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4. Being aggrieved, the assessee carried the matter in appeal before the Commissioner (Appeals). The Commissioner (Appeals) has considered the Tribunal's orders and has taken the view that even though the trustees had joined the partnership in breach of trust, as for the partnership, the trustees are individually partners. The ITO, therefore, erred in holding that no genuine firm had come into existence in this case and he directed the ITO to grant registration.

5. Being aggrieved, the revenue has come up in appeal before us. The learned departmental representative, Shri Malik, submitted that the trustees had no power to enter into partnership agreement. When they have acted beyond their powers authorised under the trust deed, their action is void. Therefore, the partnership firm has not come into existence and the ITO had rightly refused the registration. He relied on the decision in Kotasseri Ezhuthassan Veetil Sankaran Nambi's case (supra) and Addanki Narayanappa v. Bhaskara Krishnappa AIR 1966 SC 1300. On the other hand, the learned counsel for the assessee, Shri Patel, submitted that in view of Sub-clause (iv) of Clause 3 of the trust deed, the trustees are authorised to become a partner in the partnership firm and the issue was considered by the Tribunal in earlier years, wherein the claim of the assessee was allowed. His alternative submission was that, if trustees had no power under the trust deed, the grievance can only be to the beneficiaries and to none else. Therefore, the registration to the firm should not be refused.

(iv) in any other securities or investments not hereinabove specifically referred, which the trustees may, in their absalute and uncontrolled discretion, consider suitable or advantageous.

The learned counsel has tried to protect the action of the trustees specified under Sub-clause (iv) of Clause 3 of the trust deed. While I read Sub-clause (iv) of Clause 3, I have to read the word 'investment' in the line of investments narrated in earlier sub-clauses. Therefore, Sub-clause (iv) authorised only for investments and not for business. Investment is different from business. Where the trust deed gives a discretion to invest the trust money at interest on securities, the trustee can only invest in proper securities. In this case the trustees are not authorised to enter into partnership for the purpose of business. Partnership is always involved in a business, while investment simpliciter does not involve business. The trustees in this case are authorised only to invest the trust money in shares, stocks, debentures, deposits, etc., but the trustees are not authorised to run the business from the trust fund or to enter in to a partnership firm. Therefore, it is a clear violation of provisions of the trust deed. Now the question remains whether this action of the trustees, for which they are empowered under the trust deed, is void or voidable. In case of voidable, the beneficiaries may only be persons who can challenge the action of the trustees, but in case of void agreement even beneficiaries have no right to rectify the agreement entered into by the trustees. In this case the trustees have entered into partnership by contribution of capital of trust fund and thereby allowed the strangers to deal with the property of the trust. Similar case was considered by their Lordships of the Madras High Court, wherein the issue before their Lordships was that when the trustees have no power under the trust deed to introduce a stranger into a trusteeship and deal with the trust property, in spite of that if trustees introduce a stranger into the trusteeship, and authorise him to deal with the trust property, the action of the trustees is invalid and void ab initio. Therefore, in view of the above decision, when the trustees have acted beyond their powers, their action is void and invalid. Secondly, Clause (iv)(a) of partnership deed requires that the capital required for the business of the firm shall be initially contributed by the partners as specified in schedule hereunder. This means that according to the partnership deed, partners should contribute the capital. From the records, it appears that no capital contribution has been made by the partners except the capital brought from the trust fund. This can be ignored being a void agreement on behalf of the trust by the trustees, and there remains no such capital contributed by the partners. Therefore, on this basis also, it can be said that the firm was not genuine and not entitled for registration. Lastly, the counsel for the assessee has relied on the earlier decisions of the Tribunal and filed a copy for our perusal. I have gone through the earlier orders of the Tribunal. In earlier years, the view was taken that by contribution of capital in the partnership firms, there was no transfer within the meaning of Section 2(47) of the Act, but so far as Gujarat High Court is concerned, after the decision of the Gujarat High Court in the case of CIT v. Kartikey V. Sarabhai [1981] 131 ITR 42, there is a transfer within the meaning of Section 2(47) while the capital is contributed by the partner in the partnership firm. Therefore, in view of this change of facts, I do not agree with the counsel of the assessee that the issue is covered by the earlier order of the Tribunal.