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2015 (6) TMI 290 - AT - Income TaxExemption u/s.11 denied - AO disallowing capital expenditure and also making addition on account of gratuity under Sec. 40(a)(ia) - not carrying on activities which can be considered as charitable purpose within the meaning of section 2(15) - Held that:- The entire expenses of the assessee were directed towards providing services to donors who are affluent section of the society and wish to make donation for charitable purposes. The above activity of the assessee of providing services to affluent section of the society cannot be, in our considered view held as activity of general public utility also. Thus we find that no part of the income of the assessee company was actually utilised for any charitable activity during the year. Further no material was brought before us to show that any asset of the assessee-company was utilised to carry out education, medical relief, relief of poor and preservation of environment (including watersheds, forests and wildlife) or extending financial help for such activities. Rather we find that the assessee received the amount from the donor and before disbursing the same utilised the same for earning interest income. The interest income so earned by the assessee was also not utilised for payment to any charitable trust or for any other charitable activities. Simply because the assessee was registered under section 12 AA of the Act does not entitle it to claim its entire income as exempt under section 11 of the act but for getting that exemption the assessee is required to further satisfy condition of applying 85% of its income for charitable activities. In absence of the same only the amount which is utilised by the assessee for doing charitable activities can only be allowed as deduction to the assessee. In the present case as it is observed that no part of the assessee’s income was actually applied for any charitable activities as defined in section 2(15) of the Act, the assessee was not entitled for deduction under section 11 of the Act for application of income towards charitable activities. - Decided against assessee. Software expenditure - Revenue or Capital expenditure - Held that:- No relevant facts were brought on record by the A.O. and no reason was given by the AO for not accepting the claim of the assessee of software expenses being of revenue in nature. In our considered view such an unreasoned order is not sustainable - Decided in favour of assessee.
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