Revision under section 263 based on cash flow hedge accounting

Facts:

Assessee was a BPO entity who had done cash flow hedge on which they had followed AS-30 as per which the effective hedge component was showed as Hedge receivable and an equivalent amount was shown on liability side of the Balance sheet as reserves and surplus. This was questioned by PCIT under section 263 in his revision powers and remitted to the AO on grounds that a proper enquiry was not done on the cash flow hedge and the direct accounting into reserves and surplus instead of routing it via P&L account. Aggrieved by this assessee went in appeal -

Held against the assessee that the accounting aspect of cash flow hedge was not properly investigated by the AO and thus the PCIT's revision was correct.

Ed. Note: The dichotomy between tax accounting and standard based accounting is imminent with a timing issue and a deferred tax impact as well is quite likely in such hedge accounting cases. 

Case: AGS Health (P) Ltd. v. Asstt. CIT 2023 TaxPub(DT) 2476 (Chen-Trib)