Section 44C — the law in short
What the courts have decided on section 44C, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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DIT (IT)-I, Mumbai v American Express Bank Ltd
Supreme CourtHelps department
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.
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Standard Chartered Bank v ACIT (Mumbai Tribunal, 2026)
ITATCuts both waysNo later treatment found
The officer has treated expatriate salaries paid by our London head office as head office expenditure and capped them under s.44C. Is that correct, and does the treaty's non-discrimination article get me out of s.44C altogether?
On the first question, no. Section 44C restricts only executive and general administrative expenditure incurred outside India in connection with the management of the non-resident's affairs; salary of expatriate employees deputed to and working exclusively for the India branch is not head office expenditure merely because the head office paid it first. On the second, the Tribunal declined to hold that Article 26(2) of the India-UK treaty knocks out s.44C in every case — that has to be decided on the nature of the expenditure and the facts, read with Article 7(4).
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CIT v Emirates Commercial Bank Ltd
High CourtCuts both waysOverruled
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?
No. Section 44C imposes a ceiling on head office expenditure of a common nature — expenditure incurred for various branches, or for the head office and the branch — that has to be allocated. Expenditure incurred exclusively for the Indian branch is outside s.44C altogether, even where the head office paid it first and recovered it by debit note.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.
