If AO not satisfied with correctness of expenditure claimed, he has to proceed in manner prescribed in Rule 8D(2)

In the present case, the Assessing Officer has noted that the assessee had invested a certain amount of its funds in shares and that the dividend which has been received or receivable did not form part of the total income. The Assessing Officer noted that there were certain expenses on account of interest etc. which were directly attributable to the exempt income. The assessee had debited the entire expenditure to the profit or loss account. The Assessing Officer noted that since the exempt income does not form part of the total income, the expenditure which is directly related to income which...