Charitable registration cancellation upheld where seed certification activity was treated as trade-related service, not general public utility.

Cancellation of section 12AA registration was examined in light of the proviso to section 2(15) and the requirement that activities remain in accordance with stated charitable objects. The CBDT circular noted that registration cannot be withdrawn merely because section 2(15) applies; cancellation must be tested under section 12AA(3) and section 12AA(4). Applying the jurisdictional High Court's binding view on the assessee's seed certification activity, the Tribunal found that the activity facilitated trade in certified seeds and involved services in relation to trade or commerce for consideration, so it did not retain charitable character for registration purposes. The withdrawal of registration was upheld.

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Issues: Whether the withdrawal of registration granted under section 12AA was justified on the ground that the assessee's activities attracted the proviso to section 2(15) and were not being carried on in accordance with its stated charitable objects.

Analysis: The assessee had been granted registration under section 12AA and the authority sought to cancel it on two grounds: application of the proviso to section 2(15) and alleged deviation from the objects of the society. The CBDT circular relied upon clarifies that cancellation of registration is not warranted merely because section 2(15) operates, and cancellation must be tested strictly under section 12AA(3) and section 12AA(4). However, the jurisdictional High Court, in the assessee's own matter, had already held on similar facts that the seed certification activity facilitated trade in certified seeds, involved rendering services in relation to trade or commerce for consideration, and therefore did not amount to advancement of an object of general public utility within the meaning of section 2(15). Following that binding view, the Tribunal held that the assessee's activities lost charitable character for the purposes relevant to registration cancellation.

Conclusion: The withdrawal of registration under section 12AA(3) was upheld and the assessee's challenge failed.

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