Trust income assessment: trustees are taxed in a representative capacity, not as an association of persons absent voluntary common purpose.

Trust income administered by trustees is assessable in the trustee's representative capacity for the beneficiaries, not as income of an association of persons. An association of persons requires voluntary combination and common purpose for earning income, and that consent cannot be inferred merely because trustees carry on business under a trust deed. The distinction between property held for beneficiaries and property held on their behalf also supports the representative assessment model rather than an agency relationship. Section 161(1A) was not read as converting all business income of a trust into AOP income, and the earlier assessment position remained correct, leaving no basis for revision or further reference.

---

---

Issues: Whether the income of a trust administered by trustees could be treated as income of an association of persons, whether trustees are assessable only in their representative capacity under the Income-tax Act, and whether the Tribunal was right in refusing reference of the questions proposed.

Analysis: The statutory scheme distinguishing a representative assessee from a person assessed in his own right shows that a trustee holding property under a duly executed trust is assessed as representative of the beneficiaries and not as a separate association of persons. An association of persons requires a common purpose and voluntary consent to combine for the production of income, profits or gains; such consent cannot be implied merely because trustees carry on business in accordance with the trust deed. The Court also noted the distinction between property held "for the benefit of" beneficiaries and property held "on behalf of" them, the latter importing an agency relationship which a trust does not ordinarily create. The amendment introducing section 161(1A) did not support the revenue's argument that all business income of a trust must be assessed as an AOP. Since the assessment under section 161(1) was correct, revision under section 263 was not available, and the question referred by the Tribunal stood answered by binding precedent, making a reference unnecessary.

Conclusion: The trust income was rightly assessable under section 161(1) in the hands of the trustee in a representative capacity, not as income of an association of persons, and the revenue's revisionary and reference challenges failed.

Final Conclusion: The petitions were dismissed because the trustees' assessments were upheld and no referable question survived for fresh consideration.

Ratio Decidendi: A trustee under a valid trust deed is assessable as a representative assessee on behalf of the beneficiaries, and trust income cannot be treated as that of an association of persons unless there is voluntary common purpose and consent to combine for a profit-making venture.

---