Rectification under section 254(2) cannot review discretion on evidence admission, while Rule 8D disallowance needs objective satisfaction.

Section 254(2) could not be invoked to seek rectification of the Tribunal's discretionary decision to admit additional evidence without remanding the matter, because no apparent mistake on the face of the record was shown. The Revenue's challenge on that point was therefore rejected. On Rule 8D(2)(iii), the indirect expenditure disallowance could not be finally determined because the earlier order had not adjudicated that component and the Assessing Officer had not recorded the required objective satisfaction on the assessee's claim. The issue was set aside and remanded for fresh consideration, leaving the interest disallowance undisturbed.

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Issues: (i) Whether the Revenue could obtain rectification under section 254(2) on the ground that the Tribunal ought to have remanded the matter after admitting additional evidence. (ii) Whether the disallowance of indirect expenditure under Rule 8D(2)(iii) of the Income-tax Rules, 1962 required remand for fresh consideration.

Issue (i): Whether the Revenue could obtain rectification under section 254(2) on the ground that the Tribunal ought to have remanded the matter after admitting additional evidence.

Analysis: The Tribunal had admitted the additional evidence on the ground that it was necessary for a proper appreciation of the controversy and that the facts emerging from the material were not in dispute. The grievance raised by the Revenue was, in substance, that the Tribunal should have exercised its discretion differently and remanded the issue to the Assessing Officer. Such a contention did not disclose an apparent mistake on the face of the record. A rectification petition under section 254(2) could not be used to review the Tribunal's discretionary decision on admission of evidence or on whether remand was necessary.

Conclusion: The Revenue's miscellaneous petition was not maintainable on this ground and was rejected.

Issue (ii): Whether the disallowance of indirect expenditure under Rule 8D(2)(iii) of the Income-tax Rules, 1962 required remand for fresh consideration.

Analysis: The earlier order had dealt only with the interest component under Rule 8D(2)(ii) and had not adjudicated the separate disallowance under Rule 8D(2)(iii). For applying Rule 8D, the Assessing Officer must first examine the assessee's claim and arrive at an objective satisfaction regarding its correctness. As regards indirect common expenses, neither a proper claim basis from the assessee nor an objective finding by the Assessing Officer had been recorded. In that situation, the question of indirect expenditure could not be finally resolved without fresh examination by the Assessing Officer.

Conclusion: The disallowance under Rule 8D(2)(iii) was set aside and remanded to the Assessing Officer for fresh consideration.

Final Conclusion: The modification of the earlier order left the interest disallowance deleted, while the issue of indirect expenditure was reopened for fresh adjudication by the Assessing Officer; the Revenue's rectification plea failed, and the assessee obtained partial relief.

Ratio Decidendi: Section 254(2) cannot be invoked to correct or review a discretionary decision of the Tribunal on admission of additional evidence or remand, and disallowance under Rule 8D requires prior objective satisfaction by the Assessing Officer on the assessee's claim before the computational mechanism is applied.

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