Case Title : DIRECTOR OF INCOME TAX (IT)-I, MUMBAI vs M/S. AMERICAN EXPRESS BANK LTD.
Citation : 2025 INSC 1431
Date : 15.11.2025
Hon’ble Supreme Court Bench – Justice JB Pardiwala and Justice KV Viswanathan
In a major tax ruling, the Supreme Court of India recently clarified the limits on deductions for “head office expenditure” by foreign companies. Foreign banks like American Express and Oman International Bank had argued that Section 44C—which limits head office expense deductions to 5% of adjusted total income—applies only to “common” global overheads shared across multiple countries. They contended that expenses incurred “exclusively” for their Indian branches (such as travel for audits or specific certification fees) should be fully deductible under the general business expense rule of Section 37(1), without any ceiling. The Supreme Court rejected this distinction, emphasizing that Section 44C is a non-obstante provision, meaning its rules override general deduction sections, held :
- The section was created specifically because Indian tax authorities cannot easily verify books maintained abroad. Allowing companies to bypass the cap by simply claiming “exclusivity” would reintroduce the very verification hurdles Parliament sought to eliminate.
- For an expense to be capped under Section 44C, it must meet three criteria: it was incurred outside India, it is administrative in nature, and it falls within the specific categories listed in the law (like rent, salary, or travel).
The Court overruled previous High Court decisions that had favored the banks. However, rather than a total loss for the taxpayers, the Court remanded the cases back to the Tribunal.
