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The brief facts of thecaseare that the assessee is the whole time Managing Director of M/s Selan Exploration Technology Ltd. During the year under consideration, apart from salary from the whole-time Directorship of this company, the assessee has also earned interest and income from other sources within India and he has also disclosed income from sources outside India in the nature of interest income, rental income (loss) and income from transactions in financial securities. The assessee was also the owner of one unit in Trump Hotel, USA, on which he incurred loss of Rs. 52,97,197/- and claimed the said loss under the head “income from other sources” and sought to set off the loss against the salary income of the same year.The assessee also claimed loss from two Limited Liability Companies (LLC) in the USA of Rs. 26,94,282/- as deduction u/s 57 of the Act, as ‘business loss’. However, the Assessing Officer (AO) considered the loss of Rs. 52,97,197/- from the unit held in Trump Hotel, claimed under the head income from other sources as business loss and also treated the loss of Rs. 26,94,282/- from the LLCs claimed under the head other sources u/s 57 of the Act as business loss.

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Sec. 28(i), 56 & 57(iii) of income Tax Act, 1961—Nature of business - Income from other sources or business income - Unit under consideration cannot be considered to be a business undertaking of the assessee as at no point of time assessee was ever been engaged in running the Hotel Unit on his own.

Facts: CIT (A) erred in confirming the actions of AO in assessing loss from hotel unit at Hotel Trump International, New York, USA under the head ‘business loss’ as against loss under the head ‘Income from other sources’ declared in the return;

Held, that it is evident from the conduct of assessee that assessee was not intending to run a unit in Trump Hotel International himself but rather he had purchased the unit while he was employed with an Oil Exploration Company in USA and he has given this unit for being run under the ‘Hotel Operations and Maintenance Agreement’ to be run by the managing company. Thus, at no point of time has the assessee ever been engaged in running the Hotel Unit on his own. It is also evident that the control of the affairs of the assessee’s unit like to whom the unit is to be let out, what kind amenities are to be provided within the unit, what tariff has to be charged from the unit etc. are beyond the control and decision making powers of the assessee. Thus, for all practical purposes, the unit under consideration cannot be considered to be a business undertaking of the assessee. Admittedly and undisputedly, the Department has also accepted this position in the preceding two assessment years. Accordingly, we are unable to accept the view taken by CIT (A) and we set aside his finding on the issue and direct AO to treat the loss from the unit in Trump Hotel International under ‘income from other sources’. In the final result, the appeal of the assessee stands allowed. - ROHIT KAPUR V/s ADDI. CIT - [2020] 206 TTJ 385 (ITAT-DELHI)