditure. The Court clarified that the Explanation focuses only on the place where the expense is incurred (outside India) and its nature (executive & general administrative), and not on whether it benefits only India or multiple jurisdictions. Earlier reliance on Emirates Commercial Bank, Rupenjuli Tea and allied rulings was distinguished, and it was held that allowing full deduction of exclusive HO expenses would defeat the very mischief section 44C was enacted to cure. Consequently, expenditure incurred by foreign head offices outside India, even if wholly for Indian operations, is subject to the ceiling prescribed u/s 44C and cannot be fully allowed u/s 37(1)
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
