1986 (3) TMI 50 - HC - Income Tax

Summary

Issues Involved:
1. Whether the firm is carrying on a business or a profession.
2. Applicability of section 64(1)(i) of the Income-tax Act, 1961, for aggregating the income of the assessee's wife with the assessee's income.

Summary:

Issue 1: Nature of the Firm's Activities
The Tribunal found that the firm, M/s. K.T.C.M. Hospital, is carrying on a business rather than a profession because one of the partners, the assessee's father, is not a medically qualified person and contributes capital and administrative services. The Tribunal concluded that the firm's activities, including providing medical and surgical facilities, are commercial in nature and not purely professional.

Issue 2: Applicability of Section 64(1)(i)
The Tribunal aggregated the income of the assessee's wife with the assessee's income u/s 64(1)(i) of the Income-tax Act, 1961, as they were partners in a firm carrying on a business. The Appellate Assistant Commissioner, however, had held that the firm was not carrying on a business, and thus section 64(1)(i) was not applicable.

Court's Analysis:
The High Court analyzed whether the firm's activities could be classified as a profession despite the involvement of a non-professional partner. The Court referred to various precedents and definitions distinguishing between professional and business activities. It emphasized that the mere inclusion of a non-professional partner for capital investment and administrative purposes does not change the nature of the firm's activities from professional to business.

Court's Conclusion:
The Court concluded that the firm is engaged in professional activities, and the presence of the assessee's father as a partner does not alter this fact. Therefore, the income derived by the assessee's wife from the firm should not be aggregated with the assessee's income u/s 64(1)(i) of the Income-tax Act, 1961.

Judgment:
The High Court answered the referred question in the negative, favoring the assessee and against the Department. The income of the assessee's wife from the firm should not be aggregated with the assessee's income.