Cancellation of charitable registration requires proof of non-genuine activity or deviation from objects; accounted school donations were insufficient.

Registration under section 12AA(3) can be cancelled only if an institution's activities are shown to be non-genuine or contrary to its stated objects. Here, the assessee society's dominant object was education, it ran two schools, and the donations collected from parents and others for school infrastructure were duly recorded as building funds in the books. The receipts were not uniform, were collected during the year, and there was no evidence of diversion for personal benefit or abandonment of charitable activity. On those facts, the statutory conditions for cancellation were not satisfied, so withdrawal of registration was not justified.

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Issues: Whether the registration of the assessee society under section 12A could be cancelled under section 12AA(3) on the ground that donations collected from parents and others for school infrastructure showed that its activities were not genuine or were not being carried out in accordance with its charitable objects.

Analysis: The society's dominant object was imparting education and it was running two schools. The record showed that the donations were reflected in the books, were accounted for as building funds, were not received uniformly from every student, were collected over the year from parents and other persons, and were not shown to have been diverted for personal benefit. The schools were unaided, the activity of educating students continued, and the alleged violation was not established as a ground under the Income-tax Act for withdrawing registration. The parameters for cancellation under section 12AA(3) remained whether the activities were genuine and in accordance with the objects of the institution, and those conditions were not shown to be breached.

Conclusion: The cancellation of registration was not justified and the assessee succeeded.

Ratio Decidendi: Registration under section 12AA(3) can be cancelled only if the institution's activities are found to be non-genuine or contrary to its stated objects, and collection of accounted donations for educational infrastructure, without diversion of funds or abandonment of charitable objects, is not by itself a valid ground for cancellation.

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