Invalid trust deed and colourable arrangement defeated representative assessment; income taxed as association of persons.

A trust deed with inconsistent execution dates was not accepted as proved, and the surrounding affidavits and documents did not establish valid execution on the later date claimed. The instrument was also treated as executed in Gujarat on stamp papers purchased in Bombay, leading to non-compliance with stamp law and inadmissibility for the purpose relied on. As no duly executed and legally valid trust deed existed, the trustees could not be assessed in a representative capacity under the Income-tax Act. The arrangement was further treated as a colourable device to evade tax, so the income was assessed in the hands of the persons concerned as an association of persons.

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Issues: Whether the alleged trust deed was a duly executed and valid instrument so as to create a trust and permit assessment of the trustees in a representative capacity, and whether the income was instead liable to be assessed as arising from a colourable device.

Analysis: The instrument recited inconsistent dates of execution, and the supporting affidavits and surrounding documents were not accepted as satisfactory proof that the deed was actually executed on the later date claimed. The deed was held to have been executed in Gujarat on stamp papers purchased in Bombay, and the Court treated this as non-compliance with the stamp law, rendering the instrument not duly stamped and inadmissible in evidence for the purpose for which it was relied on. On that basis, the Court held that there was no duly executed trust deed capable of supporting representative assessment under the income-tax provisions. The surrounding circumstances were further treated as showing a dubious, colourable arrangement intended to evade tax.

Conclusion: The alleged trust was held not to have come into legal existence through a duly executed instrument, the trustees could not be assessed as representative assessees, and the income was liable to be taxed in the hands of the persons concerned as an association of persons. The Revenue's appeal succeeded.

Ratio Decidendi: A trust cannot found representative assessment under the Income-tax Act unless it rests on a duly executed and legally valid instrument; where the instrument is not properly stamped and the arrangement is found to be a colourable device, the trustees cannot claim assessment in representative capacity.

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