Representative assessee treatment of trust income prevails; trust cannot be assessed as an association of persons without voluntary combination.

Trustees administering a valid trust are representative assessees, and the trust income cannot be assessed as that of an association of persons unless the beneficiaries have voluntarily combined in a common venture. The mere existence of a trust deed does not imply the consent or volitional combination required for an association of persons. On that basis, assessment under section 161(1) was correct. Because a revision under section 263 requires an assessment to be both erroneous and prejudicial to the Revenue, the Commissioner could not revise a legally correct representative assessment by substituting an impermissible association-of-persons assessment.

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Issues: (i) Whether trustees administering a trust carrying on business could be assessed as an association of persons instead of under the representative-assessees provisions; (ii) whether, on a correct assessment under section 161(1), the Commissioner could invoke revisional jurisdiction under section 263.

Issue (i): Whether trustees administering a trust carrying on business could be assessed as an association of persons instead of under the representative-assessees provisions.

Analysis: The governing scheme treated a trustee as a representative assessee and confined liability to the same extent as that of the beneficiaries. The distinction between property held "for the benefit of" beneficiaries and business carried "on behalf of" persons who have joined in a common venture was material. An association of persons requires a common purpose and volitional combination to earn income; such consent cannot be implied merely from the existence of a trust deed. The trustee acts in accordance with the trust and not as an association of persons formed by the beneficiaries.

Conclusion: The trust income was not liable to be assessed as income of an association of persons; assessment under section 161(1) was correct.

Issue (ii): Whether, on a correct assessment under section 161(1), the Commissioner could invoke revisional jurisdiction under section 263.

Analysis: Revisional power under section 263 depended on the assessment being both erroneous and prejudicial to the interests of the Revenue. Once the trustees were rightly assessed in the representative capacity contemplated by section 161(1), the foundation for treating the assessment as prejudicial to the Revenue disappeared. The Commissioner could not revise a legally correct assessment merely to substitute an impermissible assessment as an association of persons.

Conclusion: The Commissioner had no jurisdiction to revise the assessment under section 263.

Final Conclusion: The petitions failed because the assessment of the trustees under the representative-assessees provisions was upheld and the attempted revisional interference was unsustainable.

Ratio Decidendi: Trustees under a valid trust are representative assessees, and unless beneficiaries have voluntarily combined in a common venture, the trust cannot be assessed as an association of persons; a correct assessment under section 161(1) cannot be revised under section 263 as erroneous and prejudicial to the Revenue.

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