Assessee-company engaged in business of operating airlines in India, entered into a purchase agreement with AIRBUS SAS, France for supply of 100 aircrafts. Assessee was given option to chose engines to be fitted in aircrafts and it chose engines manufactured by IAE. In return, IAE agreed to give certain amount of credit to assessee for choosing its engines.  Assessing Officer held that credits were revenue receipts on ground that aircrafts were not purchased by assessee but hired on lease and nature of credit will change with change in mode of acquisition. On appeal the Tribunal held that credits were received for selection of engines for purpose of support for aircraft acquisition and nature of receipt for 34 aircrafts was accepted to be capital. Since aircrafts were part of fixed capital for assessee and credits were not incidental to or derived from business of operation of commercial aircraft the amount of credit is capital in nature. The Tribunal also held that the aircrafts were assessee’s commercial assets and not stock-in-trade, there was no adventure in nature of trade when aircrafts acquisition was made or engines were selected and therefore, provisions of section 28(i) and 28(iv) would not be applicable and credits received by assessee from engine manufacturer for selecting its engine in aircraft would not be taxable as business income.  (AY. 2012-13)