Deduction of Head Office Expenditure in the Case of Non-Residents – Section 44C - International Taxation - Income Tax

Deduction of Head Office Expenditure in the Case of Non-Residents Section 44C As per section 44C of Income Tax Act, deduction allowed for head office expenditure incurred outside India by Non-resident (attributable to the business or profession being carried on in India) is allowable, but restricted to the following ceiling An amount equal to 5 % of the adjusted total income, or In case of adjusted total income of the assessee is a loss 5 % of the Average adjusted total income; or Actual head office expenditure attributable to the business or profession of the assessee in India. (Whichever is lower). Following is the statutory meaning of: Head office expenditure It refers to the executive and general administration expenditure being incurred by the assessee outside India, including the expenditure of Rent, rates, taxes, repairs of any premises outside India for business purpose Salary, wages annuity, pension, fees, bonus gratuity, perquisites or profits in lieu or in addition to salary, paid or allowed to any employee engaged in managing the affairs of any office outside India Traveling by any employee or any other person employed in, or engaged in managing the affairs of, any office outside India Such other matters connected with executive and general administration. Adjusted Total Income The total income computed In accordance with the provisions of the Act without giving followings effects- Allowance under this section Unabsorbed depreciation allowance u/s 32(2) Expenditure incurred by a company for the purpose of promoting family planning amongst its employees under first proviso to section 36(1)(ix). Business loss brought forward u/s 72(1). Speculation loss b/f u/s 73(2). Loss under the head Capital Gain u/s 74(1). Loss from certain specified source b/f u/s 74A(3) (i.e. the amount of loss incurred by the assessee in the activity of owning and maintaining race horses) . Deduction under Chapter VI-A. Average Adjusted Total Income It essentially includes: In a case where the total income of an assessee is assessable for each of the three assessment years immediately preceding the relevant assessment year , 1/3rd of the aggregate amount of the adjusted total income. is assessable only for two of the aforesaid three assessment years , of the aggregate amount of the adjusted total income is assessable only for one of the aforesaid three assessment years , The amount of the adjusted total income.