Charitable deduction requires proof of actual spending; donations to a trust alone do not satisfy the rule.

For deduction based on charitable expenditure, the assessee must prove actual spending of the relevant amount on a recognised charitable purpose in the relevant year; a mere donation to a trust is insufficient. The assessees failed to show that the Jalan Charity Trust had expended the donated sums for charitable purposes, or to establish any direct correlation between the donations and such spending, so the deduction was disallowed. The Board of Revenue was also competent to examine the correct legal position under the Act and Rules while deciding the further exemption claim, even though an earlier partial exemption order had become final in another respect. Both questions were answered against the assessees and in favour of the Revenue.

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Issues: (i) Whether the Board of Revenue could examine the correct legal position under the Act and the Rules while deciding the assessees' claims, notwithstanding the Assistant Commissioner's earlier grant of partial exemption. (ii) Whether donations made to the Jalan Charity Trust could be treated as amounts actually spent for charitable purposes so as to qualify for deduction under the relevant rule.

Issue (i): Whether the Board of Revenue could examine the correct legal position under the Act and the Rules while deciding the assessees' claims, notwithstanding the Assistant Commissioner's earlier grant of partial exemption.

Analysis: The earlier order of the Assistant Commissioner could not be reversed by the Board as to the relief already granted, but that did not prevent the Board from determining the true position in law for deciding the further exemption claimed. A tribunal deciding a claim is competent to examine whether the legal basis of the claim is correct, even if it cannot disturb a matter that has already become final in another aspect.

Conclusion: The Board was competent to examine the correct legal position, and the answer to this issue was in favour of the Revenue.

Issue (ii): Whether donations made to the Jalan Charity Trust could be treated as amounts actually spent for charitable purposes so as to qualify for deduction under the relevant rule.

Analysis: Under the rule read with the statutory provision, the assessee had to show that the amount in question was actually spent for one of the recognised charitable purposes in the relevant year. A mere contribution to a trust fund was not enough. The assessees failed to prove that the trust had expended the donated amounts for charitable purposes during the relevant years, and they also failed to establish any co-relation between the donations and the amounts spent by the trust.

Conclusion: Donations to the trust did not amount to actual spending by the assessees for charitable purposes, and the answer to this issue was in favour of the Revenue.

Final Conclusion: The appeals succeeded, the High Court's answers were set aside, and both referred questions were answered against the assessees and in favour of the Revenue.

Ratio Decidendi: For claiming deduction on the footing of charitable expenditure, the assessee must prove actual spending of the relevant amount for a recognised charitable purpose in the relevant year; a mere donation to a trust does not satisfy that requirement.

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