DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 4(1), CHENNAI, CHENNAI vs. MOVATE TECHNOLOGIES PRIVATE LIMITED, CHENNAI

आयकर अपीलीय अिधकरण ’सी’ �ायपीठ, चे�ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI सु�ी प�ावती एस, लेखा सद�ा के सम �ी मनु कुमार िग#र, �ाियक सद� एवं BEFORE MS. PADMAVATHY S, ACCOUNTANT MEMBER AND SHRI MANU KUMAR GIRI, JUDICIAL MEMBER In ITA No. 2341/Chny/2026 �नधा�रण वष� / Assessment Year: 2010-11 Dy. CIT, Corporate Circle-4(1) v. Movate Technologies Private Room No. 428, Fourth Floor, Limited, 6th Floor, No. 32, A & B, Main Building, Aayakar Bhawan, No. 121, M.G. Road, Ambit IT Park, Ambattur Chennai-600034 Industrial Estate, Chennai-600058, TN [PAN: AAECS 2087 A] (Respondent/Assessee) (अपीलाथ�/Appellant/Revenue) In CO No. 68/Chny/2026 �नधा�रण वष� / Assessment Year: 2010-11 Movate Technologies Private Dy. CIT, Limited, Corporate Circle-4(1) 6th Floor, No. 32, A & B, Ambit Room No. 428, Fourth Floor, IT Park, Ambattur Industrial Main Building, Aayakar Estate, Chennai-600058, TN Bhawan, no. 121, M.G. [PAN: AAECS 2087 A] Road,Chennai-600034 (अपीलाथ�/Appellant/Assessee) (Respondent/Revenue) अपीलाथ� क� ओर से/ Assessee by : Mr. Sandeep Bagmar, Adv. Department/Revenue by : Ms. Nayani Swapna, CIT : 01.09.2026 सुनवाई क� तार�ख/Date of Hearing घोषणा क� तार�ख /Date of : 11.09.2026 Pronouncement आदेश / O R D E R PER MANU KUMAR GIRI, JM:

This appeal by the Revenue is directed against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“Ld. CIT(A)”], dated 23.02.2026

ITA No 2341/Chny/2026 & CO No. 68/Chny/2026 (AY 2010-11) Movate Technologies Pvt Ltd. Vs DCIT CC-4(1) :: 2 :: for the assessment year 2010-11, arising out of the assessment order passed u/s. 143(3) read with section 147 of the Income Tax Act, 1961 [“the Act”].

ITA No 2341/Chny/2026 & CO No. 68/Chny/2026 (AY 2010-11) Movate Technologies Pvt Ltd. Vs DCIT CC-4(1) :: 3 :: 3. The grounds raised by the Revenue, insofar as relevant to the present adjudication, relate to deletion by the Ld. CIT(A) of the addition of Rs.14,51,54,601/- made by the Assessing Officer on account of Mark-to-Market (“MTM”) gain on restatement of outstanding foreign exchange derivative contracts. 4. Briefly stated, the assessee is engaged in providing information technology and IT-enabled services. During the relevant previous year, the assessee had outstanding foreign exchange derivative contracts as on 31.03.2010. On restatement of such outstanding contracts, an MTM gain of Rs.14,51,54,601/- was recognised in the books of account in accordance with Accounting Standard-11. 5. In the computation of taxable income under the normal provisions of the Act, however, the assessee reduced the aforesaid amount on the ground that the gain was unrealised and notional in nature. It is an admitted position, as recorded by the Ld. CIT(A), that no actual settlement or receipt in respect of the said contracts took place during the relevant previous year. 6. The Assessing Officer brought the aforesaid amount to tax primarily on the ground that the assessee was following the mercantile system of accounting and had recognised the MTM gain in its Profit & Loss Account. According to the Assessing Officer, therefore, the income had accrued to the assessee and was liable to tax.

ITA No 2341/Chny/2026 & CO No. 68/Chny/2026 (AY 2010-11) Movate Technologies Pvt Ltd. Vs DCIT CC-4(1) :: 4 :: 7. On appeal, the Ld. CIT(A), after considering the material on record, deleted the addition. The Ld. CIT(A) observed that the gain had arisen only on restatement of outstanding derivative contracts as at 31.03.2010 and that there had been no actual settlement or receipt during the relevant previous year. The Ld. CIT(A) further relied upon the principle embodied in CBDT Instruction No. 3/2010 dated 23.03.2010 and held that an MTM adjustment in the absence of actual settlement remains notional/contingent. The Ld. CIT(A) also noted that the assessee had consistently followed the same method of treatment in earlier and subsequent years by adding back MTM losses and reducing MTM gains from taxable income. Now revenue is in appeal before us. 8. The ld.DR for the revenue has contended that the Ld. CIT(A) erred in treating the MTM gain as notional. It has been submitted that the assessee follows the mercantile system of accounting, the gain was recognised in the Profit & Loss Account in accordance with the applicable accounting standards and, therefore, the income had accrued. Reliance has also been placed upon the decision of the Hon'ble Supreme Court in CIT v. Woodward Governor India Pvt. Ltd. (2009) 312 ITR 254 (SC). The Revenue has further contended that CBDT Instruction No. 3/2010 relates to MTM losses and cannot be applied for excluding MTM gains from taxation. 9. Per contra, the assessee has supported the order of the Ld. CIT(A). It has been submitted that the MTM gain was entirely unrealised, no settlement had taken place and there was no

ITA No 2341/Chny/2026 & CO No. 68/Chny/2026 (AY 2010-11) Movate Technologies Pvt Ltd. Vs DCIT CC-4(1) :: 5 :: actual receipt during the year. The recognition of the gain in the books pursuant to Accounting Standard-11, according to the assessee, is not determinative of its taxability. It has further been submitted that the assessee has consistently followed the same treatment over the years and that such treatment had not been disturbed. 10. We have considered the rival submissions and perused the material placed on record. The controversy before us is limited to the question whether the MTM gain of Rs.14,51,54,601/- arising on restatement of outstanding foreign exchange derivative contracts, without any actual settlement or realisation during the relevant previous year, is liable to be brought to tax under the normal provisions of the Act. 11. At the outset, it is not in dispute that the impugned amount represents an MTM gain arising from the restatement of outstanding foreign exchange derivative contracts as at 31.03.2010. It is also undisputed, as recorded by the Ld. CIT(A), that there was no actual settlement or receipt in respect of the said contracts during the relevant previous year. 12. We are unable to accept the Revenue's contention that mere recognition of the MTM gain in the Profit & Loss Account necessarily concludes the issue of its taxability. Accounting treatment and determination of taxable income operate in their respective fields. The fact that a particular adjustment is required to be recognised in the books in accordance with an accounting standard cannot, by itself, be conclusive of whether

ITA No 2341/Chny/2026 & CO No. 68/Chny/2026 (AY 2010-11) Movate Technologies Pvt Ltd. Vs DCIT CC-4(1) :: 6 :: the same constitutes taxable income under the provisions of the Act. 13. In the present case, the MTM gain arose merely on valuation/restatement of the outstanding contracts as on the balance sheet date. In the absence of actual settlement during the year, the valuation remained susceptible to reversal on account of subsequent movements in the foreign exchange rates. The gain, therefore, did not represent an amount actually received by the assessee during the year. 14. We also find substance in the approach adopted by the Ld. CIT(A) with reference to CBDT Instruction No. 3/2010 dated 23.03.2010. Though the said Instruction specifically deals with MTM losses, the principle relied upon by the Ld. CIT(A) is that, in the absence of actual settlement, an MTM adjustment is not to be treated merely by virtue of the valuation entry as a finally crystallised item. The relevant issue before us is the nature of the impugned gain in the facts of the present case and not merely the nomenclature of the adjustment as appearing in the books. 15. The Revenue has placed reliance on the decision of the Hon'ble Supreme Court in CIT v. Woodward Governor India Pvt. Ltd. (2009) 312 ITR 254 (SC). We have considered the said contention. However, on the facts as recorded in the impugned order, the amount before us is an unrealised MTM gain arising from outstanding derivative contracts, with no actual settlement or receipt having taken place during the year. The Revenue has not demonstrated from the material placed

ITA No 2341/Chny/2026 & CO No. 68/Chny/2026 (AY 2010-11) Movate Technologies Pvt Ltd. Vs DCIT CC-4(1) :: 7 :: before us that the impugned amount represented an unconditional and enforceable right to receive a crystallised amount during the relevant previous year. Therefore, the mere recognition of the MTM gain in the books cannot, in the facts before us, be treated as sufficient to bring the amount to tax. 16. We further take note of the consistent method followed by the assessee. As recorded by the Ld. CIT(A), in earlier assessment years the assessee had added back MTM losses in computing taxable income and, in years in which MTM gains arose, had reduced such gains from taxable income. It is also recorded that there is nothing on record to demonstrate that this consistent treatment was disturbed in the earlier years. While the principle of consistency cannot be invoked to perpetuate an incorrect position contrary to law, where the facts and circumstances remain unchanged and the Revenue has itself accepted a consistent method in the earlier years, the principle assumes relevance, particularly when there is no demonstrated change in the underlying facts or legal position. 17. In the present case, the Revenue has not brought any material on record to establish that the nature of the impugned MTM gain was different from the MTM adjustments consistently dealt with by the assessee in the other years. We therefore find no infirmity in the Ld. CIT(A)'s reliance upon the consistent treatment, read with the factual finding that the impugned gain was unrealised and no settlement had taken place during the year.

ITA No 2341/Chny/2026 & CO No. 68/Chny/2026 (AY 2010-11) Movate Technologies Pvt Ltd. Vs DCIT CC-4(1) :: 8 :: 18. On an overall consideration of the facts and circumstances, we are of the considered view that the unrealised MTM gain of Rs.14,51,54,601/- arising on restatement of the outstanding foreign exchange derivative contracts, in the absence of actual settlement or receipt during the relevant previous year, cannot be brought to tax as real income merely on the basis of its recognition in the books of account.We accordingly uphold the finding of the Ld. CIT(A) deleting the addition of Rs.14,51,54,601/- on account of MTM gain.Accordingly, the grounds raised by the Revenue on the MTM issue are dismissed. Hence, the revenue's appeal is dismissed. 19. CO No. 68/Chny/2026: Since we have adjudicated the MTM issue on merits while disposing of the Revenue’s appeal, the legal issue raised by the assessee in CO No. 68/Chny/2026 is not being adjudicated separately. Hence, dismissed as infructuous. 20. In the result, the Revenue's appeal is dismissed. Order pronounced in the open Court on 11th day of September, 2026 in Chennai.

Sd/- Sd/- (प�ावती एस) (मनु कुमार िग#र) (PADMAVATHY S) (MANU KUMAR GIRI) लेखा सद या/ACCOUNTANT MEMBER "या�यक सद य/JUDICIAL MEMBER

ITA No 2341/Chny/2026 & CO No. 68/Chny/2026 (AY 2010-11) Movate Technologies Pvt Ltd. Vs DCIT CC-4(1) :: 9 :: चे"नई/Chennai, $दनांक/Dated: 11th September, 2026. SNDP, Sr. PS आदेश क� &�त'ल(प अ)े(षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF SANDEEP KUMAR Digitally signed by SANDEEP KUMAR Date: 2026.09.17 12:07:29 +05'30'