India-UAE DTAA Prevails: ITAT Allows 100% Deduction for Head Office Expenses, Bypasses Section 44C Restrictions

ITAT allowed an Indian branch of a UAE company to deduct head office expenses under the India-UAE tax treaty, overriding Section 44C restrictions. The tribunal held that the treaty's non-discrimination clause (Article 24) protects foreign companies from unilateral domestic limitations. The case involved ₹2.8 crore in head office expenses disallowed by the AO citing Section 44C's 5% ceiling. This precedent strengthens treaty protections against restrictive domestic provisions. Multinationals can structure Indian operations more efficiently knowing treaty benefits prevail. However, taxpayers must still demonstrate expense genuineness and benefit to Indian operations. The ruling may influence pending disputes where treaties conflict with domestic tax ceilings.