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Facts
The Revenue filed an appeal against the order of the CIT(A) which deleted the addition of advance fees amounting to Rs. 9,84,72,620/-. The Assessing Officer had taxed this amount in the current year, but the assessee argued it pertained to the subsequent financial year.
Held
The Tribunal noted that neither the AO nor the CIT(A) had conclusively established whether the advance fees were offered in the subsequent year. Relying on previous decisions, the Tribunal directed the AO to verify this fact and decide accordingly.
Key Issues
Whether advance fees received for a subsequent academic year can be treated as income in the current financial year. Whether a statement recorded under Section 133A, without corroborative evidence, can be the sole basis for addition.
Sections Cited
5, 11, 133A
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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI ABY T VARKEY & SHRI AMITABH SHUKLA
(प्रत्यर्थी/Respondent) (अपीलार्थी/Appellant) अपीलार्थी की ओर से/ Assessee by : Mr.A.Satyaseelan, Advocate प्रत्यर्थी की ओर से /Revenue by : Ms.R.Anitha, Addl.CIT सुनवाई की तारीख/Date of Hearing : 17.07.2025 घोषणा की तारीख /Date of Pronouncement : 20.08.2025 आदेश / O R D E R PER AMITABH SHUKLA, A.M :
This appeal is filed by the Revenue against the order bearing DIN & Order No.ITBA / NFAC / S / 250 / 2024-25 / 1072947312(1) dated 05.02.2025 of the Learned Commissioner of Income Tax [herein after “CIT(A), National Faceless Appeal Center[NFAC], Delhi, for the assessment year 2020-21. The reference to the word “Act” in this order hereinafter shall mean the Income Tax Act, 1961 as amended from time to time.
2.0 The only issue raised in this appeal of the Revenue, through its grounds of appeal, is regarding taxability of advance fees received by the assessee. The Ld.AO had noted that the assessee though had shown receipt of advance fees amounting to Rs. 9,84,72,620/- the same was not included in the income for the year under consideration. The Ld.AO concluded that as per the provisions of section 5 r.w.s. 11 of the Act the impugned amount was liable for taxation in the present year and consequently proceeded to add the same. Aggrieved by the action, assessee preferred appeal before the Ld.CIT(A) who proceeded to delete the addition. He concurred with the argument of the assessee that the advance fees received by it for subsequent financial year can be offered in such succeeding year only. The Ld.Counsel for the assessee placed full reliance upon the decision of Ld.CIT(A) . It was argued that CBSE regulations also confirmed the assessee’s action. 3.0 The Ld.DR vehemently argued in favour of the Ld.AO. Reference was made to the decision of Hon’ble Jurisdictional High Court on the same principle though on the issue of AMC transactions. It argued in favour of the real income theory propounded by the Ld.AO. 4.0 We have heard rival submissions in the light of the material available on records. We have noted that the Ld.CIT(A) has relied upon the decision of the Banglore Bench of the ITAT in the case of Gokula Education Foundation / Bang / 2017 where the Ld.AO had Page - 2 - of 6 treated advance fees as income, a decision which was reversed by the tribunal. In the referred decision following was concluded: - “…..17. We have considered the rival submissions and perused the material on record. The assessee receives full amount of fees for the entire course duration from students admitted under NRI/IP quota and the said income is recognized proportionately in the books of account to the extent of fees in the given academic year and the balance amount is treated as advance fees. According to the assessee, the proportionate amount is recognized as income from fees collected in earlier financial year and recognized as advance fees and that the said method of accounting is consistently followed for several years. We notice that the coordinate Bench in Moogambigai Charitable and Educational Trust in dated 13.7.2016 on a similar issue held as follows:- “12.4 We have considered the rival submissions as well as the relevant material on record. The Assessing Officer has made the addition of this amount as income of the year on the ground that Page 12 of 32 the assessee has used this amount for revenue as well as capital expenditure during the year. Further the Assessing Officer has placed reliance on the statement recorded under Section 133A of the Act. It is pertinent to note that neither the Assessing Officer nor the CIT (Appeals) has disputed this fact that this amount has been duly recorded in the books of accounts as advance tuition fees. The assessee filed the ledger account wherein the details of the opening balance, the advance tuition fees received during the year as well as closing balance has been shown. The correctness of the accounts has not been examined or disputed by the Assessing Officer or the CIT (Appeals). It is pertinent to note that if an advance fees is received by the assessee for a particular academic year spread over more than one
Page - 3 - of 6 financial year then the part of the fees received by the assessee which relates to the academic year falling in next financial year cannot be treated as income of the assessee for the year under consideration. It is well settled law that the statement recorded under Section 133A cannot be sole basis for making an addition or disallowance without corroborating evidence. In this case, the authorities below have not shown in their findings that any corroborating evidence was found to support this statement recorded under Section 133A of the Act. In view of the above facts and circumstances, we find that the addition made by the Assessing Officer based on the statement recorded under Section 133A and further by giving a reason that the assessee has used the advance fees received for revenue as well as capital expenditure is not justified and accordingly we set aside the orders of authorities below qua this issue and remit the same to the record of the Assessing Officer to re- examine the issue from the record produced by the assessee and then decide the same as per law.” (emphasis supplied) 18. Similar view was taken in the decision in the case of Akshaya Patra Foundation (supra).
In the assessee’s case, it is submitted that the assessee is following accrual system of accounting for recognizing the income and that fees collected from the students is refundable in case the student Page 13 of 32 leaves the course in between the duration of the course. This fact needs to be verified factually as per the terms of the agreement entered into by the assessee with the students at the time of admission. Therefore, following the decision of the Tribunal in the case of Moogambigai Charitable and Educational Trust (supra), we remand the issue back to the AO to examine the facts from the record produced by the assessee and decide the issue in accordance with law, after giving reasonable opportunity of being heard to the assessee. This ground is allowed for statistical purposes. ….” Page - 4 - of 6 5.0 We have noted that in the present case neither the Ld.AO nor the Ld.CIT(A) has brought on record any fact to clearly illustrate that the amount of Rs. 9,84,72,620/- represented by advance fees was actually offered by the assessee in the subsequent year. This fact is critical because it is the case of the assessee that the fees has been offered in the subsequent financial year. In the decisions of the Banglore Bench relied upon by the Ld.CIT(A) supra also confirms that fees received by the assessee relating to an academic year falling in next financial year cannot be treated as income of the earlier financial year. Accordingly, we direct the Ld.AO to do a verification qua the disclosure of impugned amount of Rs. 9,84,72,620/- in the subsequent year by the assessee. In case the amount has been disclosed by the assessee then no addition, in respectful compliance to the decision of the Bangalore Bench in the decisions discussed supra, would be liable to be made in the present assessment year. To the extent, the order of lower authorities is set aside for verification and decision as directed above. The Ld.AO would give due opportunity of being heard to the assessee and the assessee is directed to comply with all the statutory notices issued. Accordingly all the grounds of appeal raised by the Revenue are allowed for statistical purposes.
Page - 5 - of 6 6.0 In the result, the appeal of the Revenue is allowed for statistical purposes. Order pronounced on 20th , Aug-2025 at Chennai. Sd/- Sd/- (एबी टी. वर्की) (अधमताभ शुक्ला) (ABY T VARKEY) (AMITABH SHUKLA) न्याधयक सदस्य / Judicial Member लेखा सदस्य /Accountant Member चेन्नई/Chennai, धदनांक/Dated: 20th , Aug-2025. KB/- आदेश की प्रतितिति अग्रेतिि/Copy to: 1. अिीिार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT - Chennai/Coimbatore/Madurai/Salem. 4. तिभागीय प्रतितिति/DR 5. गार्ड फाईि/GF
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