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CMA Intermediate · Direct and Indirect Taxation · Clubbing of Income

Mr. Sanjay Mehta owns 25% of the profits of a partnership firm, Mehta & Co. His wife, Dr. Kavita, a qualified chartered accountant, receives a professional fee of ₹6,00,000 from the firm for audit and advisory services that are solely attributable to her professional qualification and experience. How is the fee treated under the Income-tax Act, 2025?

The fee is not clubbed. Although Sanjay has a substantial interest in the firm, section 99(1)(a)(i) excludes remuneration solely attributable to the spouse's professional knowledge, experience and qualification, so Dr. Kavita is taxed on it herself.

  1. AClubbed with Sanjay's income because he is entitled to at least 20% of the profits
  2. BClubbed with the income of the spouse having the lower total income
  3. CSplit equally between the spouses
  4. DNot clubbed, because income solely attributable to the spouse's technical or professional knowledge and qualification is excludedCorrect

Explanation

Sanjay has a substantial interest, as he is entitled to at least 20% of the profits. However, section 99(1)(a)(i) excludes income solely attributable to the application of the spouse's technical or professional knowledge, experience and qualification. The fee therefore stays with Kavita.

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