Does the section 44C ceiling bite only on head office expenditure shared with other branches, or also on expenditure the head office incurred exclusively for the Indian branch?
It bites on both. The Explanation to s.44C defines head office expenditure by two things only: that it is incurred outside India, and that it is executive and general administrative expenditure of the kind listed. Nothing in it says the expenditure must be common or shared. The Bombay High Court's contrary view in Emirates Commercial Bank was held to be wrong.
Decided by the Supreme Court (J.B. Pardiwala J and K.V. Viswanathan J (judgment by Pardiwala J)) on 2025-12-15, reported as 2025 INSC 1431; 2025 LiveLaw (SC) 1206; Civil Appeal No. 8291 of 2015 with Civil Appeal No. 4451 of 2016; reported at (2026) 484 ITR 137 (SC) per the itatonline digest. It bears on section 44C, section 37, section 28 of the Income Tax Act 1961, in Deductions & Disallowances and How Tax Law Is Read matters.
Foreign bank and other non-resident branches have for two decades split head office charges into 'common' (capped at 5% under s.44C) and 'exclusive' (claimed in full under s.37). That split no longer works. Assessments and appeals built on Emirates Commercial Bank must be re-examined.
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Two non-resident banks with branches in India — American Express Bank (AY 1997-98) and Oman International Bank, now Doha Bank (AY 2003-04) — claimed deduction of expenditure incurred by their overseas head offices. Part of the claim was for expenditure said to have been incurred exclusively for the Indian branches, which the assessees argued fell outside s.44C altogether and was deductible in full under the ordinary provisions, the 5% ceiling in s.44C applying only to common or shared head office expenditure. That argument rested on the Bombay High Court's decision in CIT v. Emirates Commercial Bank Ltd. The Revenue appealed to the Supreme Court against the Bombay High Court's order dated 1 April 2015 in IT Appeal No. 1294 of 2013 and the connected matter.
The Revenue's appeals were allowed. Section 44C draws no distinction between common and exclusive head office expenditure; expenditure incurred outside India by a non-resident which is executive or general administrative in nature is head office expenditure and is subject to the s.44C ceiling even if it was incurred exclusively for the Indian branches (para 71). The Bombay High Court's view in Emirates Commercial Bank on the applicability of s.44C was held incorrect (para 71). The matters were remitted to the Income Tax Appellate Tribunal, Mumbai, to verify whether the particular items of expenditure satisfy the description in the Explanation to s.44C (para 85). The operative order records that 'the appeals succeed and are hereby allowed' (para 91).
The Court read the Explanation to s.44C as exhaustive of what 'head office expenditure' means, and found it imposes only two requirements: the expenditure must be incurred outside India by the assessee, and it must be of a nature described as executive and general administrative expenditure, including the items in clauses (a) to (d) (para 47). There is no indication in that language that the expenditure must be common or shared. To read in an exception for exclusive expenditure would be to add words to a taxing statute, which is impermissible where the language is plain and admits of only one meaning. Section 44C being a non obstante provision, it displaces the ordinary computation provisions to the extent it applies.
Thus, after examining the issue from all angles, we have no doubt that Section 44C does not create a distinction between common and exclusive head office expenditure.
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Handle my notice → Ask a CA on WhatsAppIt bites on both. The Explanation to s.44C defines head office expenditure by two things only: that it is incurred outside India, and that it is executive and general administrative expenditure of the kind listed. Nothing in it says the expenditure must be common or shared. The Bombay High Court's contrary view in Emirates Commercial Bank was held to be wrong. This was decided by the Supreme Court (J.B. Pardiwala J and K.V. Viswanathan J (judgment by Pardiwala J)) and bears on section 44C, section 37, section 28 of the Income Tax Act 1961. It is reported as 2025 INSC 1431; 2025 LiveLaw (SC) 1206; Civil Appeal No. 8291 of 2015 with Civil Appeal No. 4451 of 2016; reported at (2026) 484 ITR 137 (SC) per the itatonline digest. Foreign bank and other non-resident branches have for two decades split head office charges into 'common' (capped at 5% under s.44C) and 'exclusive' (claimed in full under s.37). That split no longer works. Assessments and appeals built on Emirates Commercial Bank must be re-examined. If it applies to you, the first step is this: Re-open your working for head office charges and stop treating exclusivity as the test; ask instead whether the expenditure was incurred outside India and is executive or general administrative in nature.
Two non-resident banks with branches in India — American Express Bank (AY 1997-98) and Oman International Bank, now Doha Bank (AY 2003-04) — claimed deduction of expenditure incurred by their overseas head offices. Part of the claim was for expenditure said to have been incurred exclusively for the Indian branches, which the assessees argued fell outside s.44C altogether and was deductible in full under the ordinary provisions, the 5% ceiling in s.44C applying only to common or shared head office expenditure. That argument rested on the Bombay High Court's decision in CIT v. Emirates Commercial Bank Ltd. The Revenue appealed to the Supreme Court against the Bombay High Court's order dated 1 April 2015 in IT Appeal No. 1294 of 2013 and the connected matter. The matter was decided on 2025-12-15 by the Supreme Court (J.B. Pardiwala J and K.V. Viswanathan J (judgment by Pardiwala J)). On those facts the Supreme Court held as follows. The Revenue's appeals were allowed. Section 44C draws no distinction between common and exclusive head office expenditure; expenditure incurred outside India by a non-resident which is executive or general administrative in nature is head office expenditure and is subject to the s.44C ceiling even if it was incurred exclusively for the Indian branches (para 71). The Bombay High Court's view in Emirates Commercial Bank on the applicability of s.44C was held incorrect (para 71). The matters were remitted to the Income Tax Appellate Tribunal, Mumbai, to verify whether the particular items of expenditure satisfy the description in the Explanation to s.44C (para 85). The operative order records that 'the appeals succeed and are hereby allowed' (para 91).
The Court read the Explanation to s.44C as exhaustive of what 'head office expenditure' means, and found it imposes only two requirements: the expenditure must be incurred outside India by the assessee, and it must be of a nature described as executive and general administrative expenditure, including the items in clauses (a) to (d) (para 47). There is no indication in that language that the expenditure must be common or shared. To read in an exception for exclusive expenditure would be to add words to a taxing statute, which is impermissible where the language is plain and admits of only one meaning. Section 44C being a non obstante provision, it displaces the ordinary computation provisions to the extent it applies. In the words reproduced by the source cited on this page: "Thus, after examining the issue from all angles, we have no doubt that Section 44C does not create a distinction between common and exclusive head office expenditure." The decision followed or applied CIT v. Emirates Commercial Bank Ltd. [2003] 262 ITR 55 (Bom) — disapproved; the view on applicability of s.44C held incorrect (para 71).
It was decided by the Supreme Court on 2025-12-15 and is reported as 2025 INSC 1431; 2025 LiveLaw (SC) 1206; Civil Appeal No. 8291 of 2015 with Civil Appeal No. 4451 of 2016; reported at (2026) 484 ITR 137 (SC) per the itatonline digest. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 44C, section 37, section 28, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The Revenue's appeals were allowed. Section 44C draws no distinction between common and exclusive head office expenditure; expenditure incurred outside India by a non-resident which is executive or general administrative in nature is head office expenditure and is subject to the s.44C ceiling even if it was incurred exclusively for the Indian branches (para 71). The Bombay High Court's view in Emirates Commercial Bank on the applicability of s.44C was held incorrect (para 71). The matters were remitted to the Income Tax Appellate Tribunal, Mumbai, to verify whether the particular items of expenditure satisfy the description in the Explanation to s.44C (para 85). The operative order records that 'the appeals succeed and are hereby allowed' (para 91). It arises in Deductions & Disallowances and How Tax Law Is Read matters, on section 44C, section 37, section 28 of the Income Tax Act 1961, and was decided by J.B. Pardiwala J and K.V. Viswanathan J (judgment by Pardiwala J). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Where an exclusive-expenditure claim is pending in appeal, expect it to be brought within the 5% ceiling, and quantify the exposure now. Test each item against the Explanation's description rather than conceding the whole claim: expenditure that is not executive or general administrative in character is still outside s.44C, and that is what the Court sent back to the Tribunal to verify. Check whether the amount, once inside s.44C, is capped by 5% of adjusted total income or by the actual expenditure attributable to the Indian business, whichever is less.
Still good law. indiankanoon's citedby index does not yet carry the judgment, but a search on the bank's name with section 44C shows it already being applied by the Mumbai Tribunal, which is where the section 44C banking appeals sit. In DDIT (IT)-1(1), Mumbai v M/s Bank of America N.A. and the connected appeal decided on 18 March 2026 the Tribunal proceeds on the footing that 'In American Express Bank Ltd (supra), the Hon'ble Supreme Court' settled the construction of section 44C, and the remanded American Express and Standard Chartered matters were taken up on 17 June 2026. Nothing doubting, distinguishing on principle or overruling it was found. The judgment itself disapproves CIT v Emirates Commercial Bank Ltd (Bombay), so the contrary Bombay High Court line should no longer be relied on. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The full text was read on Indian Kanoon (print view) and the concluding paragraphs on the LiveLaw judgment PDF, because the Indian Kanoon print page was truncated before the operative order. Both sources agree on paragraph 71. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Revenue's appeals were allowed. Section 44C draws no distinction between common and exclusive head office expenditure; expenditure incurred outside India by a non-resident which is executive or general administrative in nature is head office expenditure and is subject to the s.44C ceiling even if it was incurred exclusively for the Indian branches (para 71). The Bombay High Court's view in Emirates Commercial Bank on the applicability of s.44C was held incorrect (para 71). The matters were remitted to the Income Tax Appellate Tribunal, Mumbai, to verify whether the particular items of expenditure satisfy the description in the Explanation to s.44C (para 85). The operative order records that 'the appeals succeed and are hereby allowed' (para 91).
TaxSphere, “DIT (IT)-I, Mumbai v American Express Bank Ltd”, https://taxnotice.vittsphere.com/caselaw/case/dit-v-american-express-bank-44c/ (validity last checked 2026-09-06)
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Our head office sent staff to work on the Indian branch and debited us the cost. Does the s.44C five per cent ceiling apply to it?
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I paid a foreign firm a lump sum for technical know-how that raised the yield of a product I was already making. The Assessing Officer says section 37(1) is shut because I bought an asset of enduring benefit. Is the payment capital?
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