Satellite with different sensors generates images with different characteristics such as, images with spatial resolution such as panchromatic (PAN) images and images with high spectral resolution such as multispectral (MS) images. But for feature extraction, land cover analysis etc. requires images with high spatial and spectral characteristics. Several image fusion methods have been discovered, but each of the methods generates gamut problem. In this paper gamut problem is analyzed visually, a new model improved nonlinear IHS model is used to solve the gamut problem. This model solves gamut problem occurred during image fusion. We have analyzed HIS and iNIHS (Improved Nonlinear IHS Transformation) visually and quantitatively by using intensity substitution during image fusion. After analysis it comes to know that, due to the large intensity differences between input images MS and PAN, there is color distortion in the image. This paper suggests, rather than intensity substitution while image fusion only the spatial details from the PAN image should be embedded into MS image while image fusion.