Delta Global Inc., a foreign company, operates a branch in India. For the financial year ending on 31st March 2025 (A.Y. 2025-26), head office…

Section 44C restricts the allowability of the head office expenses to the extent of lower of an amount equal to 5% of the adjusted total income (where the adjusted total income is a loss, 5% of the average adjusted total income) or the amount actually incurred as is attributable to the business of the assessee in India. Allowable Head Office Expense u/s 44C will be lower of 5% of Average Adjusted Total Income - 12,41,667 (i.e.2,48,33,333 x 5%) [Refer Note Below]Actual Expenditure - 1,85,00,000 Hence, allowable Head Office expense would be - 12,41,667. Note – Since adjusted total income for the A.Y. 2025-26 is a loss, deduction with respect to head office expenses will be computed on the basis of the average adjusted total income. Computation of Average Adjusted Total Income Particulars A.Y. 2022-23 A.Y. 2023-24 A.Y. 2024-25 Total Income 18,00,000 28,00,000 41,00,000 Add: Adjustments not allowed while computing adjusted total income Current year depreciation - - - Unabsorbed depreciation 12,00,000 18,00,000 22,00,000 Deduction under Chapter VI-A 21,00,000 29,00,000 34,00,000 Brought forward Short-term capital loss 2,00,000 - 1,00,000 Long-term capital loss [No adjustment is required while computing adjusted total income] - - - Brought forward speculative business loss 2,00,000 17,00,000 15,00,000 Expenditure on Voluntary Retirement Scheme [Only 1/5 is allowable as deduction. Thus, no adjustment is needed] - - - Head Office Expenses 1,45,00,000 1,60,00,000 1,80,00,000 Adjusted Total Income 2,00,00,000 2,52,00,000 2,93,00,000 Average of Adjusted Total Income: 2,00,00,000 +2,52,00,000 +2,93,00,000/3 = 2,48,33,333