Section 44C of Income Tax Act "Deduction of head office expenditure in the case of non-residents"
44C. Notwithstanding anything to the contrary contained
in sections 28 to 43A, in the case of an assessee, being a
non-resident, no allowance shall be made, in computing the
income chargeable under the head "Profits and gains of
business or profession", in respect of so much of the
expenditure in the nature of head office expenditure as is
in excess of the amount computed as hereunder, namely:-
(a) an amount equal to five per cent of the adjusted total
income; or
(b) [***]
(c) the amount of so much of the expenditure in the nature
of head office expenditure incurred by the assessee as is
attributable to the business or profession of the assessee
in India,
whichever is the least :
Provided that in a case where the adjusted total income of
the assessee is a loss, the amount under clause (a) shall be
computed at the rate of five per cent of the average
adjusted total income of the assessee.
Explanation.-For the purposes of this section,-
(i) "adjusted total income" means the total income computed
in accordance with the provisions of this Act, without
giving effect to the allowance referred to in this section
or in sub-section (2) of section 32 or the deduction
referred to in section 32A or section 33 or section 33A or
the first proviso to clause (ix) of sub-section (1) of
section 36 or any loss carried forward under sub-section (1)
of section 72 or sub-section (2) of section 73 or
sub-section (1) or sub-section (3) of section 74 or
sub-section (3) of section 74A or the deductions under
Chapter VI-A;
(ii) "average adjusted total income" means,-
(a) in a case where the total income of the assessee is
assessable for each of the three assessment years
immediately preceding the relevant assessment year,
one-third of the aggregate amount of the adjusted total
income in respect of the previous years relevant to the
aforesaid three assessment years;
(b) in a case where the total income of the assessee is
assessable only for two of the aforesaid three assessment
years, one-half of the aggregate amount of the adjusted
total income in respect of the previous years relevant to
the aforesaid two assessment years;
(c) in a case where the total income of the assessee is
assessable only for one of the aforesaid three assessment
years, the amount of the adjusted total income in respect of
the previous year relevant to that assessment year;
(iii) [***]
(iv) "head office expenditure" means executive and general
administration expenditure incurred by the assessee outside
India, including expenditure incurred in respect of-
(a) rent, rates, taxes, repairs or insurance of any premises
outside India used for the purposes of the business or
profession;
(b) salary, wages, annuity, pension, fees, bonus,
commission, gratuity, perquisites or profits in lieu of or
in addition to salary, whether paid or allowed to any
employee or other person employed in, or managing the
affairs of, any office outside India;
(c) travelling by any employee or other person employed in,
or managing the affairs of, any office outside India; and
(d) such other matters connected with executive and general
administration as may be prescribed.
What are Amounts not deductible? Section 40 of Income Tax Act 1961
What are Profits chargeable to tax? Section 41 of Income Tax Act 1961
Section 43AA Taxation of foreign exchange fluctuation
Section 43CB Computation of income from construction and service contracts
Section 44ADA Special provision for computing profits and gains of profession on presumptive basis