Vikram Bakshi and Company Pvt. Ltd. Vs CIT(A) (ITAT Delhi)
No Notional Commission or Interest Taxable – CPRPL Never Paid or Accrued Any Amount; Only a Disputed Claim
The Assessee, owner of commercial property at Mohan Dev Building, had entered into a management arrangement with Connaught Plaza Restaurants Pvt. Ltd. (CPRPL), later followed by a commission/lease agreement dated 15.03.2001. On 22.07.2002, the Assessee agreed to sell the property to CPRPL for ₹4.40 crore and received ₹4 crore advance. However, Noida Authority did not approve the transfer until FY 2019-20 due to title-related disputes beyond Assessee’s control. Ultimately, in AY 2020-21, the property was transferred to CPRPL with permission of Noida Authority, and capital gains were duly offered & assessed.
AO taxed (i) ₹1,34,07,964 as commission and (ii) ₹1,25,07,426 as interest on unpaid commission for AY 2016-17 solely on the basis of a letter dated 09.11.2017 written by the Assessee to CPRPL asserting a claim for commission/interest. CPRPL, however, categorically confirmed (page 99 of paper book) that no commission or interest had ever been provided for, accrued, or paid. CIT(A) upheld the additions on the presumption that the Assessee “ought to have” continued to receive commission since the property was not transferred earlier.
Tribunal rejected this approach, holding that no income can be taxed on a notional or hypothetical basis. Since CPRPL neither recorded any liability nor paid any amount, and no real accrual occurred, the mere raising of a claim—especially in a period of long-standing dispute over property transfer—cannot constitute taxable income. Tribunal noted that the AO had misconstrued the letter of 09.11.2017 as proof of real accrual, when in fact it was only a unilateral, unaccepted demand.
Tribunal further held that once the property dispute was resolved & transfer occurred in AY 2020-21, capital gains were properly taxed in that year; therefore, commission-linked accrual ceased long before. There was no evidence of any subsisting enforceable right to receive commission or interest in AYs 2016-17 or 2017-18.
Accordingly, additions of commission & interest for AY 2016-17 were deleted. Since issues for AY 2017-18 were identical, the order was applied mutatis mutandis and both appeals were partly allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
The appeal in ITA No. 1679/Del/2024 for AY 2016-17 & 1385/Del/2024 for AY 2017-18, arise out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 14.02.2024 and 31.01.2024 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 28.12.2018 and 31.12.2019 by the Assessing Officer, ACIT, Circle-26(2), New Delhi (hereinafter referred to as ‘ld. AO’). Subsequently, the appeals were migrated to the National Faceless Appeal Centre (NFAC).
