Which of the following statements is/are correct regarding Section 44C of the Income Tax Act, 1961?
1. It restricts the deduction of head office expenditure claimed by non-resident entities to a specific percentage of their adjusted total income.
2. According to a recent Supreme Court ruling, this section only applies to common expenses and excludes expenses incurred exclusively for Indian operations.

Question

Accepted Answer

A) 1 only — Statement 1 is correct as Section 44C caps the allowable deduction for head office expenses (generally at 5 percent of adjusted total income) for non-residents. Statement 2 is incorrect because the Supreme Court clarified that Section 44C applies to all head office expenditures, including those incurred exclusively for Indian operations.

SC Clarifies Section 44C Head Office Expenditure

FCRA Amendment Bill, 2026 Introduced