Registration under section 12AA required reconsideration where notified toll rules were not examined

Refusal of registration under section 12AA was examined against the assessee's reliance on toll-related rules. The authority had proceeded on proposed toll rules and had not considered the notified 2011 rules, which required toll collections to be remitted to the State Government. In that context, the character of the assessee's activities as commercial required fresh consideration. The prior decision was therefore set aside and the matter remitted for reconsideration after examining the notified 2011 rules and giving an opportunity of hearing.

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Issues: Whether refusal of registration under section 12AA of the Income-tax Act, 1961 was sustainable when the authority had proceeded on proposed toll rules and the applicability of the notified 2011 rules had not been examined.

Analysis: The registration decision was founded on proposed rules, whereas the notified rules provided that toll collections were to be remitted to the State Government. In that setting, the question whether the assessee's activities were commercial in nature required reconsideration. The earlier order did not examine the effect of the notified rules on the claim for registration.

Conclusion: The refusal of registration was set aside and the matter was remitted for fresh adjudication in the light of the notified 2011 rules after granting an opportunity of hearing.

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