The flame should be shown above the water.
The flame of the torch is actually displayed below the water.
1. Place a torch on the same level as a water source
2. Look at the torch to the flame can be seen in front of the water
Related issues
Attachments
Comments

[media]

I created a youtube video of this issue, with the intention of submitting a bug report. However, found it's already been reported. However, if it helps, the video is here. http://www.youtube.com/watch?v=q-YhZorCmmU
I'm seeing the issue on 1.7.4 (Windows 8.1 x64, Java 7 u45)