BANK OF BAHRAIN & KUWAIT B.S.C.,MUMBAI vs. THE ASSISTANT COMMISSIONER OF INCOME-TAX (INTL. TAXATION) - CIRCLE 1(2)(1), MUMBAI, MUMBAI

आयकरअपीलीयअिधकरण, मुंबईपीठ�, मुंबई INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI BENCH: I BEFORE HON’BLE MS.BEENA PILLAI, JUDICIAL MEMBER AND HON’BLE SHRIARUN KHODPIA, ACCOUNTANT MEMBER ITA 9021/MUM/2025 िनधा�रणवष�/AssessmentYear:2022-23) BANK OF BAHRAIN & KUWAIT THE ASSISTANT B.S.C. COMMISSIONER OF INCOME- TAX (INTERNATIONAL Bank of Bahrain and Kuwait B.S.C. TAXATION) CIRCLE-1(2)(1)- Ground Floor Jolly Chambers Maker- MUMBAI II225, Nariman Point, Mumbai- Vs. Room No. 1811, 18th floor, Air 400021, Maharashtra. India Building, Nariman Point, Mumbai-400 021, Maharashtra. अपीलाथ�Appellant ��थ� Respondent

Permanent Account Number of Assessee: AAACB 2140 F

अपीलाथ��ारा/Appellant represented by: Shri Ketan Ved ��थ��ारा/Respondentrepresented by: MS. Shruti Anzare, SR DR सुनवाईकीतारीख/Date of conclusion of hearing: 13-05-2026 घोषणाकीतारीख/Date of pronouncement: 07-08-2026 आदेश / ORDER

PERARUN KHODPIA, ACCOUNTANT MEMBER: The present appeal of assessee arises from the order passed by the learned Commissioner of Income-tax (Appeals)-55, Mumbai dated 22.10.2024 for the A.Y. 2022-23.

1:0 Re.: Not considering the amounts other than direct staff costs incurred vis-à-vis NRI Desk Expenses allowable under section 37(1) of the Income-tax Act, 1961:

1:1 The Commissioner of Income-tax (Appeals) ["CIT(A)"] has erred in not considering the amounts other than direct staff as allowable u/s. 37(1) of the Income-tax Act, 1961. 1:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the limits as defined u/s. 44C of the Income-tax Act, 1961 do not apply to the aforesaid NRI Desk expenses and the amount of Rs. 2,52,61,883 is allowable as such. 1:3 The Appellant submits that the Assessing Officer be directed to consider the aforesaid NRI Desk expenses without applying the limits of section 44C of the Income-tax Act, 1961. 2:0Re.: General 2:1 The Appellant craves leave to add, alter, amend, substitute and/or otherwise modify in any manner whatsoever all or any of the foregoing grounds of appeal at or before the hearing of the appeal.” 3. Briefly stated that the assessee herein is a non-resident company falls under the jurisdiction of International Tax, Circle-1(2)(1), Mumbai. The assessee has filed its return electronically on 30.11.2022 declaring total income at NIL under regular provision and Rs. 8,99,58,120/- under Section 115JB (MAT). The case of assessee was selected for scrutiny, accordingly notice u/s 143(2) and 142(1) were issued. Certain queries were raised by the AO which were responded by the assessee and finally the assessment came to be completed on 06.05.2024 u/s 143(3) r.w.s. 143C(3) of the Act. While completing the assessment the ld. Assessing Officer has made certain adjustment to the income of assessee, wherein the assessee is NRI Desk Expenses are disallowed to certain extent.

. Bank of Bahrain & Kuwait B.S.C.

support & general and admini general and administrative cost, the details of NRI expenditure the details of NRI expenditure furnished by the assessee before the Ld. CIT(A) furnished by the assessee before the Ld. CIT(A)are culled out as under: culled out as under:

Upon thoughtful consideration of the submissions advanced by both the 9. parties, perusal of the material available on record and the judicial pronouncements relied upon by them, we find that, in the present case, the nature of expenditure incurred by the assessee under its Overseas NRI Department, comprising NRI Desk expenses such as internal audit, financial control, information technology, human resources, operations, rent and maintenance, depreciation, advertising and other similar expenses, falls within the specific categories enumerated in clauses (a) to (d) of Explanation (iv) to section 44C of the Act. Accordingly, such expenditure qualifies as “head office expenditure” within the meaning of section 44C of the Act. Consequently, the said expenditure is subject to the limitations prescribed under section 44C and cannot be claimed as direct expenditure allowable under section 37(1) of the Act.

Our aforesaid view is supported by the decision of the Hon’ble Supreme 10. Court in the case of DIT (IT)-I v. American Express Bank Ltd. (supra), which has also been relied upon by the Co-ordinate Bench of the Tribunal in the case of DIT (IT) v. Bank of America, ITA Nos. 4090/Mum/2004 and 4154/Mum/2004 for A.Y. 2000-01, vide order dated 18.03.2026. In the said decision, the Tribunal, after considering the aforesaid issue and taking into account the decision of the Hon’ble Supreme Court in the case of American Express Bank Ltd. (supra), has held as under:

“22. Thus, we are of the considered view that in the present case, the fact that the assessee's overseas branches had set up infrastructure at its branches for NRI Desks with separate staff and office space, which leads to the receipt of NRI deposits by the Indian branch, cannot lead to the conclusion that the expenses as enumerated in the foregoing paragraphs are in the nature of marketing expenses. These expenses, such as salaries of staff, office rental, courier and postage charges, telephone, telex and fax charges, electricity and water expenditure, equipment rentals, depreciation expenses, etc., are nothing but pertain to general banking business conducted at a branch, and thus are in the nature of "executive and general administration" expenses of the bank. Further, we find that these expenses also fall within the specific species enumerated in clauses (a) to (d) of Explanation to section 44C of the Act, which is reproduced as follows for ready reference: "(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 execution and general administration as may be prescribed." 23. Insofar as the decision of the Special Bench of the Tribunal in Inspecting Assistant Commissioner v/s Goodricke Group Ltd., reported in [1985] 12 ITD 1 (Cal.) (SB), relied upon by the assessee in its written submission, we findthat in the facts of that case, an agent was specifically appointed in London, inter alia, for supervising the sales of tea produced in India. However, such are not the facts of the present case, as no outside agency is involved, and the assessee's own overseas branch employees conducted general banking business from the infrastructure at the branch. This fact is further evident from the details of expenditure as certified in the sample local accountant's certificates, which also do not indicate any marketing/sales expenditure being incurred by the overseas branches in respect of the NRI Desks. Thus, we are of the considered view that the decision of the Special Bench relied upon by the assessee is factually distinguishable. 24. Since in the present case, it is undisputed that these expenditures were incurred outside India, accordingly, we are of the considered view that the tripartite test laid down by the Hon'ble Supreme Court in American Express Bank Ltd (supra) is satisfied in the present case, and the expenditure incurred by the assessee's London and Singapore branches towards NRI Desks charges qualify as "Head Office Expenditure" under the Explanation to section 44C of the Act. Therefore, the provisions of section 44C of the Act are applicable in the present case. As a result, the impugned order on this issue is set aside, and the order passed by the AO restricting the deduction under section 44C of the Act is reinstated. Hence, Ground No. 2 raised in Revenue's appeal is allowed.” 11. Since the issue has been decided by the Assessing Officer in accordance with the decision of the Tribunal in the assessee’s own case for the earlier years, which is in consonance with the decision of the Hon’ble Apex Court in the case of DIT (IT)-I, Mumbai v. American Express Bank Ltd. (supra), and which has further been followed by the Tribunal in the case of Bank of America (supra), we find that the items of expenditure under consideration fall within the specific categories enumerated in clauses (a) to (d) of the Explanation to section 44C of the Act. Accordingly, such expenditure is governed by the provisions of section 44C of the Act and the claim of the assessee for allowing the entire expenditure under section 37(1) of the Act is contrary to the statutory scheme.

In the result, appeal of the assessee stands dismissed, in terms of our 14. aforesaid observations.

Order pronounced in the open court on 07/08/2026.

Sd/- Sd/- BEENA PILLAI ARUN KHODPIA JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai, Dated: 07/08/2026 Kunal, P.S.

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT

BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai