Trust registration under section 12AA(3) cannot be cancelled for isolated asset-sale, car-purchase, or scholarship-routing allegations.
Registration under section 12AA(3) can be cancelled only where a trust's activities are shown to be non-genuine or not carried out in accordance with its objects. A proposed sale of hospital land was treated as a step to recoup funds already invested in a stalled charitable project, not as evidence of a commercial venture, so it did not justify cancellation. Purchase of a BMW in a trustee's name, even if questioned under section 13, affected exemption for the relevant year rather than registration, and did not by itself establish non-genuineness. Scholarship routing through another foundation and a temporary advance also did not show diversion or misuse, so cancellation was unwarranted.
Issues: (i) Whether registration granted to the trust could be cancelled under section 12AA(3) on the ground that the Ratnagiri hospital land was advertised for sale as commercial land; (ii) Whether purchase of a BMW car in the name of a trustee out of trust funds justified cancellation of registration; (iii) Whether routing scholarship assistance through PAAK Foundation and the temporary advance given to it showed that the trust's activities were not genuine or not in accordance with its objects.
Issue (i): Whether registration granted to the trust could be cancelled under section 12AA(3) on the ground that the Ratnagiri hospital land was advertised for sale as commercial land.
Analysis: The land was acquired for establishing a cancer hospital, substantial expenditure had already been incurred on construction, and the proposal to sell arose only because the project had stalled for want of funds. The advertisement was intended to recover capital already locked in the project, not to carry on a commercial venture. Mere sale of the property to recoup investment did not show that the trust had abandoned its charitable objects or that its activities had become non-genuine.
Conclusion: The ground based on alleged commercial sale of land was not a valid basis for cancellation of registration.
Issue (ii): Whether purchase of a BMW car in the name of a trustee out of trust funds justified cancellation of registration.
Analysis: The controversy over the car had already been examined in assessment proceedings, where the appellate authority had held that there was no contravention of section 13 because the car was used for trust purposes. Even if a section 13 issue arose, the statute provides for denial of exemption for the relevant year and not cancellation of registration unless the activities themselves are shown to be non-genuine or contrary to the objects. The purchase of the car, by itself, did not establish misuse so grave as to attract section 12AA(3).
Conclusion: The car purchase did not justify cancellation of registration.
Issue (iii): Whether routing scholarship assistance through PAAK Foundation and the temporary advance given to it showed that the trust's activities were not genuine or not in accordance with its objects.
Analysis: Scholarship assistance was consistent with the trust's objects, and the record did not show diversion of trust funds to PAAK Foundation for non-charitable purposes or for private benefit. The payments were made directly for the benefit of students and not as a transfer of funds to the other trust. The temporary advance was returned shortly thereafter and did not establish any misuse inconsistent with the charitable objects. These facts did not support a finding that the trust's activities were non-genuine or outside its objects.
Conclusion: This ground also failed to support cancellation of registration.
Final Conclusion: The conditions for cancellation under section 12AA(3) were not satisfied, as none of the objections established that the trust's activities were either non-genuine or not carried out in accordance with its objects; the registration was therefore restored.
Ratio Decidendi: Registration under section 12AA(3) can be cancelled only if the trust's activities are shown to be non-genuine or not carried out in accordance with its objects; isolated allegations of possible section 13 violations or prudent sale of trust property to recoup invested funds do not, by themselves, warrant cancellation.