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Issues involved: Registration under section 12A of the Income-tax Act, refusal of registration, legality of the order, compliance with principles of natural justice, activities of the trust being considered as business.
Registration under section 12A: The assessee trust applied for registration under section 12A of the Act with the DIT (E) on 25th July, 2008, providing details of its activities. The DIT (E) conducted multiple hearings and requested additional information, which the trust duly submitted. However, the DIT (E) observed that the trust deed was not registered and lacked irrevocability clause. Consequently, the DIT (E) rejected the registration application, deeming the trust's activities as business-oriented rather than charitable, as it involved renting out buildings for events. The rejection was based on the provision of sub-section (15) of section 2 of the Income-tax Act. The assessee appealed against this decision. Legality of the refusal of registration: The counsel for the assessee argued that the DIT (E) did not provide a reasonable opportunity for the trust to be heard before refusing registration, as mandated by section 12AA of the Act. The counsel contended that the order was passed without proper consideration and violated principles of natural justice. It was emphasized that the DIT (E) failed to adhere to the statutory requirement of granting a fair hearing before making a decision. The counsel also highlighted the limitation period of six months for passing such orders, asserting that the impugned order was non est due to procedural irregularities. Compliance with principles of natural justice: The counsel for the assessee contended that the DIT (E) did not follow the statutory provisions requiring a reasonable opportunity for the trust to present its case before a decision was made. The failure to provide a proper hearing before refusing registration was deemed a violation of natural justice, rendering the order invalid. The counsel argued that the trust should have been granted registration under section 12AA of the Act due to the procedural lapses. Activities of the trust considered as business: Upon review, it was found that the trust engaged in activities that were more aligned with business operations rather than charitable endeavors. The trust leased property from another entity and rented it out for events, generating income through hire charges. This commercial aspect of the trust's operations led to the conclusion that its activities did not qualify as charitable under the relevant provisions of the Income-tax Act. The DIT (E) was justified in refusing registration based on the nature of the trust's operations. Conclusion: After considering the arguments and reviewing the activities of the trust, the appeal was dismissed. The Tribunal found that the DIT (E) had provided adequate opportunities for the trust to present its case and that the refusal of registration was justified based on the commercial nature of the trust's operations. The decision was pronounced on 21-10-2010.
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