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Interpretation of trust deeds in relation to partnership agreement for tax assessment purposes. Analysis: The case involved the interpretation of trust deeds in connection with a partnership agreement for tax assessment purposes. Two individuals had executed deeds of trust endowing sums of money to charitable trusts and appointed themselves as trustees. They later entered into a partnership agreement, stating that they were partners in the firm in their capacities as trustees of the charitable trusts. The Income Tax Officer (ITO) assessed the income of the partnership firm in the hands of the individuals, considering the trusts invalid. The Appellate Authority Commission (AAC) upheld this decision. The case was then brought before the Tribunal, which held that a trustee could be a partner in a firm and that the partnership was genuine. The Tribunal found that the partners represented their respective trusts in the firm and were not acting in their individual capacities. It emphasized that the ITO should have only examined the genuineness of the partnership firm, not the validity of the trusts. The Tribunal also noted that the volume of business of the partnership firm did not raise suspicions, and the trusts were valid as beneficiaries included schools, hospitals, and charitable institutions, even unborn persons. As a result, the Tribunal allowed the appeal and deleted the additions. Upon the Commissioner's reference, the High Court considered the questions of law raised. The High Court acknowledged the settled legal principles that a trustee could enter into a partnership on behalf of the trust and that unborn persons could be beneficiaries under a trust. The High Court agreed with the Tribunal's findings that the partners were acting as trustees in the partnership, and therefore, the share income from the firm should not be included in their individual assessments. Consequently, the High Court answered both questions in favor of the assessee, concluding that the share income was not includible in the computation of the individual partners' income. The assessee was awarded costs amounting to Rs. 200.
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