2007 (9) TMI 315 - AT - Income Tax

Summary

Issues Involved:
1. Whether the contribution made to the Rajasthan Rajya Krishi Board, Jaipur, should be considered as application of income irrespective of actual expenditure by the Board.
2. Whether the amount spent outside the local jurisdiction of the committee should be treated as application of income.
3. Whether depreciation u/s 32 of the IT Act, 1961, should be allowed on the WDV of construction work.
4. Whether the contribution made for renovation of Gang Canal should be considered as application of income.
5. Whether the assessee should be treated as a 'public charitable institution' or 'local authority'.
6. Whether the payment made to Rajasthan Rajya Krishi Board, Jaipur, should be treated as application of income.

Summary:

1. Contribution to Rajasthan Rajya Krishi Board:
The Tribunal held that the entire amount given to the Rajasthan Rajya Krishi Board, Jaipur, should be treated as 'application of income' irrespective of whether the Board spent it within the same year. The Tribunal relied on the Supreme Court judgment in the case of Thanthi Trust, which established that the Revenue cannot insist that the amount donated must be spent within the assessment year. The Tribunal emphasized that the amount given was for a specific charitable purpose and was irretrievable, thus qualifying as application of income.

2. Expenditure Outside Local Jurisdiction:
The Tribunal disagreed with the CIT(A)'s direction that the amount spent outside the local jurisdiction should not be treated as application of income. It clarified that u/s 11(1)(a) of the IT Act, 1961, the application of income for charitable purposes is not restricted to any particular place but to purposes in India. The Tribunal noted that the State Government has the power to direct the committee to spend funds beyond its local jurisdiction, and such expenditure should be considered as application of income.

3. Depreciation u/s 32:
The Tribunal noted that the assessee had not claimed any depreciation u/s 32 in the returns filed, and there was no taxable income in the year due to the registration granted by the Tribunal. Therefore, the ground for depreciation was unfounded and academic, and it was not allowed.

4. Contribution for Renovation of Gang Canal:
The Tribunal held that the contribution made for the renovation of Gang Canal should be treated as application of income. It noted that the contribution was made as per the instructions of the Agriculture Marketing Directorate, Jaipur, and fulfilled the conditions for treating it as application of income.

5. Status of Assessee:
The Tribunal upheld the CIT(A)'s decision to treat the assessee as a 'public charitable institution' instead of a 'local authority,' following the order passed by the Tribunal in similar cases.

6. Payment to Rajasthan Rajya Krishi Board:
The Tribunal upheld the CIT(A)'s decision that the payment made to the Rajasthan Rajya Krishi Board, Jaipur, should be treated as application of income. It noted that the payment was made as per the provisions of the State Act and was obligatory for the assessee, thus qualifying as application of income.

Conclusion:
The appeals were partly allowed for the assessees and dismissed for the Revenue, with the Tribunal providing detailed reasoning for each issue based on legal precedents and statutory provisions.