The Tax Publishers2020 TaxPub(DT) 2714 (Del-Trib) : (2021) 186 ITD 0466 : (2020) 206 TTJ 0385 INCOME TAX ACT, 1961
Sections 14 & 72
Where assessee purchased a hotel unit solely and wholly for the purpose of investment and he did not intend to run that hotel unit as its business undertaking, the loss occurred on account of such hotel unit was rightly claimed under the head 'Income from other sources'.
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Loss - Set-off - Whether loss incurred on account of a hotel unit purchased solely and wholly for purpose of investment allowable under the head 'Income from other sources' -
Assessee was a whole-time MD in a company. He was also the owner of one unit of a hotel, which was located outside India on which he incurred loss. He 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. However, AO considered the said loss as business loss. Assessee submitted that he made investment in one unit of a property that was situated outside India which along with other such units had been developed as a hotel entity by some other entrepreneurs. He further submitted that he neither had any control over the property constituting the units nor did he have any say or role in the management of the hotel. Further, the unit was purchased solely and wholly for the purpose of investment. Held: It was evident that the assessee was not intending to run that unit of the hotel but rather, he purchased the unit while he was employed outside India. Further, he gave that unit for being run under the 'Hotel Operations and Maintenance Agreement' to be run by a managing company. Thus, at no point of time, the assessee had ever been engaged in running the hotel unit on his own. It was also evident that the control of the affairs of the assessee's unit like to whom the unit was to be let out, what kind of amenities were to be provided within the unit, what tariff had to be charged from the unit, etc., were beyond the control and decision making powers of the assessee. Therefore, the unit under consideration could not be considered to be a business undertaking of the assessee. Further, the Revenue also accepted such position in the preceding two assessment years. Hence, the loss incurred on account of such unit was rightly claimed under the head 'Income from other sources'.
REFERRED : Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC) : 1992 TaxPub(DT) 858 (SC) and Sultan Brothers Private Limited v. CIT (1964) 51 ITR 353 (SC) : 1964 TaxPub(DT) 259 (SC).
FAVOUR : In assessee's favour.
A.Y. :
INCOME TAX ACT, 1961
Section 14
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