TMI Blog2019 (12) TMI 1128X X X X Extracts X X X X X X X X Extracts X X X X ..... er the loss and the learned AO committed error in taking the sale proceeds as income and ignoring the loss - HELD THAT:- CIT(A) considered the plea of the assessee and satisfied that the assessee could demonstrate that the income u/s 11 had to be determined on commercial principles. We are also of the considered opinion that the income u/s 11 has to be determined on commercial principles and to determine the same, the losses arising on sale of assets of the society shall be considered. Therefore, the capital loss has to be considered while calculating the income of the assessee. With this view of the matter, we uphold the finding of the Id. CIT(A) on this ground and dismiss Ground No.3. - ITA No. 641/DEL/2017 - - - Dated:- 23-12-2019 - Ms. Sushma Chowla, Judicial Member, And Shri N.K. Billaiya, Accountant Member For the Assessee : Shri Shailender K. Bajaj For the Department : Shri A.K. Saroha, CIT- DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, With this appeal, the Revenue has challenged the correctness of the order of the Commissioner of Income Tax [Appeals] - 40, New Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Assessing Officer was of the opinion that the benefit of application of fund has already been claimed when the fixed assets were acquired. Therefore, allowance of depreciation would amount to double deduction and, accordingly, denied the claim of depreciation. 5. Proceeding further, the Assessing Officer noticed that the assessee has claimed provision for doubtful debts of ₹ 20.11 lakhs and bad debts of ₹ 9.91 lakhs. The Assessing Officer was of the opinion that bad debts actually written off have to be considered while determining the income u/s 11 of the Act. 6. After considering the submissions made by the assessee, the Assessing Officer was of the opinion that the assessee has not clarified the circumstances and efforts made to realize the debts. Further, provisions of sections 28 to 44 of the Act, which are related to business activities are not applicable in the case of charitable organizations. The Assessing Officer, accordingly, disallowed the provision of doubtful debt of ₹ 20.11 lakhs and bad debt of ₹ 9.91 lakhs. 7. Proceeding still further, the Assessing Officer noticed that the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) has erred both in facts and in law by sustaining the disallowance made by the assessing officer of provision for bad debts of ₹ 12,74,419/- claimed while determining the income of the society on commercial principles of the appellant society under section 11 of the Act. 3. That the Ld. CIT(A) erred both in facts and in law while sustaining the disallowance , made by the assessing officer , of the loss on sale of capital assets of ₹ 6,92,232/- while determining the income of the appellant society under section 11 of the Act. 4. That the order passed by the Ld. CIT(A) - XXI is bad in law and against the facts of the case. 5. That the appellant craves leave to add , delete or amend any of the ground of appeal on or before the disposal of the present appeal. 11. The relevant findings of the co-ordinate bench read as under: 5. We have heard the rival submissions and also perused material on record. Although, the Ld. Sr. D.R. has argued vehemently against the two issues under challenge, she was not able to negate the fact that the issue of depreciation is squarely covered in favo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e debt was a necessary pre-condition. Be that as it may, under the commercial principles it has always been recognized that a provision, reasonably made for a loss or an outgoing, can be deducted from the income if there is apprehension that the debt might become bad. There is nothing brought on record to show that the provision was not made bonafide. In such a situation, the ratio of the decisions cited by us while dealing with the deductibility of the taxes paid under the VDIS will equally apply. We accordingly hold that while computing the income available to the trust for application to charitable purposes in India in accordance with Section 11(1)(a) the provision for doubtful debts must be deducted. Accordingly, we frame the following substantial question of law and answer the same in the affirmative in favour of the assessee and against the Revenue: - Whether the Tribunal was right in law in holding that the provision for doubtful debts must be deducted from the ITA No.2555/Del/2015 A.Y.:2010-11 Indraprastha Cancer Society and Research Centre vs. ITO(Exemptions) income of the trust on commercial principles, for the purposes of Section 11(1)(a) of the Act? ..... X X X X Extracts X X X X X X X X Extracts X X X X
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