9911796707
TMI Blog1996 (1) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... atics etc. It appears from the record that the assessee was running as many as 5 branches in the previous year concerning to assessment year 1990-91 in which as stated by the ld. counsel for assessee, there were five thousand students. The modus operandi of the assessee is that any student who desires to get coaching in Science/Mathematics subject or in any other subject, approaches the assessee and fills up admission form (copy of admission form is appearing on paper book) giving out his name, address and details of the subjects in which he wants to be coached in Rs. 100 is charged as provisional admission fees and before classes start and mostly in the vacation period of students, the assessee-company calculates the amount of fees to be charged from that student and whole of the fees is realised before he is allowed to join the classes. It is also the case of the assessee that some students are not in a position to pay the whole of the amount of the fees at one time and then they are allowed the payment through instalments after making such prayer through application for instalments and after result of the scrutiny that prayer is reasonable one. 4. In the year under considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were bound to pay the full amount to the institute. He had also rejected the plea of the assessee that students sometime failed to turn up after depositing of Rs.100 as fee or quit classes in the middle of the session on the same ground that amount of entire fees became due to the assessee, the moment the students filled up the admission form. Ultimately the assessee's appeal was rejected confirming the said addition. The assessee came in appeal before the Tribunal. 6. The ld. counsel for the assessee had taken us through the working of the assessee institute and tried to point out that main basis for Assessing officer for making the addition was that the assessee company was not maintaining any attendance register or any other record so as to reveal as to which student did not attend the classes for whole or part of the year. In this connection it was pointed out that taking attendance is not mandatory as in the schools where it is statutory requirement. Secondly, coaching classes are conducted for 2 - 2.30 hours consisting of 3-4 periods being attended by 60-75 students and if each of the coach starts taking attendance, he will waste 10-15 minutes of the students in each class ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 60,955 ----------- Rs. 1,58,565 ---------------------------------------------------------------------------- According to him the assessee had shown Rs. 15,800 realised from those students who have not turned up after filling of admission form and depositing Rs. 100 and further received Rs. 56,514 out of those students who had left the classes in the middle of session leaving the unpaid balances which was to be paid by them through instalments. There were so many causes in which students had paid up the whole of the amount and did not attend the classes and still assessee had shown that amount of fees as its receipts. On the basis of all these facts the contention of the assessee was that these were not actual receipt of the assessee as the same were neither receivable nor due from the students and there was no legal right to the assessee to recover the said amount from the said amount. 7. The ld. counsel further pointed out that it is not the case of revenue that said amount has been realised by the assessee and not shown by it in the books but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses for this recovery shall be quite high. If any legal process is adopted, it will bring bad name to the institutes and in future most of the students will be scared from the name of the institute itself and it all shows that business expediency is also not in favour of adopting such practice on the part of assessee. The ld. counsel pointed out that this reasoning of the Hon'ble Bombay High Court was approved by the Hon'ble Supreme Court in the case of CIT v. Birla Gwalior (P.) Ltd. [1973] 89 ITR 266 and followed by Patna High Court in the case CIT v. S.K.G. Sugar Ltd. [1974] 96 ITR 194. 9. In ld. counsel further placed reliance on the decision of Hon'ble Supreme Court in the case of CIT v. Shoorji Vallabhdas Co. [1962] 46 ITR 144 in which their Lordships have dealt with the effect of book keeping entries in the mercantile system of accounting. Their Lordships have observed that "Income-tax is a levy on income. Though the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt, yet the substance of the matter is the income. If income does not result at all, there cannot be a tax, even th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prove that such and such students and left after payment of Rs. 100 registration fee or left the classes in the middle of the session but nothing has been done by it. Students were not to be examined by Assessing Officer as argued by the ld. counsel but assessee should have produced the same. The ld. D.R. was of the view that real income theory will not come into play in the sense as argued by the ld. counsel for the assessee. The ld. D.R. further pointed out that assessee had not acted as was expected by a businessman. The assessee company was entitled to recover the amount and once that has not been recovered no benefit of non-action on the part of assessee can be extended to the assessee. On the basis of these, the contention was that addition must be upheld. 13. The ld. counsel for the assessee in rejoinder placed reliance on the earlier arguments and pointed out that there was no question of contract as students were minors and contract with minor is nullity. He further pointed out that there was no accrual of any income nor that amount comes in the theory of real income. Relying upon the arguments of the ld. D.R. it was contended by the ld. counsel that in case book entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... getting any coaching also for the remaining period. It is again noteworthy fact that if services are not rendered by the assessee then such amount will not be automatically paid out to the assessee. We have gone through the guidance note issued by the Institute of Chartered Accountants of India on Accrual Basis of Accounting and the relevant extract thereof are appearing from pp.199 to 211 of the paper book of assessee. Dealing with revenue recognition (AS-9) the said guidance note describes the accounting standard issued by the said Institute in cases relating to sale of goods, rendering of services etc. On page 211 of the same we do find how the amount of tuition fee is to be dealt with and it shows revenue should be recognised over the period of instructions. This again clarifies the whole position of the assessee and method being adopted by assessee. The fact remains that students who were not getting coaching would not be coming forward to pay the amount of fees even then the institute may be following mercantile system of accounting and business expediency also requires that no punitive steps can be taken by the assessee for realisation of the alleged due amount according t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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