Charitable registration cannot be cancelled merely because activities are funded through inter-entity contracts when beneficiaries receive services free.

Contractual receipts between two charitable entities do not by themselves negate charitable character where the trust's objects, beneficiary details and supporting documents show that services were extended to students and candidates from government schools without monetary consideration. The ITAT Delhi noted that the factual and legal basis for treating the activity as paid service had not been properly examined. It therefore held that cancellation of approval or registration could not be sustained without fresh inquiry, and restored the matter to the Commissioner of Income-tax (Exemption) for reconsideration on merits, leaving the substantive question open.

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Issues: Whether cancellation of approval/registration under the charitable provisions was justified on the ground that the assessee's activities were rendered under an agreement with another foundation and constituted paid services rather than charitable activity.

Analysis: The assessee placed the trust deed, memorandum of understanding, invoices raised on an activity basis, beneficiary details, and confirmation from the other foundation indicating that the programme was being run for social impact and knowledge transfer to support youth from underprivileged communities. The decisive question was whether the activities, viewed in the light of the objects of the trust and the actual benefit extended to students and candidates from government schools without monetary consideration, could be treated as non-charitable merely because funds moved under contractual arrangements between two entities engaged in similar work. The issue had not been examined by the first authority on the correct factual and legal footing.

Conclusion: The matter required fresh examination by the Commissioner of Income-tax (Exemption) on merits, and the cancellation could not be sustained without such inquiry.

Final Conclusion: The appeals succeeded to the extent that the impugned issue was restored for reconsideration, leaving the substantive question open for a fresh decision.

Ratio Decidendi: Contractual receipts or inter-entity funding do not by themselves negate charitable character where the beneficiaries are shown to have received the services without payment and the activities are aligned with the trust's objects.

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