Revocable trust with identifiable beneficiaries taxed in contributors' hands, not as an Association of Persons.

A trust with identifiable beneficiaries and fixed shares from inception was treated as a determinate, non-discretionary revocable trust, because the deed preserved a real right of revocation. On those facts, the arrangement was not assessed as an Association of Persons merely because income passed through the trust. Applying the provisions governing revocable transfers, the income was held taxable in the hands of the contributors rather than in the hands of the trust.

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Issues: Whether the assessee trust was liable to be assessed as an Association of Persons or as a revocable trust, and whether the income was assessable in the hands of the trust or the contributors under the Income-tax Act, 1961.

Analysis: The beneficiaries and their respective shares were found to be identifiable from inception and to have remained unchanged. The trust deed provided for revocation of contributions, and the revocation mechanism was treated as sufficient to retain the character of a revocable transfer. On those facts, the trust was held to be a determinate and non-discretionary trust. The provisions governing revocable transfers were applied, and the arrangement was not treated as a common-purpose association merely because the income flowed through the trust.

Conclusion: The assessee was not an Association of Persons. The trust was held to be revocable, and the income was held taxable in the hands of the contributors, not in the hands of the assessee.

Ratio Decidendi: Where the beneficiaries and their shares are identifiable from inception and the trust deed retains a real right of revocation, the trust is a determinate revocable trust and the income is taxable in the hands of the contributors under the provisions governing revocable transfers.

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