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From the above, it will be clear that even as per official thinking, till 1-4-1984, private trusts could carry on business legally though it may be unethical and that the only consequence of such activity was evasion of R.F. tax. The liability of beneficiary members as an AOP was not contemplated.

3. On behalf of the appellant, Shri Inamdar took us through the basic facts. The appellant-trust (pages 51 to 67 of the paper book) came into existence on the strength of a document executed between the settlor Shri J.M. Agarwal and the trustees Shri J.K. Jain and Shri S.P. Jain. The settlor settled Rs. 1,500 on trust for the benefit of two minors, viz., Master Anilkumar J. Jain and Master Nareshkumar J. Jain. The beneficiaries could disclaim, renounce, settle or transfer their interest. The duration of the trust would be the date of death of the last survivor amongst the beneficiaries. The trustees were authorised to carry on business and to deal in movable and immovable properties which may be held as stock-in-trade or as capital assets. The trustees were required to distribute income of the trust equally amongst the two beneficiaries. On death of any beneficiary, the income to which that beneficiary was entitled would be distributed equally amongst the legal heirs of that beneficiary (settlor excluded). The trust deed also provided for distribution of the trust fund or corpus in the same proportion as the income. The trust was irrevocable and excluded the settlor from all benefits. The powers of the trustees are explained in Chapter VIII of the trust deed. As mentioned above, the trustees have powers of investment, business and other administrative powers like defending suits, appeals, etc. Other provisions of the trust deed are ancillary to the above main provisions.

28. The real question is whether the beneficiaries constitute an AOP/BOI. For this purpose, it is necessary to note the distinction between the trustee AOP and the beneficiary AOP if any. The tenor of the Commissioner's order indicates whilst the ITO treated the trustees as an AOP, the Commissioner held that the trustees should be assessed in like manner and to the same extent as a beneficiary AOP should have been assessed.

In other words, the contention of the Commissioner is that on a proper interpretation of the trust deed, the real beneficiary is the AOP/BOI, consisting of the various beneficiaries. Actually, the beneficiaries are not carrying on any business. Nor can it be said that the trustees are carrying on the business as agents of the beneficiaries. The trustees are carrying on business on the strength of authority given to them in terms of the trust deed by the settlor. To the beneficiaries, it makes no difference how the trustees derive their income for the purpose of distribution amongst the beneficiaries.

29. In our opinion the case of a trustee carrying on business in terms of the mandate given to him in the trust deed (independently of what the beneficiaries ultimate or proximate do) is different from the case of a receiver who carries on business clearly on behalf of certain persons. The ratio of N.V. Shanmugham & Go's case (supra) applies only to latter. The element of consent amongst the various persons on whose behalf the receiver was working doubtless formed the basic foundation of the Supreme Court judgment. There is a distinction between carrying on of business in terms of mandate given by the beneficiaries (in N.V. Shanmugham & Co.'s case (supra) the erstwhile partners) and business carried on by trustee independently of what the persons whom they represent do. The common interest of the beneficiaries is not existing in the business carried on in terms of the trust deed. Mere pocketing of benefits is no ground for assuming consent or common interest or even remote participation and involvement in the activities carried on by the trustees for producing income. The beneficiaries are themselves not liable for losses though their interest might suffer as a result of losses. But such a situation can arise in respect of other income, e.g., where property held in trust is lost in fire or money is embezzled. There is no common bond between the beneficiaries which would suggest that they have agreed to share the profits or surplus jointly or that one has agreed to take the benefits only if the other takes similar benefits. A plain reading of the trust deed shows that the settlor himself never intended to make the benefit available to one beneficiary dependent on the fancies or volition of other beneficiaries. Nor did the trustees consider themselves as carrying on the business as representative of the beneficiaries individually or collectively. Acting as representative of business is different from acting as representative of persons on whose behalf or for whose benefit the representative receives or becomes entitled to receive income irrespective of the source. It is the latter category which is referred to in Section 161(1) and not the former. It is not clear what the Commissioner has meant in para 7 'in the hands of an AOP represented by trust deed'. Obviously, the Commissioner did not mean AOP of trustees. The Commissioner possibly meant AOP of beneficiaries. We do not see any basis for holding that the persons whom the trustees represent constitute AOP of beneficiaries. The beneficiaries whom the trustees represent are individuals with specific shares, consequently even if the assessment were to be made on the trust, the same could be made only in like manner and to the same extent as would have been made on the persons whom they represent. What the ITO has done is a mere procedural lapse, if at all, in framing the assessment directly on the beneficiaries. As this action has not been shown to have put the revenue in jeopardy in this case (as full recovery has been made in the individual cases), there is no error causing prejudice to the revenue.

31. Now comes the question whether the beneficiaries could be taken as constituting BOI. We uphold the contention of Shri Inamdar that whatever be the position in the order of the Commissioner other than the operative para, the fact remains that ultimately the Commissioner has directed adoption of the status of an AOP and not BOI. The departmental representative cannot be permitted to make a new case now. Nevertheless, since the matters may not remain at this stage, in view of the observations of the Gujarat High Court in CIT v. Kartikey V. Sarabhai [1981] 131 ITR 42 partly reversed by the Supreme Court on another point, that where alternate or interlocutory matters are raised, the Tribunal should decide all the matters, we proceed to examine the claim. The case law relied upon by the departmental representative, viz., Harivadan Tribhovan-das's case (supra), Meera & Co.'s case (supra) and N.P. Saraswathi Animal's case (supra) does indicate that the element of consent is not an ingredient of the concept of BOI. A common nexus with the origin of income is, however, an essential ingredient. In other words, fortunes of all the beneficiaries should be linked together by a common nexus with the source of income. In our opinion, this test is not satisfied in this case, because as already mentioned, there is no business income of the beneficiaries. Each beneficiary derives his benefit from the trust independently of the other and the mere fact that two or more beneficiaries have been thrown together through the discretion of the settlor in a trust to which they were not parties, cannot make them BOI, merely because they have not given up their interest. The nexus, if any, is with the trust and not the income or the business. On facts, therefore, we hold that the beneficiaries do not constitute BOI also.