TMI Blog2018 (9) TMI 1693X X X X Extracts X X X X X X X X Extracts X X X X ..... ively. Thus, it is observed that these amounts were not spent by the assessee during the year for carrying out the objects of the assessee trust. Hence, these are not amounts applied in the objects of the trust. Hence, the Assessing Officer as well as the CIT(A) were fully justified in not allowing the deduction for the same while computing the income of the assessee. - Decided against assessee. - ITA No.252/CTK/2017 - - - Dated:- 26-9-2018 - SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER For The Assessee : Shri S.C.Bhadra, AR For The Revenue : Shri Subhendu Datta, DR ORDER Per N.S.Saini, AM The appeal filed by the assessee is directed against the order of the CIT(A)-3, Bhubane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time of hearing , the order of assessment be quashed to meet the end of justice. 3. Ld D.R. had no objection to adjudicating the same, therefore, they are being adjudicated in place of the original ground of appeal raised by the assessee. 4. The brief facts are that the Assessing Officer observed that the expenses amounting to ₹ 6,58,94,988/ claimed under the micro finance activities, includes the following provisions : Education Charity Fund Rs.25,00,000 Provision for Loan loss ₹ 31,07,127 Capacity Building Fund ₹ 15,00,000 Rs.71,07,127 5. During ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular of RBI standard assets are subject to 1% provision needs to be explained properly. Assets are not classified a standard assets, substandard assets, doubtful assets and details of computation of provision on doubtful 'assets are not made available on record. Further the other issue is whether a provision against a future anticipated loss can be allowed as expenditure. As per judicial pronouncements bad debts and writing off of unrecoverable loan has been treated as application, but treating a provision against a contingent future expenditure does not find any support under the existing scheme of the statute specifically under section 11(1)(a). Bad loans and the NPA are expected in such activity, but expenditure can be allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e passed, they can be claimed as application. The judicial precedence is in favour of allowing bad debts but in all the cases the admissibility is on the actual writing off. --There are no instances where a provision has been treated as application under section 11(1)(a). In the case of CIT v. Sacred Heart Church [2005) 278 ITR 180 (Gui.), it was held that the loan advanced to persons belonging to weaker sections of public under a scheme framed by trust in pursuance of its objects could be written off and the same can be claimed in advance as an item of expenditure allowable as deduction under section 11(1)(a). In this case the Tribunal had held that the loan had been given from the income of the assessee and that instead of making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the income are applied, it is but natural that the adjustment of the expenses incurred by the trust for charitable and religious purposes in the earlier year against income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year in which such adjustment has been made having regard to the benevolent provisions contained in section 11 of the Act and will have to be excluded from the income of the trust under section 11(1)(a) of the Act. (p. 300) The Hon'ble Supreme Court, vide CIT v. Thanthi Trust (1999) 239 ITR 502 held that the word application has to be understood as actually expended. Provisions towards bad loans i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, these are not amounts applied in the objects of the trust. Hence, the Assessing Officer as well as the CIT(A) were fully justified in not allowing the deduction for the same while computing the income of the assessee. 8. Further, ld A.R. could not controvert the decisions of Hon ble Gujarat High Court in the case of Sacred Heart Church(supra), Hon ble Rajasthan High Court in the case of Maharana of New2ar Charitable Foundation (supra) and Hon ble Supreme Court in the case of Thanthi Trust (supra), which were followed by the CIT(A). Therefore, we find no error in the order of the CIT(A) to interfere, which is hereby confirmed and grounds of appeal of the assessee are dismissed. 9. In the result, appeal of the assessee are dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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