The Tax Publishers2020 TaxPub(DT) 0306 (Mum-Trib)

INCOME TAX ACT, 1961

Section 37(1)

There was no dispute that expatriate employees in question were working exclusively for Indian operations came from the head office broad to attend to work of Indian Branch and, in connection with that work, expense was incurred and expense was initially incurred by head office and was recovered by head office from the branch in India by raising a debit note and therefore, expense was incurred for branch office in India and hence, section 44C had no application. The employees concerned rendered whole time service India throughout the accounting year under consideration and thus assessee's claim towards off shore payment to expatriate employees in India had to be allowed.

Business expenditure - Salary paid to expatriate employees - No dispute that expatriate employees in question were working exclusively for Indian operations came from the head office broad to attend to work of Indian Branch -

Assessee claimed deduction of salary paid to expatriate employees. AO required assessee to also justify the claim of deduction thereon. Assessee stated that expatriate officers rendered services in India for which they were paid salaries and said salary has been taken into account in computing their salary income chargeable to tax in India after due deduction of tax in terms of section 192. The expenditure had been incurred for the purpose of Indian Operations and for earning income in India and hence, it was an expenditure allowable as deduction in computing income of Indian branches. AO held that said expenditure was not debited by assessee to profit and loss account and expatriate employees were not on pay roll of Indian Branch and accordingly, salary paid to expatriate employees had to be clubbed with head office expenses and hence was not allowable as deduction under section 37.Held: There was no dispute that expatriate employees in question were working exclusively for Indian operations came from the head office broad to attend to work of Indian Branch and, in connection with that work, expense was incurred and expense was initially incurred by head office and was recovered by head office from the branch in India by raising a debit note and therefore, expense was incurred for branch office in India and hence, section 44C had no application. The employees concerned rendered whole time service India throughout the accounting year under consideration and thus assessee's claim towards off shore payment to expatriate employees in India had to be allowed.

Followed: Emirtes Commercial Bank Ltd. (now known as Abu Dhabi Commercial Bank Ltd. (2003) 262 ITR 55 (Bom) : 2003 TaxPub(DT) 1265 (Bom-HC), American Express Bank Limited in Income Tax Reference No. 3 of 2002, RA No. 568/Mum/1998 Order, dated 17-7-2003, Shinhan Bank v. Dy. CIT(IT) (2012) 54 SOT 140(Mum-Trib) : (2012) 23 Taxmann.com 449 (Mum) : 2013 TaxPub(DT) 71 (Mum-Trib), Dy. CIT (IT) v. Chohang Bank (2010) 126 ITD 448 (Mum) : 2010 TaxPub(DT) 554 (Mum-Trib), ABN Amro Bank NV v. Jt. CIT ITA No. 692/Cal/2000 (Assessment Year 1996-97), dated 30-3-2001, Kedarnath Jute Mfg Co. Ltd. v. CIT (1971) 82 ITR 363 (SC) : 1971 TaxPub(DT) 366 (SC) and British Bank of Middle East v. Jt. CIT ITA. No. 751/Mum/1998 (Assessment Year 1993-94) Order, dated 28-6-2005 : 2005 TaxPub(DT) 1690 (Mum-Trib),

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2002-03


INCOME TAX ACT, 1961

Section 37(1)

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