Section 12AA registration cannot be cancelled solely for excess commercial receipts; genuineness and objects remain the key test.

Registration under section 12AA cannot be cancelled merely because a trust's commercial receipts exceed the threshold in the proviso to section 2(15). Cancellation is permissible only if the activities are not genuine, are not carried out in accordance with the stated objects, or there is a change in the nature of activities. The Bombay HC relied on Circular No. 21 of 2016 to distinguish cancellation of registration from denial of exemption for a particular year under section 13(8). As the assessee's activities had not changed, the challenge to cancellation failed and the Tribunal's order was upheld.

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Issues: Whether registration granted under section 12AA of the Income-tax Act, 1961 could be cancelled merely because the assessee's receipts from commercial activities exceeded the monetary limit in the proviso to section 2(15) of the Income-tax Act, 1961.

Analysis: Circular No. 21 of 2016 clarified that the mere crossing of the threshold in the proviso to section 2(15) does not by itself justify cancellation of registration. Cancellation under section 12AA(3) is warranted only where the activities of the trust or institution are not genuine or are not being carried out in accordance with its objects, or where there is a change in the nature of activities. The circular also distinguished denial of exemption for the relevant year under section 13(8) from cancellation of registration, and the assessee's activities had not changed during the assessment year in question.

Conclusion: The Court held that excess commercial receipts, by themselves, do not authorize cancellation of registration under section 12AA(3); the issue was answered against the Revenue and in favour of the assessee.

Final Conclusion: The appeal failed, the Tribunal's order was upheld, and the challenge to cancellation of registration was rejected in view of the CBDT circular.

Ratio Decidendi: Registration under section 12AA cannot be cancelled solely because the proviso to section 2(15) is attracted by excess commercial receipts; cancellation requires absence of genuineness, departure from objects, or a change in the nature of activities.

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