Law:

Section:

Section 44C of the Income-tax Act, 1961 - Non-resident - Head office expenditure in case of - Assessment years 1981-82 and 1982-83 - Assessee was a non-resident company, being only a branch of a foreign company with Head Office in UK - Its business both in UK and in India was that of manufacturing pharmaceutical products - During assessment proceedings, Assessing Officer examined issue of applicability or otherwise of section 44C in respect of laboratory expenses - Assessing Officer took a view that entire Research and Development activities had been centralized in UK, and expenses were merely in nature of general administrative and executive in nature, and, hence, applicability of section 44C was inevitable - Accordingly, Assessing Officer disallowed assessee's claim in respect of laboratory expenses - On appeal, assessee filed financial statements to show that UK Company had shown executive or general administration expenditure as indicated in different clauses of Explanation (iv) to section 44C separately - Whether in absence of any contrary material placed on record by revenue to show that laboratory expenses claimed by assessee included expenses incurred on executive or general administration as indicated in above Explanation (iv) to section 44C, impugned disallowance was to be deleted - Held, yes [Paras 9 & 10] [In favour of assessee] FACTS The assessee was a non-resident company, being only a branch of a foreign company with Head Office in U.K. Its business both in U.K. and in India was that of manufacturing pharmaceutical products. It had a separate and independent establishment for its branch business in India. During assessment proceedings, the Assessing Officer examined the issue of applicability or otherwise of section 44C in respect of laboratory expenses. In response, the assessee filed certificate of overseas auditors 'A' along with details of research and development expenses and apportionment of total laboratory expenses. However, the Assessing Officer did not accept the assessee's explanation. He observed that the entire research and development activities had been centralized in U.K. and the expenses were merely in the nature of general…

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