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18. Assessee earns the foreign exchange earned on service such as landing, parking, PSF (CUTE counters), etc. This foreign exchange earning is eligible under the schemes and the assessee would utilize the duty credit scrips towards payment of custom duty towards import of goods. The value of duty credit scrips would be reduced from the capital asset and the value of the duty credit script will be recognized as revenue according to the assessee. The ITA Nos.581, 596, 622, 636/Bang/2017 assessee follows merchantile system of accounting. The foreign exchange accrues to the assessee when the services are provided. Therefore, the duty credit scrip shall be accounted for when the foreign exchange earning exceeds Rs.10,00,000/- during the year. But the assessee has not recognized income on account of duty credit scrips on accrual basis for assessment years 2008-09 to 2013-14. The AO, relying upon the Experts Advisory Committee of Institute of Chartered Accountants of India (ICAI) wherein it was held that duty credit should be recognized as other income and further the cost of fixed asset inclusive of duty payable is eligible for depreciation. The AO was of the view that assessee should have offered to tax the duty credit entitlement for the assessment year in which the assessee became entitled to the duty credit. The AO accordingly made an addition of Rs.19,91,32,992/- in assessment year 2011-12 having observed that assessee has recognized the principle by offering to tax the duty credit entitlement to tax for assessment year 2014-15.

19. Assessee preferred an appeal before the CIT(A) with the submission that under the SFIS scheme, assessee became entitled to SFIS duty credit scrips amounting to Rs.8.82 crores based on the foreign exchange earned by the assessee company during the financial year 2010-11. It was further submitted that assessee company has cumulatively utilised duty credit scrips amounting to Rs.89.60 crores upto the financial year 2012-13 against the payment of custom duty which was required to pay on import of capital goods/consumables. The complete details of year wise duty entitlement and its utilization from financial year 2007- 08 to financial year 2012-13 was furnished before the CIT(A) with the submission that out of Rs.8.82 crores of duty credit entitlement, assessee company has utilised the duty credit scrips amounting to Rs.4.45 crores upto financial year 2012-13 against the custom duty which it was required to pay on import of capital goods. It was further contended that the assessee company has utilised the custom duty credit certificate only against the amount of custom duty payable by it on import of capital goods and has neither used for the purpose of import of consumables nor transferredto any of its group company/entity. As the company utilised the SFIS scrips for the purpose of import of capital goods and not paid any custom duty in cash for capital items imported during the financial year 2009-10 to 2012-13 for development, operation and management of Delhi Airport as per details given above. Therefore, the assessee has adjusted the amount of SFIS scrips utilised against the entitlement against the ITA Nos.581, 596, 622, 636/Bang/2017 cost of asset imported and accordingly the assets were capitalized at cost/net SFIS scrips. It was further contended that SFIS amounting to Rs.2,07,84,731/- is utilised for import of capital goods which is lying under capital work in progress and yet to be capitalised. Further the SFIS scrips amounting to Rs.5,31,85,162/- remains unutilized due to expiry of the said SFIS. The learned Counsel for the assessee further placed reliance upon the accounting standard 12 on accounting of Government grants issued by ICAI with the submission that assessee has treated the SFIS scrips utilised for import of capital goods as capital grant in accordance with the accounting standard 12. The detailed submissions made by the assessee is also extracted in the order of CIT(A) and for the sake of reference, we extract the same as under:

9. The Appellant most humbly submits that the learned AO failed to appreciate and ought to have held that mere accrual of the entitlement of SFIS duty credit scrips would not be considered as income. The Appellant is only eligible to obtain the SFIS Scrips on the foreign exchange earned during the year but the process for obtaining the same have not been initiated during the assessment year under consideration. Further, the appellant has to meet various other conditions prescribed in the Foreign Trade Policy to be eligible to receive the SFIS scrips. Since the eligibility of Appellant to receive the SFIS scrips is dependent on various other conditions in addition to earning to foreign exchange the mere accrual of entitlement of SFIS duty credit scrips should not be considered as income. Further, such duty credit scrips are to be utilized against custom duty payment on capital goods and having regard to same the amount of duty credit scrips cannot be treated as revenue receipt.

The learned DR on the other hand has placed heavy reliance upon the order of the CIT(A).

21. Having carefully examined the orders of the authorities below in the light of rival submissions, we find that undisputedly under the SFIS, the assessee company became entitled to duty credit entitlements certificate from the Director General of Foreign Trade, Government of India,for custom duty credit scrips which are to be used for import of any capital goods including spares, office equipment and provisional equipment, etc. These certificates are valid for 2 years from the date of issue. From the details furnished it is evident that the assessee utilised the duty credit scrips in different assessment years but the complete SFIS scripswere not utilised. According to the assessee, SFIS schemes amounting to Rs.5,31,85,162/- remains unutilized due to expiry of said SFIS scrips. In the light of these facts, it is not proper to tax the accrual of duty credit scrips on mercantile basis as the life of the certificate is only for 2 years. Moreover, the nature of receipt or the duty credit entitlements is to be examined in the light of judgment of Apex Court in the case of CIT Vs. Ponni Sugars Ltd., (supra). Though CIT(A) has recorded the detailed submissions in 4 pages in its order but in one para in few lines, he rejected the claim of the assessee after placing heavy reliance upon the Expert Advisory Committee report whereas the issue should have been examined in the light of the judgment of the Apex Court in the case of Ponni Sugars Ltd., (supra). Therefore, we are of the view that CIT(A) has not properly adjudicated the character of receipts and the year of taxability. If itis held to be the capital receipt, it may reduce the value of the capital assets but it cannot be taxed as a revenue receipt. In any ITA Nos.581, 596, 622, 636/Bang/2017 case, this issue was not properly examined by the CIT(A). We therefore set aside his order and restore the matter to his file with a direction to readjudicate this issue afresh in the light of assessee's contentions and also in the light of the judgment of the Apex Court in the case of Ponni Sugars Ltd., (supra).