Section 12AA cancellation is confined to statutory grounds; extraneous review of trust deeds cannot justify revocation.
Registration under section 12AA can be cancelled only on the statutory grounds that the trust's activities are not genuine or are not being carried out in accordance with its objects; the power cannot be enlarged by revisiting the original trust deed or importing extraneous considerations. Reliance on earlier deeds and alleged inconsistency with the founder's wishes, without more, could not sustain a finding of non-genuineness. A further adverse finding based on the use of sale proceeds also failed because that issue was not part of the cancellation notice and the record showed the proceeds were deposited in fixed deposits. The cancellation and its affirmance were therefore set aside and registration restored.
Issues: (i) Whether registration granted under section 12AA could be cancelled on grounds beyond the statutory conditions under section 12AA(3); (ii) whether the authorities could rely on the earlier trust deeds and alleged inconsistency with the founder's wishes to hold the trust's activities not genuine; (iii) whether the finding that sale proceeds were not shown to have been used for charitable objects was sustainable.
Issue (i): Whether registration granted under section 12AA could be cancelled on grounds beyond the statutory conditions under section 12AA(3).
Analysis: Section 12AA(3) permits cancellation only if the activities of the trust are not genuine or are not being carried out in accordance with its objects. Once registration has been granted after examination of the trust deed and objects, cancellation cannot rest on a broader reconsideration of the same material or on matters that belong to assessment of exemption under section 11.
Conclusion: The cancellation power was confined to the statutory grounds and could not be exercised on extraneous considerations.
Issue (ii): Whether the authorities could rely on the earlier trust deeds and alleged inconsistency with the founder's wishes to hold the trust's activities not genuine.
Analysis: The trust deed in force when registration was granted had to be treated as the operative instrument. The finding that the later deed was contrary to the founder's wishes travelled beyond the limited enquiry under section 12AA(3). The reasoning also stood inconsistent with the Supreme Court's ruling that the religious trust could transfer property with statutory sanction.
Conclusion: The finding of lack of genuineness on that basis was unsustainable.
Issue (iii): Whether the finding that sale proceeds were not shown to have been used for charitable objects was sustainable.
Analysis: The utilisation of sale proceeds was not the basis of the cancellation notice or the Commissioner's order. The Tribunal introduced an additional basis not forming part of the original controversy. The record also showed deposit of the proceeds in fixed deposits, which could not justify the adverse finding as recorded.
Conclusion: The finding on utilisation of sale proceeds was perverse and could not support cancellation.
Final Conclusion: The cancellation of registration under section 12AA(3) and the Tribunal's affirmance were set aside, and the trust's registration stood restored.
Ratio Decidendi: Registration under section 12AA can be cancelled only on the specific statutory grounds in section 12AA(3), and the authority cannot revoke it by revisiting the same deed or by importing extraneous considerations unrelated to genuineness of activities or compliance with objects.
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