Clubbing of spouse income excludes genuine professional partnerships, but separate business income in the same firm remains taxable.

Section 64(1)(i) of the Income-tax Act, 1961 applies only where the spouse is a member of a firm carrying on business, not a genuine professional partnership. Income arising from doctor-spouses practising together in partnership is therefore not clubbed, because the statute deliberately distinguishes profession from business. However, where the same arrangement includes a separate commercial activity, such as an independent nursing home or chemist's shop, that distinct business income remains liable to clubbing to that extent. A nursing home operated only as an integral part of the partners' own medical practice is treated as professional income and is not clubbed.

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Issues: (i) Whether the income of spouses carrying on medical practice in partnership is liable to be clubbed under section 64(1)(i) of the Income-tax Act, 1961 when the partnership is for professional activity and not business. (ii) Whether income from distinct business activities connected with the partnership, including a nursing home or other commercial activity, can still be clubbed.

Issue (i): Whether the income of spouses carrying on medical practice in partnership is liable to be clubbed under section 64(1)(i) of the Income-tax Act, 1961 when the partnership is for professional activity and not business.

Analysis: The provision in the 1961 Act differs materially from the corresponding clubbing provision in the 1922 Act. The earlier law applied where the wife was a member of a firm of which her husband was a partner, whereas the later law applies only where the spouse is a member of a firm carrying on a business. The change in language was held to be deliberate and intended to distinguish business from profession. The scheme of the Act separately recognises professional income and business income, and the legislative history showed that professional partnerships such as between doctors were intended to be excluded from clubbing.

Conclusion: The income arising from the professional activities of doctor-spouses in partnership is not liable to be clubbed under section 64(1)(i).

Issue (ii): Whether income from distinct business activities connected with the partnership, including a nursing home or other commercial activity, can still be clubbed.

Analysis: The protection from clubbing does not extend to separate business income merely because it is carried on alongside professional work. If the partnership carries on a distinct commercial activity, such as a chemist's shop or a nursing home admitting patients of others and charging room or service fees, that part of the income may fall within the clubbing provision. By contrast, a nursing home run only for treating the partners' own patients as an integral part of the profession remains professional income.

Conclusion: Income from separate business activities is liable to be clubbed to that extent, while income from a nursing home integral to the partners' own professional practice is not.

Final Conclusion: The references were answered by excluding professional income of spouse-doctors from clubbing, while preserving the Revenue's right to club income arising from any distinct business activity.

Ratio Decidendi: Section 64(1)(i) applies only to a spouse's income from membership in a firm carrying on business, not to income from a genuine professional partnership; however, any independent business component of the firm remains subject to clubbing.

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