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2. The facts as are noted in the order of assessment and the order of the DIT is brought out briefly below. The assessee-trust in its statement of income had sought for accumulation of Rs. 65 lakhs for the specific purpose of construction of buildings for housing the poor section of the Parsi community and this was stated pursuant to the resolution dated 16-10-1990. The appellant had leased out land owned by it to M/s Spenta Co-op. Housing Society Ltd., a Parsi society for fifty years at an annual rent of Rs. 75,000. On this land development was carried out followed by construction of sixty flats which flats was sold to richer class and a surplus of Rs. 7,09,13,678.75 was generated. The generated funds was treated as on capital account and so transferred vide a resolution dated 12-12-1990 to a composite scheme of housing. Of the above surplus the appellant utilized Rs. 4,96,38,106 in the construction of flats that were given on nominal rent to the poor section of the Parsi community. The balance of the surplus Rs. 2,12,75,572.75 was placed in fixed deposit with British Bank of Middle East on 31-3-1990. The Assessing Officer (hereinafter referred to as AO) observed in his order dated 11-3-1993 that the activity of lease of land, its development, construction thereupon, sale of flats was not an activity hit by the provisions of Section 11 (4A) of the Act and hence, the surplus of over Rs. 7 crores was not liable to the taxed.

8.2 The departmental representative however contended that the activity of lease, development, construction of flats and sale realizing a surplus of Rs. 7 crores was a business activity and the subsequent utilization of the surplus for housing the poor would not change its present character of profit from business. The Section 11(4A) of the Act does not permit the construction & sale of property to meet the ends of charity and therefore, the surplus from the activity is clearly taxable.

8.3 The rival submissions and the various materials as placed on our record have been very carefully considered. The assessee in its submissions to the authorities had categorically stated that the entire process of lease development of land, construction of flats thereupon and their sale to title richer families of Parsi community was achieving the objective of providing housing for the poor based on which consideration that the Charity Commissioner of Maharashtra State had granted his approval. The Maharashtra State in the course of implementing the Urban Land Ceilings Act, 1976 finding that public charitable trusts had large chunk of land and with a view to find houses for the poor evolved a scheme by which they were permitted to sell or construct on those lands flats and sell them to rich and use the surplus therefrom in the construction of housing for the poor. The Government of Maharashtra realized that the public charitable trust would require huge funds to implement the housing for the poor and therefore, observed that it would be the best proposition to allow the construction and sale of flats to people and utilize the funds so collected in providing housing for the poor.

The resolutions of the trust are in line with the scheme floated by the State Government and they had carried their intentions by leasing the land to a co-op, society of Parsis for fifty years, constructed thereupon flats, indicated the price at which it was proposed to be sold to the Charity Commissioner while seeking his approval for the lease. The Charity Commissioner was to ensure that surplus land owned by public charitable trust would be allowed to be retained by the trust only if it constructed flats to house the poor and for achievement of this objective it could sell, or lease land and construct houses thereupon and sell them at the market price because there was no other way to augment resources by such trusts. The Charity Commissioner had granted his approval of the low lease rent, permitted the sale of flats and realize the proceeds and utilize the proceeds for construction of flats for housing the poor Parsis.

The fact that sixty flats were constructed on the leased land to Spent Coop. Housing Society which were sold to the richer sections of Parsi community realizing over Rs. 7 crores, out of which surplus little less than Rs. 5 crores was utilized in the construction of 350 flats which were let to the poor Parsis at a very nominal rent is not disputed by the revenue. It is not in dispute by the revenue that the 350 flats constructed which house the poor was possible because of the generation of funds from the construction and sale of 60 flats to the richer class. It is not the case of the revenue that the trust had liquid funds available of the magnitude of Rs. 7 crores.