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TMI Blog1986 (3) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's father who is not a doctor by profession. The relevant clauses I to 13 of the partnership deed are extracted in the statement of the case forwarded to this court by the Tribunal. We need advert only to the salient features of these clauses relating to the firm. The objects of the firm are carrying on general medical practice including surgery and for that purpose to run a medical dispensary and do all other activities conducive to the proper conduct of a pucca hospital. The assessee's father shown as first partner has invested capital for land, building, equipments, etc. The assessee and his wife being qualified doctors are to contribute their professional services for running the hospital. The assessee's father is in charge of the accounts and registers and other documents relating to the partnership. The firm is to be managed by the assessee and he will be in charge of all matters relating to the administration of the hospital. The assessee and his father are each entitled to 45% of the net profits of the firm. The assessee's wife is entitled to the remaining 10% besides a fixed remuneration at the rate of Rs. 500 per mensem. The Income-tax Officer as per separate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee and his wife, have lent their services for the benefit of a firm which carries on a commercial activity. The assessee and his wife were partners of a firm carrying on a business within the meaning of section 64 of the I.T. Act 1961. Incoming to this conclusion, we have given anxious thought to the present day requirements of having an efficient administrator in any large organisation of professionals. Administrative services can be procured even if the administrator is not partner. However, where the administrator who is not professionally qualified is taken in as partner and the income of the firm is not confined to income attributable only to the services rendered by the professional partners, it is not possible to subscribe to the view that the firm is one carrying on a profession within the meaning of the term 'profession' in the I.T. Act 1961. Such firm has to be held to be a firm carrying on business within the meaning of the term 'business' in the I.T. Act, 1961. In such an event, the provisions of section 64(1) which are absolute straightaway apply and the share incomes have, to be aggregated. " Counsel for the Revenue strongly urges that on the finding of the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause (13) of section 2 defines "business" to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. The expression " profession " is defined in section 2(36) to include vocation. Section 64 of the 1961 Act corresponds to section 16 of the 1922 Act. The definition of " business " is identical in both the Acts. The 1922 Act did not contain a definition of the expression " profession ". Under section 16(3)(a)(i) of the 1922 Act, in computing the total income of any individual for the purpose of assessment, so much of the income of his wife as arises directly or indirectly from the membership of the wife in the firm of which he is a partner is also to be included. Section 64(1)(i) of the 1961 Act makes a significant alteration confining aggregation to such income as arises directly or indirectly " to the spouse of such individual " from the membership of the spouse in a firm carrying on a business in which such individual is a partner. As per this provision of the 1961 Act, aggregation is permitted only in respect of income from a firm carrying on business, in which both the spouses are partners. Under the earlier Act of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lubbed together under section 64(1)(i). We would, however, add the following riders: (1) If a doctor-husband and a doctor-wife are also carrying on the activity of a nursing home in the context of their professional activity for the purpose of treating their own patients, the income from the nursing home can be treated as the professional income of the professional couple and no question of clubbing together can arise. (2) If any business activity is carried on by a firm constituted by the doctor-husband or doctor-wife such as of running a drug store for selling drugs to the patients or to others, the income from such activity can be clubbed together. Such income will not be exempt from being clubbed together merely because it is an activity which is adjunct to the main professional activity. Similarly, when a doctor-couple carries on the nursing home activity by admitting patients of other doctors and charging fees such as room fees or fees for services rendered to them, it may amount to a business activity carried on by the firm and that part of the income can be clubbed together. (3) Merely because a part of the activity is professional activity, the assessee cannot esc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In National Union of Commercial Employees' case, AIR 1962 SC 1080, 22 FJR 25, Gajendragadkar J. (as he then was), speaking for the court, stated at page 1084 of AIR 1962 SC and at p. 29 of 22 FJR: " The distinguishing feature of an industry is that for the production of goods or for the rendering of service, co-operation between capital and labour or between the employer and his employees must be direct and must be essential." The above observation of the Supreme Court clearly makes out the distinction between an industrial concern and a firm of professional men. The fact that different categories of servants are employed, each category being assigned separate duties and functions, does not render a firm of professionals as one carrying on business. The National Union of Commercial Employees' case, AIR 1962 SC 1080; 22 FJR 25, related to a firm of solicitors where the Supreme Court observed that subsidiary work purely of an incidental type intended to assist the solicitor in doing his job has no direct relation to the professional service ultimately rendered by the solicitor. A solicitor may for his own convenience employ a clerk because a clerk would type his opinion. He may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, we do not think it can be said that the word 'business' in the expression 'trade or business' occurring in the proviso will include the profession of an advocate. " The question as to whether a firm of lawyers is a commercial establishment within the meaning of the Kerala Shops and Commercial Establishments Act, 1960, came up for decision before the Supreme Court in Sasidharan v. Peter and Karunakar, AIR 1984 SC 1700. The Supreme Court observed at p. 1702 : " Whatever may be the popular conception or misconception regarding the role of today's lawyers and the alleged narrowing of the gap between profession on the one hand and a trade or business on the other, it is trite that, traditionally, lawyers do not carry on a trade or business nor do they render services to 'customers'. The context as well as the phraseology of the definition in section 2(13) is inapposite in the case of a lawyer's office or the office of a firm of lawyers. " When both the spouses are skilled in a profession such as of medicine, law, etc., and they derive income as partners of a firm engaged in the profession, the income of each spouse is to be separately assessed in their respective hands and ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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