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2012 (7) TMI 126 - AT - Income TaxAddition made on account of unrecoverable fees - amount of unrecoverable fee as taxable income as expenditure is considered as bad debts in the sections of ‘Business and Profession’ and 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 - CIT(A)deleted the addition made by AO - Held that:- the appellant has claimed exemption u/s 11 on the basis of registration u/s 12AA and fulfillment of prescribed conditions regarding accumulation, amount expended on objects of the trust, modes of investments, application of income etc, no such violation of any of the conditions 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 purpose of granting exemption u/s 11 - in favour of assessee.
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