Clubbing of income under section 64 is based on computed income, with Chapter VI-A deductions allowed on the deeming fiction.

Income clubbed under section 64(1) is to be taken at the computed income stage, not as gross receipts, because the phrase "all such income" refers to income computed under the Act. The spouse's salary and the minor children's income must first be computed under the relevant heads before clubbing. The legal fiction in section 64 is then fully applied for consequential Chapter VI-A relief, so deductions under sections 80C and 80L are available to the extent the relevant payments are treated as having been made from the assessee's own income after gross total income is determined. The clubbing principle is therefore preserved, while related deduction claims are also recognised.

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Issues: Whether income clubbed under section 64(1) had to be taken at the gross receipts stage or as computed income, and whether deductions under Chapter VI-A, including sections 80C and 80L, were allowable in respect of amounts relatable to the spouse's and minor children's income.

Analysis: The expression "all such income" in section 64(1) refers to income as computed under the Act and not to gross receipts. The income of the spouse from salary had to be computed under the head "Salaries" before clubbing, while deductions under section 80C could arise only after determination of gross total income in terms of section 80B(5). Section 64 operates through a legal fiction, and that fiction must be fully worked out so that payments attributable to the clubbed income are treated as having been made from the assessee's own income for the purpose of the relevant deductions. The same approach applied to the claim under section 80L.

Conclusion: The income of the wife and minor children was rightly included for gross total income purposes, but the assessee was entitled to consideration of deductions under sections 80C and 80L as if the relevant payments had been made by him.

Final Conclusion: The clubbing under section 64 was upheld, while the assessee's entitlement to the connected Chapter VI-A deductions was recognized, resulting in only partial success in the departmental appeal.

Ratio Decidendi: Income clubbed under section 64 is to be computed as income under the Act, but the deeming fiction extends to the extent necessary for applying consequential deductions on the basis of gross total income.

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