Clubbing provisions treat spouse's firm loss as assessee's own loss for set-off and carry forward under income tax law.

Section 64(1)(i) of the Income-tax Act, 1961 treats the spouse's share of loss from a firm, when clubbed in the assessee's hands, as part of the assessee's own business result. The construction follows the settled view that, for this provision, "income" includes loss as well as profit, so the artificial liability created by the section extends to set-off and carry forward of loss. The later 1979 Explanation is treated as confirming that meaning. The practical effect is that the assessee may carry forward both his own loss and the wife's share of loss.

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Issues: Whether, on the facts and in the circumstances of the case, the assessee was entitled to carry forward to subsequent years not only his share of loss but also the share of loss of his wife from the firm.

Analysis: Section 64(1)(i) of the Income-tax Act, 1961, is analogous to section 16(3)(a)(i) of the Income-tax Act, 1922. The provision creates an artificial liability and the expression "income" in that setting was considered in the earlier binding decision to include loss as well as profit for the purpose of set-off and carry forward. The later statutory Explanation added in 1979 was treated as a legislative exposition of the same meaning. The Court followed the settled construction that the spouse's share of loss from a firm, when clubbed under section 64(1)(i), is to be treated as part of the assessee's own business result for the purpose of set-off and carry forward.

Conclusion: The question was answered in the affirmative and against the Revenue; the assessee was entitled to carry forward the wife's share of loss along with his own share of loss.

Ratio Decidendi: For the purpose of section 64(1)(i) of the Income-tax Act, 1961, the word "income" includes loss, and the spouse's share of loss from a firm included under that provision is to be treated as the assessee's own loss for set-off and carry forward.

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