TaxTMI 
TaxTMI 
2020 (7) TMI 100
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....imed 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. The assessment was completed at an income of Rs. 10,25,0000/-. 2.1 Aggrieved, the assessee approach the Ld. First Appellate Authority who dismissed the assessee's appeal and now the assessee is now before this Tribunal and has challenged the order of the Ld. CIT (A) by raising the following grounds of appeal: "On the facts and in the circumstances of the case and in law the Ld. CIT (Appeals) erred in confirming the following actions of the Assessing Officer: (i) In assessing loss from hotel unit at Hotel Trump International, New York, USA under the head 'business loss' as against loss u....
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.... disparate owners of other units or even with that entrepreneur in USA who was running the hotel operations. 3.2 It was submitted by the Ld. AR that the findings of the Assessing Officer, as recorded in Para 3.3, are all erroneous and are wholly untenable because business, as understood under the Act, comprises of a systematic and organized activity done repetitively with the purpose of earning income and the entrepreneur assumes a proactive role in the conduct of business activity. It was argued that passive disposition is contrary to the enterprise in business. The Ld. AR submitted that an important factor to determine whether a transaction is business or investment is the initial intention of the assessee while deploying funds in that particular pursuit and in this particular case, the Assessee knowing fully-well that he was the owner of only one out of 160 units and that he could not in any circumstance manage the hotel operations both due to the size of his holding in the business of hotel and his service commitments in India entailing his stay in India and his desisting from engaging in other activity, he had paid the money as for investment. It was submitted that there is n....
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....t of the fact that in the preceding years investments of this nature have consistently not been treated as business in the assessments. 4.1 The Ld. Authorized Representative further submitted that the lower authorities have erred in not abiding by the principle of consistency also as the assessment records of the assessee would reveal that the income earned from investment activity has always been considered as investment income but in the year under consideration the Assessing Officer has revised his opinion to treat such income as income from business activity which is against the principle of consistency. It was also submitted that onus was on the Revenue to prove that the income was from business activities and not from other sources. 5.0 In response, the Ld. Sr. DR appearing on behalf of the Department submitted that there is no res judicata in Income Tax Law and, therefore, the clock can be re-set to give a correct treatment to the income earned by the assessee. It was also submitted that the earlier assessments made u/s 143(3) of the Act were limited scrutiny assessments and the issues in the present appeal were not looked into at that point of time. The Ld. Sr. DR placed ....
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.... rooms rentals, staff for monitoring and collecting charges such as cable television, telephone and rooms services charges etc. Thus, evidently, the Revenue is being generated for each Hotel Unit without the active participation of the unit owners. 6.2 The Hon'ble Apex Court in the case of Sultan Brothers (Pvt.) Ltd. vs. CIT reported in [1964] 51 ITR 353 (SC) was considering an issue to decide the appropriate head for taxing the income i.e., whether the income was covered under income from business or profession or income from other sources. In this case, the assessee had constructed a building fully furnished and had let out the same to another person for use as a Hotel. The assessee never carried on the business of the Hotel in the premises let out and there was nothing to show that it intended to carry on the Hotel business itself. The building and the furniture and plants etc. were all let out for running the Hotel and were inseparable from each other. The Hon'ble Apex Court held that the income was to be assessed as income from other sources. In the present case, it is evident from the conduct of the assessee that the assessee was not intending to run a unit in Trump Hotel I....