9911796707
TMI Blog2005 (7) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... dvanced as loan to certain section of the public, which according to the Income-tax Officer the assessee had written off since it found that the chances of recovery were remote?" The assessment year is 1985-86 and the relevant accounting period is the year ended on December 31, 1984. The assessee, a public charitable trust, filed its return of income declaring a deficit of Rs. 1,40,760 on March 2, 1987. On perusal of the statement of income; and expenditure the Assessing Officer found that the assessee had deducted an amount of Rs. 1,65,201 against the current year's income and accordingly, had arrived at the said deficit. As per the assessee the said amount had been advanced as loan to members of the weaker sections of the public in the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and that instead of making an outright gift, the assessee had first disbursed the amount as loan and in the subsequent years waived its right to recover the amount. That, the assessee must be said to have applied the income when it gave up its rights to recover the loan. The Tribunal placed reliance upon the decision of the Rajasthan High Court in the case of CIT v. Maharana of Mewar Charitable Foundation [1987] 164 ITR 439, and held that the assessee was entitled to the benefit of section 11 in respect of the amount of Rs. 1,65,201. Mr. Tanvash U. Bhatt, learned standing counsel appearing on behalf of the applicant-Revenue, reiterated the reasons that weighed with the Assessing Officer as well as the Deputy Commissioner of Income-tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the trust and that the section did not limit the application of the income for charitable or religious purposes only to the year in which the income had arisen, and that the word "applied" must be given its natural meaning. It was submitted that even if the expenses had been incurred in the earlier year and the said expenses were adjusted against the income of the subsequent year, the income could be said to be applied for charitable and religious purposes in the year in which the same has been adjusted. In support of its contention the assessee had relied upon the Central Board of Direct Taxes Circular No. 100 dated January 24, 1973. On behalf of the assessee reliance had also been placed upon the decision of the Rajasthan High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds, even if expenses for charitable and religious purposes have been incurred for the earlier year and the said expenses are adjusted against the income of a subsequent year, the income of that year can be said to have been applied for charitable and religious purposes in the year in which the expenses incurred for charitable and religious purposes had been adjusted." The court referred to the Central Board of Direct Taxes Circular No. 100 dated January 24, 1973, and held as follows: "According to the abovereferred circular if a trust wants to spend more money for charitable and religious purposes in a particular year, it can take a loan and the said loan can be repaid out of the income of the subsequent year and the repayment of the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to such income being applied for charitable or religious purposes." The court referred to the decision of the Rajasthan High Court in the case of CIT v. Maharana of Mewar Charitable Foundation [1987] 164 ITR 439, wherein the court, after referring to several decisions on the point, had held that the adjustment of the expenses incurred by the trust for charitable and religious purposes in the earlier year against the income earned by the trust in the subsequent year would amount to applying the income of the trust for charitable and religious purposes in the subsequent year in which such adjustment had been made and would have to be excluded from the income of the trust under section 11(1)(a) of the Act. This court agreed with the view exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no part of the Revenue's case at any point of time that the credit entries made in the assessee's books of account were not genuine or true or that they were mere make believe or bogus. In the facts of the present case also, it is not the case of the Revenue that the Assessing Officer has doubted the entries made in respect of the item of expenditure in question. Applying the aforesaid principles to the facts of the present case, it is apparent that the trust had incurred expenditure towards advancement of loan to persons belonging to the weaker sections of society for the purpose of its charitable objects. The said amount was written off in the year under consideration as the chances of recovery were found to be remote and were trans ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
