JUDGMENT Akil Kureshi, J. - This appeal under section 260A of the Income Tax Act, 1961 ("the Act" for short), challenges the order dated 26.8.2015 passed by the Income Tax Appellate Tribunal, Mumbai ("the Tribunal" for short). 2. This appeal relates to the Assessment Year 2008-09. 3. The Revenue urges following question of law for our consideration: " Whether on the facts of the case and in law, the Tribunal was justified in deleting the addition made by the Assessing Officer who held that the exchange gain on account of restatement on foreign loan is not covered under the tonnage tax scheme and is taxable as normal business income? 4. The respondent assessee is engaged in the business of shipping. For the purpose of its business, it owns ships, boats, barges etc and also hires them. 5. The respondent filed return of income on 27.9.2008 declaring income of Rs. 1.62 crore (rounded off). During the course of assessment proceedings, the Assessing Officer noted that the respondent had opted for tonnage tax scheme under Chapter XIIG of the Act i.e special provisions relating to income of shipping companies. On verification, the Assessing Officer found that an amount of Rs. 8.89 crore in the aggregate being the gain on account of foregin exchange fluctuation and was credited to the Profit & Loss Account. 6. The gains, the Assessing Officer found was on account of the notional foreign exchange gain as restatement of liability to purchase ships, actual foreign exchange gain arising at the time of actual payment of loan taken to purchase ships and notional foreign exchange gain on account of actual restatement of foreign exchange balances on account of debts. According to the Assessing Officer, the gains on account of exchange rate variation of foreign loan is not covered under Chapter XII-G of the Act i.e tonnage tax scheme. Therefore, the agreegate amount of Rs. 8.89 crore was brought to tax under the normal business income by order dated 24.12.2010 passed under Section 143(3) of the Act. 7. Being aggrieved, the respondent carried the issue in appeal to the Commissioner of Income Tax (Appeals) ["CIT(A)" for short]. By order dated 2.1.2012, the CIT(A) held that the respondent assessee has himself shown the foreign exchange gain (notional and actual) agreegating to Rs. 7. Being aggrieved, the respondent carried the issue in appeal to the Commissioner of Income Tax (Appeals) ["CIT(A)" for short]. By order dated 2.1.2012, the CIT(A) held that the respondent assessee has himself shown the foreign exchange gain (notional and actual) agreegating to Rs. 8.89 crore as revenue receipt but the Assessing Officer was correct in holding that the above gain though revenue in nature is not covered by Chapter XII-G of the Act. Thus, the appeal of the respondent was dismissed by the CIT (A). 8. On further appeal, the impugned order of the Tribunal noted the fact that in subsequent assessment year namely assessment year 2010-11, on identical facts situation, the Assessing Officer has allowed the foreign exchange gain/loss arising on account of loan taken for the purpose of acquisition of ships as forming part of the core activity of the respondent assessee and thus, entitled to the benefit of Chapter XIIG of the Act. It also placed reliance upon the decision of its coordinate bench in case of Dredging Corporation of India Ltd v. ACIT [2011] 13 taxmann.com 37 (Vishakhapatnam) wherein it has been held that the gains realized on the foreign exchange fluctuation in connection with the core activity of the assessee would be treated as gains falling under the tonnage tax scheme as provided in Chapter XIIG of the Act. Thus, allowing the appeal of the respondent. 9. The learned counsel Mr. Walve in support of the appeal submits:- a. Exchange gain on account of restatement on foreign loan would not be covered under the tonnage tax scheme but would be taxable as normal business income. Thus, the appeal is restricted to only an amount attributable to the notional foreign exchange gain on account of restatement of liability of foreign loan taken to purchase ships; and b. The activity of purchasing of ships cannot be considered to be a core activity of the respondent for the purpose of shipping income as defined in Section 115VI of the Act. 10. On the other hand, Mr. 10. On the other hand, Mr. Mistri, the learned senior counsel on behalf of the respondent supports the impugned order of the Tribunal and submits as under :- a. The Assessing Officer himself as per the assessment order 2010-11 considered the gain arising on loan taken for acquisition of ships as core activity of the respondent for the purpose of shipping income as defined in Section 115VI of the Act. Further for the assessment year 2009-10, loss on account of foreign exchange fluctuation was allowed as part of tonnage income. It is submitted that on account of consistency, no fault can be found with the impugned order of the Tribunal allowing the respondent''s appeal; b. Reliance is placed upon the decision of the Tribunal in the case of Dredging Corporation of India Ltd (supra) wherein it has been held that the gains realized on the foreign exchange fluctuation in connection with the core activity of the assessee would be treated as gains falling under the tonnage tax scheme as provided in Chapter XIIG of the Act. 11. We may note that Chapter XII-G of the Act is a special chapter relating to income of the shipping companies. It inter alia provides to tax the income of shipping companies on deemed basis i.e on the basis of tonnage of the vessels. In terms of Section 115VF of the Act, the deemed income is to be computed on the basis of tonnage income and shipping income referred to Section 115VI shall not be chargeable to tax. Section 115VI of the Act inter alia refers to profits and gains of shipping companies obtained from core activities of the Company. Sub-section 2 of Section 115VI of the Act inter alia provides as core activity income from "operating qualifying ships." It is on the basis of the aforesaid provisions that the Assessing Officer for the assessment years from 2009-10 and 201011 consistently accepted the view that the gain/loss on the foreign exchange variation would be covered within the meaning of core activities of the shipping business of the respondent assessee. 12. 12. We find that the respondent had claimed the following gain on account of foreign exchange fluctuation as noted in the order dated 2.1.2012 of the CIT(A) claimed by the respondent as part of its shipping business is as under:- Particulars Amount (Rs.) Explanation Notional gain on account of restatement of foreign exchange liabilities on account of purchase of ships as on the end of the year. 5,91,41,900 (*) These are the entires passed in order to comply with Accounting Standard 11 - 'The effects of Changes in Foreign Exchange Rates.' Realized gains on foreign exchange on account of purchase of ships. 2,78,79,481 (*) This is the entry passed at the time of repayment during the year of the loans taken for the purchase of ships. Gains on foreign exchange fluctuations in balances on account of debtors etc, arising from the shipping activates 19,13,239 These arise basically on account of movement in the debtors' accounts. Mr. Walve, the learned counsel appearing for the Revenue, on instructions, states that this appeal is only restricted to Serial No. 1 above. The notional gain on account of restatement of foreign exchange liabilities on account of purchase of ships as on the end of the year. Therefore, according to the Revenue before us the foreign exchange gain/loss on account of Serial No. 2 & 3 above would form a part of the shipping income. The Revenue has not been able to give any rationale for submitting that gain arising in view of exchange variation on purchase of ships is taxable as shipping business and the gain as reinstatement of foreign exchange liability is not taxable as shipping business. This itself would warrant no interference of the impugned order dated 26.8.2015 of the Tribunal. 13. We also note that the Assessing Officer has allowed the gain made on account of foreign exchange variation for acquisition of ships as being a part of the core activity of the respondent assessee''s shipping business in its order for assessment year 2010-11. Thus holding that it falls within the meaning of the core activity of shipping business under Section 115VI (1) and (2) of the Act. The Revenue has not been able to show as to any material difference in the subject assessment year to the subsequent years when it has been accepted as shipping business which would warrant a different view in this appeal. 14. The Revenue has not been able to show as to any material difference in the subject assessment year to the subsequent years when it has been accepted as shipping business which would warrant a different view in this appeal. 14. Further, the impugned order also placed reliance on the decision of the Tribunal in the case of Dredging Corporation of India Ltd (supra). In the aforesaid decision, the Tribunal recorded the fact that the income earned on account of foreign exchange fluctuation was an activity which was generated from the activity of operating ships as defined in Section 115VI of the Act. On being specifically asked, Mr. Walve, the learned counsel for the Revenue states that he is not aware whether the decision of the Tribunal in the case of Dredging Corporation of India Ltd (supra) has been challenged before the Andhra Pradesh High Court. However, we find that from the Tribunal decision in Dredging Corporation of India Ltd (supra), it is not clear as to whether the gain on exchange fluctuation was on account of carrying out dredging activity or for purchase of dredges. Thus, we do not reply upon it. Be that as it may, independent of the decision of the Tribunal in the decision Dredging Corporation of India Ltd (supra), we are of the view that the activity of loss or gain on account of exchange variation is in the nature of core activity of the respondent. 15. Chapter XII-G of the Act contains special provisions relating to income of shipping companies. As per Section 115VA, the income of a company from the business of operating qualifying ships, at its option, be computed in accordance with the provisions of the said chapter. The term ''Qualifying Company'' is defined in Section 115VC and term "Qualifying ship" is defined in Section 115VD of the Act. For being categorized as ''Qualifying Company'', one of the requirements is that the company owns at least one qualifying ship. Section 115VB of the Act pertains to operating of ships and provides that a company shall be regarded as operating a ship if it operates any ship whether owned or chartered by it. Section 115VE of the Act contains provisions for manner of computation of income under tonnage tax scheme. Section 115VG makes provision for computation of tonnage income. Section 115VI pertains to relevant shipping income. Section 115VE of the Act contains provisions for manner of computation of income under tonnage tax scheme. Section 115VG makes provision for computation of tonnage income. Section 115VI pertains to relevant shipping income. As per sub-clause (i) of subsection (1), the relevant shipping income of a tonnage tax company would mean its profits from core activities referred to in sub-section (2). Sub-section (2) of Section 115VI lists the core activities of the tonnage tax company which includes its activities from operating qualifying ships. 16. From such provisions, it can be seen that a qualifying company can take advantage of the provisions contained in the said chapter for computing its income arising from the business of operating qualifying ships. Though the term ''Operating Ships'' takes within its fold a case of company which operates a ship whether owned or even chartered by it, for a company to be categorized as qualifying company, one of the requirements is that it owns at least one qualifying ship. Owing a ship for the purpose of operating is thus an integral part of qualifying company to be engaged in the business of operating the qualifying ships. 17. In case of Commissioner of Income Tax v. Bokaro Steel Ltd (1999) 36 ITR 315 (SC) , the Supreme Court examined a case where the company was in the process of constructing and erecting its plant. While this process was going on, the company had earned from different activities the income including rent from quarters let out to employees of the contractors. In such background, it was held that the amount was directly connected and incidental to the construction of plant by the assessee and therefore, a capital receipt. Similarly in the present case, we find that the assessee''s act of acquiring the ships was closely connected, interlinked and integral to its core activities of operating qualifying ships. 18. We see no reason to interfere with the impugned order of the Tribunal, as the Revenue itself contends that its appeal is restricted only to Serial No. 1 referred to herein above i.e. on account of restatement of foreign exchange liabilities on purchase of ships and it makes no grievance on realized gains on foreign exchange on account of purchase of ships referred to at serial No. 2 above. This distinction itself is without any basis. This distinction itself is without any basis. If realizing gain on account of foreign exchange fluctuations on account of purchase of ships at Sr No. 2 is to be treated as shippping income, there is so reason as to why notional gain on account of foreign exchange liabilities on account of purchase of ships at Serial No. 1 should also not been given the same treatment. 19. Besides on account of consistency of the treatment of the variation on account of foreign exchange gain/loss arising on loan taken for acquisition of ships would be considered core activity arising out of operating ships. That is so far as gain/loss arising on variation of foreign exchange on purchase of ships is concerned. There is no reason given as to why the gain made as restatement of foreign exchange liability is not a part of shipping business under Section 115VI of the Act. Further the variation in exchange rates on account of loan taken on purchase of ships and which gives rise to profit/loss on account of foreign exchange variation of loan taken would in our view be considered to be a part of core activity of the shipping company entitled the benefit of Chapter XII-G of the Act. In the above view, the question as proposed does not give rise to any substantial question of law. Thus, not entertained. Appeal is dismissed.