Rectification for omitted expense allocation under section 36(1)(viii) led to reworking of common expenses and verification of workings.

Rectification under section 254(2) was held warranted where the Tribunal had omitted to address the assessee's specific ground on allocation of interest on foreign currency borrowings, provision for contingencies and other common expenses while computing deduction under section 36(1)(viii). The omission was treated as an apparent mistake because the expense allocation had to be reworked between eligible and ineligible income in light of the findings on the character of the relevant income streams. The Tribunal substituted the earlier paragraph and directed the Assessing Officer to reallocate the expenses and verify the assessee's workings, with ground 2.4 partly allowed.

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Issues: Whether rectification under section 254(2) of the Income-tax Act, 1961 was warranted for omission to adjudicate the assessee's ground concerning allocation of interest on foreign currency borrowings, provision for contingencies, and other common expenses while computing deduction under section 36(1)(viii) of the Income-tax Act, 1961.

Analysis: The Tribunal had already decided the broader controversy on eligibility of income streams for deduction under section 36(1)(viii), but the specific contention in ground 2.4 regarding the manner of allocation of certain expenses had not been separately addressed. Since the expenses had to be reallocated between eligible and ineligible income in light of the findings on the character of the income streams, the omission was treated as an apparent mistake requiring rectification. The Tribunal accordingly substituted paragraph 43 and directed reworking of the expense allocation, including verification of the assessee's workings by the Assessing Officer.

Conclusion: Rectification was allowed, and the Assessing Officer was directed to reallocate the expenses and examine the assessee's workings; ground 2.4 was partly allowed.

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