21(5) is, I think, designed to allow for training in multipilot aircraft. Without it, two crew plus the student would be required, which would be a bit daft. It allows the student to act as P2.
Note 21(5)(b)(ii) which requires a pilot taking advantage of such an exemption to have a licence already (or be a military pilot), it just doesn't have to be a licence with the correct type rating on.
21(2)(c) is the bit that covers ab initio training, and it doesn't have a 'no passengers' provision.