Statutory diversion of mandi receipts by overriding title counts as application of receipts, not taxable income of the Samiti.

Amounts collected by Mandi Samitis as mandi shulk and development cess, and statutorily remitted in part to the State Agricultural Produce Market Board, were treated as application of receipts rather than income available for the Samitis' own use. The statutory scheme required remittance of 50% of mandi shulk and the full development cess, so the transfer was compulsory and not a voluntary diversion. As the Board had an overriding title over the remitted sums and the amounts were ultimately used for market-yard development, management improvement, and better service to agricultural producers, the disallowance was deleted and the remitted amounts were allowable under the Income-tax Act, 1961.

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Issues: Whether the amounts collected by the Mandi Samitis as mandi shulk and development cess and transferred to the State Agricultural Produce Market Board under the statutory mandate constituted application of the Samitis' receipts so as to entitle them to exemption or allowance under the Income-tax Act, 1961.

Analysis: The amounts were collected under the Mandi Act and, to the extent of 50% of mandi shulk and the entire development cess, were required to be remitted to the Board under the statute. The remittance was not voluntary and the amounts could not be retained by the Samitis. They were ultimately deployed for development of market yards, improvement of management, and better service to agricultural producers. The statutory scheme showed that the Board had an overriding title over the remitted amount, so the sums never formed part of the beneficial income available for the Samitis' own use.

Conclusion: The remitted amounts were application of the receipts of the Samitis and were allowable as such. The disallowance was rightly deleted by the appellate authorities, and the appeals failed.

Ratio Decidendi: Amounts compulsorily diverted by a statutory obligation to another authority under an overriding title constitute application of receipts and not taxable income available to the assessee.

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