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CL Educate Ltd. Versus DCIT

2015 (5) TMI 469 - ITAT DELHI

Non-refundable portion of Advance Fee - addition to income - Income/ Revenue Recognition - whether addition resulted in double addition which has already been offered by the Appellant for taxation in the following assessment year i.e. AY 2011-12 on account of recognition of the amount by the Appellant as income in that year and the department also has accepted it as income in assessment in AY 2011-12 - Held that:- The issue has been fully considered on similarity facts in 2006-07 assessment year .....

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e the Hon’ble High Court u/s 260A for 2006-07 assessment year.

Thus the issue can no longer be said to be res integra as far as the present forum is concerned. - Decision in the case of DCIT, Circle-3(1), New Delhi Versus Career Launcher (India) [2013 (8) TMI 139 - ITAT DELHI] followed - Decided in favour of assessee. - I.T.A .No.1697/Del/2014 - Dated:- 10-4-2015 - Smt Diva Singh And Sh. T.S.Kapoor JJ. For the Appellant : Sh. Ajay Vohra, Adv. & Ms. Shikha Sharma, Adv. For the Res .....

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on account of Non-refundable portion of Advance Fee of by the Assessing Officer and confirmation of the same by the CIT(A) has resulted in double addition of ₹ 16, 16,61,424/-, which has already been offered by the Appellant for taxation in the following assessment year i.e. AY 2011-12 on account of recognition of the amount by the Appellant as income in that year and the department also has accepted it as income in assessment in AY 2011-12. 3. The finding of the Commissioner of Income Ta .....

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e assessee for number of years and accepted by the department in spite of the fact that the principle of Res Judicata is not applicable to income tax proceedings. Appellant has been following this consistent policy of offering the revenue for taxation, in the year in which services are rendered by him to the customers, since 1995. (b) That the following preceding judicial rulings, in the case of the appellant itself, have not been considered to judge the finality of the issue in the judicial for .....

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sue by the High Court. The appellant craves leave to add or amend any of the grounds of appeal. 2. The relevant facts of the case in the year under consideration are, that the assessee company as in the earlier years continues to be engaged in providing education and training for various preparatory examination like IIM, IIT etc. through educational centres run by itself or by the franchisee on its behalf across the country. Income of ₹ 7,66,99,443/- was returned by filing off a return. Th .....

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The reply of the assessee co. has been considered and the same is not acceptable because of the following reasons: i) The assessee has stated that consistently the assessee is following the policy of not showing the advance fee as income and the same is shown in the subsequent year. In this regard it is stated that the principal of re-judicata does not apply to the income tax proceedings and, therefore, the AO is at liberty to compute income of the assessee. ii) The assessee has stated that the .....

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C) 227 1TR 172. iii) The assessee has stated that the advance fee received during the year has been offered for taxation in the next year. Each asstt. year is a separate unit and, therefore, the income of the one asstt. Year cannot be deferred to the subsequent year. The taxability normally depends on the method of the accounting policy employed by the assessee. Now in the instant case of the assessee, the assessee has been regularly following mercantile system of accounting and, therefore, the .....

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of accrual system of accounting, the revenue is considered in the next year as the cost of imparting such education will be borne in next year. In this regard, it is stated that certain expenses incurred during the year like expenses directly or indirectly attributable to staff involved in the admission counter, advertisement expenses, professional fees and other expenses incurred for material development for the course are pertaining to the advance fee received by the assessee. v) As far as as .....

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undable amount is an ascertained amount on which income has accrued. It has further been held that the assessee has attained the legal right to receive the amount and the amount is not refundable and payable by the assessee. The same therefore cannot be shown as liability and should be considered as part of income of the year. In view of the above said discussion, the non-refundable portion of advance fee of ₹ 16,16,61,424/- is disallowed and added to the total income of the assessee. (Add .....

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e ld. AR referring to the material available on record invited attention to the copy of the order of the Tribunal in 2005-06, 2006-07 assessment years which is placed at pages 12 to 51, inviting specific attention to page 43 to 50 it was submitted that the ITAT in 2006-07 assessment year vide paras 12 to 13.4 was pleased to reverse the finding of the CIT(A) by allowing the claim of the assessee. Inviting attention to pages 52-64 of the Paper Book it was submitted that the ITAT vide its order dat .....

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on of ₹ 13,14,00,000/- . The facts relates to this issue are that the assessee is engaged in the business of imparting coaching for various entrance examination. Some of the courses offered by the assessee are spread over two accounting periods. Thus, part of the fees when received is booked as advance fee in the accounting year in which the student is enrolled. The advance fee presents the fee pertaining to the period falling in the next accounting year when the education/coaching was act .....

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y the decision of this Tribunal and assessee s own case for the assessment year 2006-07. We accordingly dismiss this ground. 5.1. Inviting attention to Paper Book page-3 to 11 which contains a copy of the appeal filed by the Revenue u/s 260A before the Hon ble High Court in 2006-07 assessment year wherein the Revenue sought for admission and adjudication on various questions of law including the following questions (v) at page 5 for admission:- (V). Whether the ITAT rightly deleted the addition .....

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d accordingly Section 40(A)(ia) of the Income Tax Act, 1961 is attracted? 2. Whether the Income Tax Appellate Tribunal is right in deleting addition of ₹ 37,44,000/- made by the Assessing Officer on account of disallowance of bonus paid to the Directors in terms of Section 36(1)(ii) of the Income tax Act, 1961? 5.3. In these aforesaid facts and circumstances, it was his prayer that the consistent view on the issue taken by the ITAT on facts should have been followed by the CIT(A) and he ha .....

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Book page-65 for the sake of completeness it was his submission that the amounts mentioned in Column No.-3 over the years have been offered in the specific year as would be evident from the amount mentioned in Column No.-2 of the paper book and he would have no objection if this fact is verified. For ready-reference, we extract the following table from page 65:- CL EDUCATE LIMITED Financial Year Fee Billing Advance Fee Revenue as per P&L a/c Addition made in Assessment Remarks 1st April 31st .....

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,00,32,898 17,74,81,162 64,66,62,512 2012-13 73,04,06,242 17,74,81,162 12,56,77,943 78,22,09,461 2013-14 81,67,50,725 12,56,77,943 12,98,10,726 81,26,17,942 Note:-Advance fee is shown as Unearned Revenue under the Head Current Liabilities in Balance Sheet 6. Attention was also invited to Paper Book page 88 which contains Schedule Q Notes to the financial statement which the background is found addressing in the copy of the copy of the Audited Annual Accounts for the financial year ending 31.03.2 .....

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sue the following disclosure on Revenue recognition has been made:- (iii) Revenue Recognition Revenue in respect of educational and training fees received from students is recognized over the period of the course. Fees are recorded at invoice value, net of discounts if any. Where there is an uncertainty in recovery of the fees, the same is charged to the Profit & Loss Account on completion of the course. 7. The Ld. CIT DR, Sh. Vivek Wadekar while referring to the orders of the Tribunal in 20 .....

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d services. The circumstance under which the Revenue recognition has been postponed has not been shown and in view of the fact that certain expenses incurred for the course content material development and other expenses also pertaining to advance fees received by the company had also been shown. Accordingly on account of matching principle of receipt and expenditure it was not justified. 8. We have heard the rival submissions and perused the material available on record. On a consideration of t .....

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ed the relief following the view taken by the ITAT and the department has come in appeal, the departmental appeal has been dismissed. It is also seen that the Revenue agitated the issue before the Hon ble High Court u/s 260A for 2006-07 assessment year wherein assailing the correctness of the order dated 27.12.2010 in ITA no.-4924 & 4925/Del/2009 for 2005-06 & 2006-07 assessment years, the following questions of law canvassed as containing substantial legal issues for admission were rais .....

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