Assessee (Market Committee) paid a certain amount to Haryana State Agricultural Board (Board) and stated that payment had been made to Board on account of development works on its behalf and claimed deduction of same as application of income.  Assessing Officer held that  payment as repayment of loan taken by assessee from Board for construction of rural roads and held that payment of liability of old loan was not allowable as application of income. Commissioner (Appeals) held that amount had been paid to Board for expenditure which Board had incurred on behalf of assessee and same is  allowable as application of income. Tribunal set aside order of Commissioner (Appeals) and restored order of Assessing Officer. On appeal the Court held that   since receipt issued by Board for aforesaid payment showed that amount was paid for development works and Board had incurred expenditure on development works on account of assessee, payment is made to Board towards statutory functions and it is  not for repayment of any loan. Accordingly allowable as a application of income.  As the quantum addition is deleted. Penalty order is quashed. (AY. 2007-08)