Embezzlement losses in charitable institutions remain allowable when misappropriation is established, irrecoverable, and not a specified-person benefit.

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....Embezzlement losses incurred by a charitable blood bank may be allowed where detailed FIR allegations and the institution's conduct establish misappropriation, even if criminal proceedings have not reached a final outcome. Misappropriation by persons managing the institution does not, merely for that reason, constitute a benefit to specified persons. Where the resulting loss is absolute or irrecoverable, disallowance on the basis of an alleged benefit to specified persons is not warranted. The disallowance of the claimed embezzlement loss was deleted.....