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TMI Blog2012 (7) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions has been found by the A.O. during the entire course of assessment proceedings. For the purpose of computing income and its application u/s 11, real income received by the appellant is to be treated as income for the purpose of application - as various courts have held that the amount of depreciation debited to the accounts of a charitable institution has to be deducted to arrive at the income available for application to charitable purposes even when the said capital expenditure has also been allowed for purposes of application of income. By following the same analogy, amount of unrecoverable fee, treated as bad debts, is also allowable to the appellant trust while computing its surplus and application of its income for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er : Assessee trust has claimed Rs.40,29,350/- as unrecoverable fee. This kind of expenditure is considered as bad debts in the sections of Business and Profession as per IT Act. Since the assessee is a trust and covered u/s. 12AA so it can not take the benefit of those sections application for B P. On dated 24.09.2010, assessee was asked to justify this expense and about the steps which were taken for recovering this fee. But assessee could not provide any satisfactory answer in this case. The calculation of income after this issue will be as under : i). Total receipts shown by assessee as per Income expenditure A/c for the year 2008-09 Rs.16,10,62,929/- (ii). 85% of the above receipts Rs.13,69,03,489/- (iii). Total rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rewith already submitted on 27.12.2010 to the A.O. Accordingly, accumulation is only Rs.40,45,297/- which after adding Rs.40,29,350/- comes to Rs.80,74,647/- which is far below of 15% of total receipt of Rs.22,73,28,072.07 (Kindly refer V.K. Singhania Direct Tax pages No. 850 to 852). 2.2 The ld. CIT(A) considering the facts of the case in the light of submissions of the assessee deleted the addition. His findings in the appellate order in para 4 are reproduced as under : 4. Appellant's submissions alongwith assessment order have been considered carefully. Assessment records have also been perused. The appellant trust has been registered u/s 12AA of the IT Act since the year 2001 and has been granted exemption u/s 1 I for its earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure. For the purpose of computing income and its application u/s 11, real income received by the appellant is to be treated as income for the purpose of application. The CBDT vide Circular No. 5- P(LXX-6) dtd. 19.5.68 has made it clear that the word 'income' in Sec. 11 (l)(a) must be understood in commercial sense. The same view has also been held by Hon'ble Supreme Court in case of CIT Vs. Programme for Community Organization (2001) 248 ITR 1 (SC). It has been held that it would be incorrect to assign to the word 'income' used in Sec. 11 (l)(a), the same meaning as assigned to the expression "total income" in Sec. 2(45) of the I. T Act. Income derived from the trust property must be determined on commercial principles as the word 'income' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IT Act. The AO has also accepted the same position. However, as regards the un-recoverable fees, the AO did not allow deduction of the same on the reasons that the same would fall in the head of business profession . Since no fee was recovered by the assessee, therefore, it was claimed as unrecoverable fees. Therefore, to prepare the income and expenditure account of the assessee, it is necessary to mention unrecoverable fees. The income-tax is payable on the real income earned by the assessee and not on hypothetical income. Since the assessee fulfilled the conditions of section 12AA of the IT Act as well as section 11 of the Act and no violation has been reported, therefore, the ld. CIT(A) rightly deleted the addition because wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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