India: Head office expenses and input tax credit provisions (court decisions)

The KPMG member firm in India has prepared reports regarding recent court decisions (read more at the hyperlinks below).

• The Supreme Court has held that all head office expenses incurred outside India by a nonresident taxpayer, whether common or exclusive to Indian branch offices, are subject to the statutory limit of 5% under section 44C of the Income-tax Act, 1961. The court dismissed the taxpayer's argument that expenses incurred exclusively for Indian branch offices were fully deductible. The court remanded the matter to the Mumbai Bench of the Income-tax Appellate Tribunal to verify if the disputed expenses fall within the definition of "head office expenditure," emphasizing that tax authorities must apply the statutory definition rather than a broad interpretation. Read the December 2025 report
• The Gauhati High Court read down section 16(2)(aa) of the Central Goods and Services Tax Act, 2017, which allows the benefit of input tax credit (ITC) to a purchaser only if invoice details are uploaded by the supplier in Form GSTR-1 and are available to purchasers in their Form GSTR-2B. The court held that ITC should be allowed to bona fide purchasers even if invoices are not available in Form GSTR-2B, subject to verification by the tax officer of the tax invoices and other documents. The court found the restriction unfair as it imposes an onerous burden on the purchasing dealer. Read the December 2025 report