Charitable registration cannot be denied mechanically when bona fide preparatory steps are shown; independent inquiry and hearing are required.

Applications for permanent registration and approval under the charitable exemption regime cannot be rejected mechanically merely because full activities have not yet commenced where the applicant shows bona fide preparatory steps towards its objects. The authority must independently examine the trust deed, the material placed on record, and the steps already taken to establish the institution, rather than relying only on a report stating that activities have not started. A personal hearing should also be afforded before rejection. On these principles, the rejection orders were set aside and the matter was remanded for fresh consideration.

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Issues: Whether the rejection of the applications for permanent registration under section 12AB and approval under section 80G was sustainable, and whether the orders deserved to be set aside for fresh consideration.

Analysis: The assessee had taken lease of land and incurred substantial expenditure in furtherance of its charitable objects, while the educational activities could not yet commence because governmental approvals were contingent upon permanent registration. The rejection orders were founded mainly on the JAO report that no activities had commenced and no substantial charitable expenditure had been incurred. The Tribunal held that the authority did not independently evaluate the material placed on record, including the trust deed and the steps already taken to establish the institutions, and also failed to grant a personal hearing before rejecting the applications. On these facts, the insistence on completed charitable activity as a precondition was not treated as a valid basis to deny the registrations at the threshold.

Conclusion: The rejection orders were set aside and the matter was remanded to the CIT(E) for fresh adjudication after considering the material and the assessee's claim that substantial steps had already been taken towards its objects.

Ratio Decidendi: Registration and approval applications under the charitable exemption provisions cannot be rejected mechanically on the ground that activities have not fully commenced when the assessee shows bona fide preparatory steps towards its objects, and the authority must independently apply its mind and afford a fair hearing before deciding the application.

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