Currently I am trying to create an app for iPhone which is capable of recognizing the objects on an image such as car, bus, building, bridge, human, etc, and label as object name with the help of Internet.
Is there any free service which provide solution to my problem, as object recognition its self a complex algorithm requiring digital image processing, neural networks and all.
Can this can be done via API?
If you want to recognise planar images the current generation of mobile AR SDKs from Metaio, Qualcomm and Layar will allow you to upload images to match against, and perform the matching.
If you want to match freely against a set of 3D objects, e.g. a Toyota Prius or the Empire state, the same techniques might be applied to match against sets of images taken at different rotations, but you might have to choose to match just one object due to limitations on how large an image database you can have with the service, or contact those companies for a custom solution, and it may not work very reliably given the state of the art is to reliably match against planar images.
If you want to recognize general classes (human, car, building), this is a very difficult problem, and I don't know of any solutions anywhere fast enough to operate online (which I assume is a requirement given you want an AR solution - is that a fair assumption?). It's been a few years since I studied CV, but at that time the most promising solution for visual classification was "bag of visual words" approaches - you might try reading up on those.