SIVA INDUSTRIES AND HOLDINGS LTD.,CHENNAI vs. DCIT, CORPORATE CIRCLE3(1), CHENNAI

ITTPA 28/CHNY/2025Status: DisposedITAT Chennai27 April 2026AY 2015-1630 pages
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What were the facts?

The assessee, M/s. Siva Industries and Holdings Limited, engaged in telecom project management, strategic investments, and consulting, filed its return for AY 2015-16 declaring a loss. The Assessing Officer (AO) completed the assessment under Section 143(3) read with Sections 92CA(4) and 144C(4), making additions totaling Rs. 5,98,59,46,932/-. The assessee appealed to the CIT(A), who disposed of the appeal on 30.07.2025, partially upholding certain additions and setting aside others for verification. The CIT(A) restricted corporate guarantee commission, upheld adjustments for interest on OFCDs and loans, set aside foreign exchange fluctuation loss and Form 26AS differences, upheld closing stock valuation and partial TDS credit, and upheld disallowance of capital losses. Both the assessee and the revenue have filed cross-appeals before the ITAT.

What did the Tribunal hold?

The Tribunal held that no transfer pricing adjustment was warranted for the corporate guarantee obligation, as the transaction arose from invoking a guarantee for an insolvent AE, and imputing interest would be contrary to commercial reality and the real income theory. The addition was deleted. For loans to Siva Skylink Global Ltd., the Tribunal deleted the adjustment, stating that transfer pricing provisions cannot tax non-existent income when recovery is uncertain and the AE has ceased to exist. Regarding foreign exchange fluctuation loss, the issue was restored to the AO for verification, as the assessee claimed it was on revenue account but factual verification was needed. The addition to the closing stock valuation was deleted, as the revenue did not conclusively disprove the assessee's NRV basis and consistent valuation method. The difference between Form 26AS and P&L was restored to the AO for verification and relief if income was already offered. The depreciation claim was restored to the AO for proper verification. For capital losses, the disallowance was deleted, as Section 50CA was not applicable to AY 2015-16, and substitution of FMV was impermissible prior to its insertion. The TDS credit issue was restored to the AO for verification and allowance in accordance with Section 199 read with Rule 37BA to avoid double taxation. The revenue's appeal regarding corporate guarantee commission was dismissed, upholding the CIT(A)'s restriction to 0.5%. The revenue's grounds concerning OFCD adjustments were dismissed as infructuous in view of the deletion of the entire adjustment in the assessee's appeal.

What were the issues?

1. Whether the Tribunal had to decide if an upward adjustment towards interest receivable on investment in Optionally and Fully Convertible Debentures (OFCDs) was warranted, and if so, at what rate. The assessee argued that the investment was quasi-equity, revenue recognition was postponed due to uncertainty as per AS-9 and Supreme Court's ruling in UCO Bank v. CIT, and relied on CBDT Circular No. 491. The revenue contended that the TPO correctly treated the OFCDs as a loan, disregarded AS-9, and imputed interest at an arm's length rate, which the CIT(A) restricted. 2. Whether the Tribunal had to decide if a transfer pricing adjustment was warranted on loans to Siva Skylink Global Ltd. The assessee argued that funds were from own resources, recovery was uncertain, and the AE ceased to exist, making interest accrual untenable. The revenue's contention is not explicitly recorded for this specific issue, but the CIT(A) had upheld the adjustment. 3. Whether the Tribunal had to decide on the allowability of foreign exchange fluctuation loss. The assessee claimed it was on revenue account. The CIT(A) had set aside the issue to the AO for verification without a finding on merits. 4. Whether the Tribunal had to decide on the valuation of closing stock. The assessee argued for valuation at cost or Net Realizable Value (NRV), whichever is lower, and that its consistent method should not be disturbed without contrary evidence from the revenue. The AO had substituted the valuation without disproving the NRV basis. 5. Whether the Tribunal had to decide on the difference between Form 26AS and the Profit & Loss Account. The CIT(A) had remitted the issue for verification. 6. Whether the Tribunal had to decide on the depreciation claim. The CIT(A) had remitted the issue for verification. 7. Whether the Tribunal had to decide on the disallowance of long-term and short-term capital loss. The assessee argued that Section 50CA was not applicable to AY 2015-16 and there was no statutory mandate to substitute fair market value (FMV) for actual consideration. The AO had substituted FMV. 8. Whether the Tribunal had to decide on the TDS credit. The assessee argued that denial would lead to double taxation if income was offered. The CIT(A) had upheld partial allowance.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 92CA(4),Section 144C(4),Section 50CA,Section 199,Section 37BA

AI-generated summary — verify with the full judgment below

आयकर अपील"य अ"धकरण ’डी’ "यायपीठ, चे"नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI "ी मनु कुमार िग"र, "ाियक सद" एवं "ी एस. आर. रघुनाथा, लेखा सद" के सम" BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI S.R.RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./IT (TP)A No.28/Chny/2025 "नधा"रण वष"/Assessment Year: 2015-16 M/s. Siva Industries and Holdings v. DEPUTY COMMISSIONER Limited, OF INCOME TAX 113-114, A Block, B Wing Mena CORPORATE CIRCLE-3(1), Kampala Arcade, 3rd Floor, Sir Chennai Thyagaraya Road, T Nagar, Chennai 600017 [PAN: AAACS4460M] (अपीलाथ"/Appellant) (""यथ"/Respondent) अपीलाथ" की ओर से/ Mr. B.Ramakrishnan, F.C.A Appellant/Assessee by ""थ" की ओर से /Respondent by Mr. ARV Srinivasan, CIT आयकर अपील सं./IT (TP)A No.29/Chny/2025 "नधा"रण वष"/Assessment Year: 2015-16 DEPUTY COMMISSIONER OF M/s. Siva Industries and Holdings Limited, INCOME TAX CORPORATE 113-114, A Block, B Wing CIRCLE-3(1), Chennai Mena Kampala Arcade, 3rd Floor, Sir Thyagaraya Road, T Nagar, Chennai 600017 [PAN: AAACS4460M] (अपीलाथ"/Appellant) (""यथ"/Respondent) अपीलाथ" की ओर से/ : Mr. ARV Srinivasan, CIT Appellant/Department by ""थ" की ओर से /Respondent by : Mr. B.Ramakrishnan, F.C.A. सुनवाईक!तार"

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