Charitable trust registration cannot be cancelled for voluntary building fund collections absent proof of non-genuine activity.

Registration of a charitable educational trust under section 12A cannot be cancelled under section 12AA(3) merely because it collected voluntary building fund or donations from students and parents. Cancellation requires a finding that the activities are not genuine or are not carried out in accordance with the trust's objects; here, the collections were recorded in the books, applied towards infrastructure, and were not shown to breach the statutory conditions for withdrawal. Once the cancellation was set aside and registration restored, the denial of exemption under section 11 also failed, and the trust was held entitled to that exemption for the relevant assessment year.

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Issues: (i) Whether registration granted under section 12A could be cancelled under section 12AA(3) merely because the trust collected building fund or donations from students and parents, alleged to be in violation of the Maharashtra Educational Institution, Prohibition of Capitation Fee Act. (ii) Whether, after restoration of registration, the assessee was entitled to exemption under section 11 for the relevant assessment year.

Issue (i): Whether registration granted under section 12A could be cancelled under section 12AA(3) merely because the trust collected building fund or donations from students and parents, alleged to be in violation of the Maharashtra Educational Institution, Prohibition of Capitation Fee Act.

Analysis: Cancellation under section 12AA(3) is justified only where the activities of the trust are not genuine or are not carried out in accordance with its objects. The order cancelling registration was founded solely on receipt of donations termed as building fund. The material on record showed that the collections were voluntary, relatively small in several cases, accounted for in the books, and applied towards infrastructure and objects of the trust. The trust's charitable objects and educational ies were not disputed, and the collection was also shown to be within the prescribed fee limits. Mere receipt of such donations, without proof of violation of the statutory conditions for cancellation, was insufficient to withdraw registration.

Conclusion: Cancellation of registration was not sustainable and the registration under section 12A was restored in favour of the assessee.

Issue (ii): Whether, after restoration of registration, the assessee was entitled to exemption under section 11 for the relevant assessment year.

Analysis: The denial of exemption was consequential to the withdrawal of registration. Once the cancellation was set aside and registration stood restored from the date of grant, the basis for denying exemption under section 11 ceased to survive. The assessment could not proceed on the footing that registration was unavailable for the year in question.

Conclusion: The assessee was entitled to the benefit of exemption under section 11, and the assessment was to be made accordingly.

Final Conclusion: The registration remained valid and the consequential denial of exemption was set aside, resulting in relief to the assessee in both appeals.

Ratio Decidendi: Registration of a charitable educational trust cannot be cancelled under section 12AA(3) merely on the basis of voluntary donations or building fund collections unless the Revenue establishes that the trust's activities are not genuine or are not carried out in accordance with its objects.

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