S. 14A (2) and (3) r/w Rule 8-D merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the AO is not satisfied with the claim of the assessee.

Held The Tribunal in substance has followed the principle enunciated by the Supreme Court with regard to the applicability of Rule 8D. The court doesn’t found any error in the decision of the Tribunal which is under appeal. There is no point of law is involved in this appeal as the same stands covered by the decision of the Supreme Court. I was held by the Supreme Court that “ Sub-sections(2) and (3) of Section 14-A of the Act read with Rule 8-D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the assessing officer is not satisfied with the claim of the assessee. Whether such determination is to be made on application of the formula prescribed under Rule 8-D or in the best judgment of the assessing officer, what the law postulates is the requirement of a satisfaction in the assessing officer that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of Sections 14-A(2) and (3) read with Rule 8-D of the Rules or a best judgment determination, as earlier prevailing, would become applicable.” (Para 5)