Relief to Bank of Nova Scotia: Payment of Salary Expatriate Employees paid by Head office is an allowable Expenditure [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) granted relief to Bank of Nova Scotia, ruling that the payment of salary to expatriate employees by the head office constitutes allowable expenditure.

During the course of assessment the assessing officer noticed that the assessee has claimed deduction for salary paid to expatriate employees to the amount of Rs.106,08,973/-. However, the assessing officer was of the view that the aforesaid expenses had been incurred as overseas salaries of the expatriate was in the nature of head office expenditure, therefore, same was disallowed under Section 44C of the Income Tax Act.

The assessee filed the appeal before the Commissioner of Income Tax ( Appeals ) .The CIT (A) held that expenditure so claimed on the salary of expatriate employees is found to be deductible and allowable only to the extent of the evidence produced in respect of the presence of Shri Denis Vaz till 30.10.2014. Therefore, 7/12 of the salary pertaining to M/s Danis Vaz which comes to Rs.35,25,270/- was allowed and the remaining amount of Rs.70,83,703/- was disallowed.

Mr. Nishant Thakkar representing the assessee submitted that two employees Mr. Danis Vaz and Mr. Tery Watkins were the Canadian nationals who were on secondment to Indian operations of BNS and during the year under consideration relevant to assessment year 2005-06 have continually rendered services exclusively for the assessee company.

Further submitted that in the case of both the employees their global income were offered to tax in India, therefore, disallowance of claim of deduction of the salary paid to these employees is not justified. He has also filed details of salary paid to these employees from A.Y. 2002-03 to A.Y. 2005-06

The assessee has brought on record the relevant return of income of both the employees showing that global income was offered to tax in India in accordance with provision of Section 5 and Section 6 of the Income Tax Act for remaining present in India on secondment with Indian Branch of BNS.

The two member bench of the tribunal comprising Vikas Aswthy ( Judicial member ) and Amrjith Singh (Accountant member) observed that the Revenue has not brought on record any relevant materials to disprove these material facts and evidences. Considering the above facts and material ITAT found that the decision of CIT (A) in sustaining the disallowance was not justified. Accordingly, this ground of appeal of the assessee was allowed.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates