Charitable registration under section 12AA turns on charitable objects and genuine activities, not on expenditure or commercial prudence.

Registration under section 12AA depends only on whether the stated objects are charitable and whether the activities are genuine. At the registration stage, the authority cannot refuse approval on the basis of the application of income, the quantum of expenditure, or the commercial prudence of rental and service arrangements, as those matters are relevant to assessment. On the facts, the society's objects were educational and charitable, it was running a school, and nothing showed that its activities were not genuine merely because it had leased premises and engaged another entity for educational and administrative services. The refusal to grant registration was therefore held unsustainable, and registration was directed.

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Issues: Whether registration under section 12AA of the Income-tax Act, 1961 was liable to be granted to the assessee society, and whether the Commissioner could refuse registration on the basis of the manner in which the society applied its funds and entered into rental and service arrangements.

Analysis: The society's stated objects were educational and charitable, and its activities consisted of running a school. At the stage of registration under section 12AA, the enquiry is confined to the charitable nature of the objects and the genuineness of the activities. The application of income, the quantum of expenditure, or the reasonableness of particular payments are matters for assessment and not decisive at the registration stage. The record did not show that the objects were non-charitable or that the society's activities lacked genuineness merely because it had taken premises on lease and engaged another entity for certain educational and administrative services.

Conclusion: The refusal to grant registration was unsustainable. The assessee society was entitled to registration under section 12AA, and the appeal succeeded.

Ratio Decidendi: For registration under section 12AA, the authority must examine only whether the objects are charitable and the activities are genuine, and cannot reject registration merely because it considers the application of funds or the commercial prudence of the society's expenditure.

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