Income Tax Appellate Tribunal - Chennai
Siva Industries And Holdings ... vs Dcit, Corporate Circle3(1), Chennai on 27 April, 2026
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
नधारण 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
नधारण वष/Assessment Year: 2015-16
DEPUTY COMMISSIONER OF M/s. Siva Industries and
INCOME TAX CORPORATE Holdings Limited,
CIRCLE-3(1), Chennai 113-114, A Block, B Wing
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 ख/Date of Hearing : 11.02.2026
घोषणाक!तार ख /Date of : 27.04.2026
Pronouncement
IT (TP)A 28 & 29/Chny/2025 (AY 2015-16)
Siva Industires & Holdings Limited VS DCIT C 3(1)
:: - 2 - ::
आदे श / O R D E R
PER MANU KUMAR GIRI, JM:
The captioned cross appeals filed by the assessee and revenue are directed against the Commissioner of Income Tax, Appeal, CIT(A), Chennai-16 for the assessment year 2015-16.
IT(TP)A No.28/Chny/2025 (Assessee's Appeal):
2. Brief facts of the case are that the Appellant, M/s Siva Industries and Holdings Limited, is a company engaged in telecom project management, strategic investments, and strategic consulting services. The Appellant is assessed to tax under PAN:
AAACS4460M by the Assistant Commissioner of Income Tax, Corporate Circle-6(2), Chennai (hereinafter referred to as "the Assessing Officer" or "the AO"). The Appellant filed its original return of income for Assessment Year (AY) 2015-16 on 29.11.2015, declaring a loss of Rs.6,37,64,68,681/- under the normal provisions of the Act and reporting a book loss of Rs.1,75,14,51,532/-. The case was selected for scrutiny assessment, and a notice u/s. 143(2) of the Income Tax Act ("the Act") was issued. Subsequently, notices u/s. 142(1) were also issued. The Appellant duly furnished the details and information as called for in response to these notices. Thereafter, the assessment was completed by the AO through an order dated 28.02.2019 passed u/s. 143(3) read with 92CA(4) and 144C(4) of the Act. The AO made total additions/disallowances amounting to Rs.5,98,59,46,932/-, resulting in an assessed income of Page - 2 - of 30 IT (TP)A 28 & 29/Chny/2025 (AY 2015-16) Siva Industires & Holdings Limited VS DCIT C 3(1) :: - 3 - ::
Rs.8,40,98,852/- and raising a demand of Rs.49,87,260/-. Aggrieved by the additions and disallowances, the Appellant filed an appeal before the Commissioner of Income Tax (Appeals) on various grounds. The Commissioner of Income Tax (Appeals), vide order dated 30.07.2025, disposed of the appeal as follows:
• The upward adjustment towards Corporate Guarantee Commission at 2.34% on Rs.34,59,32,710/- was restricted to 0.5%, following the order of the ITAT in the Appellant's own case (Order dated 04.11.2022 in ITA Nos. 18/CHNY/2019 and 19/CHNY/2019). This relied on the Tribunal's earlier decision for AY 2011-12 (I.T.A. No. 919/Chny/2018 dated 12.08.2022), wherein the transaction was treated as an international transaction and the rate was restricted to 0.5% instead of
2.19%, noting that corporate guarantees issued by a holding company cannot be compared with guarantees issued by commercial banks.
• Upheld the upward adjustment towards interest receivable on investments in Optionally and Fully Convertible Debentures (OFCDs) amounting to Rs.6,22,05,255/-. • Upheld the upward adjustment of Rs.10,06,95,465/- towards interest on loans receivable of Rs.390,29,25,000/- from Winwind OY, Finland.
• Upheld the upward adjustment of Rs.3,02,27,070/- towards interest on loans receivable of Rs.129,08,08,055/- from Siva Skylink Global Ltd., Mauritius.
• Set aside the issue relating to disallowance of foreign exchange fluctuation loss amounting to Rs.2,41,75,046/- to the AO for verification.
• Upheld the addition to the value of closing stock amounting to Rs.98,25,442/-.
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• Set aside the issue relating to the difference between Form 26AS and income as per the Profit & Loss Account amounting to Rs.9,50,014/- to the AO for verification.
• Set aside the issue relating to depreciation, where Rs.2,55,78,582/- was erroneously considered instead of the actual depreciation of Rs.3,29,72,545/-, resulting in a disallowance of Rs.73,93,963/-, for verification. • Upheld the disallowance of long-term capital loss by adopting a fair market value of Rs.39,10,17,000/- and short-term capital loss by adopting a fair market value of Rs.5,78,85,850/-. • Upheld the partial allowance of TDS credit, allowing Rs.40,38,261/- as against the claimed amount of Rs.77,46,344/-, resulting in a shortfall of Rs.37,08,083/-.
3. Aggrieved by the order of the CIT(A), the assessee has preferred this appeal before us. In this regard, the ld.AR for the assessee submitted as below:
3.1 Ground No.1 - General Since the ground is general in nature, no specific submission was made in this regard. Hence dismissed.
3.2 Ground No.2 & 3:TP Issue- Upward Adjustment towards interest receivable on investment made in Optionally and Fully Convertible Debentures ("OFCD") Rs. 6,22,05,255/-: -
The ld.DR for the revenue contended that the Transfer Pricing Officer (TPO) held that the Appellant's subscription to Optionally and Fully Convertible Debentures (OFCDs) amounting to Rs.31,07,62,753/- was, in substance, in the nature of a loan. The TPO rejected the Appellant's contention that the investment constituted quasi-equity and also disregarded the non-recognition of interest under Accounting Standard (AS)-9. By adopting an Page - 4 - of 30 IT (TP)A 28 & 29/Chny/2025 (AY 2015-16) Siva Industires & Holdings Limited VS DCIT C 3(1) :: - 5 - ::
arm's length interest rate of LIBOR plus 200 basis points (2.58%), the TPO computed notional interest of Rs.8,02,44,779/- for FY 2014-15 and proposed the same as an upward adjustment. He further contended that the CIT(A) agreed with the TPO that interest ought to be imputed. This conclusion was based on the Appellant's consistent practice of advancing funds to its Associated Enterprises (AEs) and subsequently writing off both principal and interest. The CIT(A) also observed that the Appellant had not explained the facts and circumstances leading to the write-off of these advances as on 31.03.2020. However, relying on the decision of the Hon'ble Tribunal in the assessee's own case for AY 2014-15, where it was held that no transfer pricing adjustment is warranted if the interest charged exceeds the LIBOR rate--the CIT(A) directed the TPO/AO to restrict the adjustment to 2% (being the applicable interest rate on OFCDs). This rate was considered appropriate as it exceeded the relevant LIBOR rate of 0.58%, as against the earlier adjustment made at 2.58%. Per contra, the ld.AR for the assessee submitted that the investment in OFCDs of Mis Siva Skylink Gilobal Ltd. was for strategic overseas acquisitions and carried an interest rate of 2% pa. The OFCDs were issued with an inherent option to convert the same into equity shares. The appellant had provided for the total investment and interest receivable outstanding as at 31.03.2014- due to the uncertainty regarding its realization, no interest income was recognized in FY 2014-15. The appellant relied on Accounting Standard 9 (AS 9), which permits the postponement of revenue recognition when significant uncertainties exist regarding collection or realization of revenue. Reliance was placed on the Page - 5 - of 30 IT (TP)A 28 & 29/Chny/2025 (AY 2015-16) Siva Industires & Holdings Limited VS DCIT C 3(1) :: - 6 - ::
decision of the Hon'ble Supreme Court in the case of UCO Bank v. CIT, wherein it was laid down that interest on sticky or doubtful loans would not be said to accrue for the purpose of taxation, if such interest is not recoverable and there is uncertainty regarding its realization. When recognition of revenue is postponed due to the effect of uncertainties, it is considered as revenue of the period in which it is properly recognized CBDT Circular No. 491 dated 30.06.1987 provides that interest on sticky advances is to be allowed if the assessee is following the mercantile system of accounting and has changed the method of accounting to cash basis for recognizing the interest on sticky loans. Though this Circular is applicable to State Finance Corporations, in-principle, it shall be applicable to the appellant company. The appellant also emphasized the "real income" theory, arguing that only real income is taxable, not notional income, and cited various court decisions supporting the non-taxability of interest when collection is uncertain. It was submitted that the said OFCDs were never redeemed / converted in the subsequent years and on 31.03.2020, the dues outstanding as at that date were written off in the books of accounts of the appellant company as permanent diminution in the value of investments held overseas. Without prejudice, the appellant had highlighted the ITAT's order in its own case for AY 2014-15 (dated 04.11.2022) in ITA Nos.
18/CHNY/2019 and 19/CHNY/2019, wherein the Tribunal had directed the TPO/Assessing Officer to revisit the issue and fix the correct LIBOR rate before deciding on any arm's length pricing adjustment. noting that the appellant's charged rate of 2% was more than the LIBOR rate of 0.95% considered by the TPO. The Page - 6 - of 30 IT (TP)A 28 & 29/Chny/2025 (AY 2015-16) Siva Industires & Holdings Limited VS DCIT C 3(1) :: - 7 - ::
appellant had prayed for the addition to be deleted or restricted to the LIBOR rate before the CIT(A) where the Ld. CIT(A) had directed to restrict the adjustment to 2% (the applicable interest rate on OFCDs), as it was higher than the applicable LIBOR rate of 0.58%. Based on the above, it is prayed that the addition made towards interest receivable on investment made in OFCDs of M/s Siva Skylink Global Ltd. be deleted.
3.3 Ground Nos.4 & 5-TP Issue-Upward adjustment towards interest on Loan Receivable amounting to Rs. 390,29,25,000/-
from Winwind OY, Finland -Rs.10,06,95,465/-:
The Ld.DR-CIT submitted that the Transfer Pricing Officer (TPO) treated the Appellant's payment of Rs.390.29 crores to IDBI, made on behalf of Winwind OY, as a loan rather than an advance. The TPO rejected the Appellant's contention that the funds were cost-free, particularly in light of the substantial finance costs incurred by the Appellant. It was further observed that no interest income had been recognized and that no efforts were made to recover the amount. Accordingly, the TPO computed an upward adjustment of Rs.10,06,95,465/- for FY 2014-15 by applying an arm's length interest rate of LIBOR plus 200 basis points (2.58%). The Ld.CIT(A) concurred with the findings of the TPO and upheld the addition, noting that the Appellant had incurred significant finance costs and had a consistent pattern of writing off advances and interest relating to its Associated Enterprises (AEs). The CIT(A) held that the failure to charge interest was not in accordance with the arm's length principle. Further, the CIT(A) distinguished the present case from earlier decisions of the Hon'ble Tribunal in the Appellant's own case, observing that, in Page - 7 - of 30 IT (TP)A 28 & 29/Chny/2025 (AY 2015-16) Siva Industires & Holdings Limited VS DCIT C 3(1) :: - 8 - ::
the instant transaction relating to the corporate guarantee invoked on behalf of the AE, the Appellant had neither accounted for any interest receivable nor determined any specific rate of interest. The Ld. Authorised Representative (AR) for the Appellant submitted that the Appellant company had executed a corporate guarantee in favour of IDBI Bank Limited, DIFC Branch, Dubai ("IDBI") during FY 2010-11 in connection with credit facilities availed by its Associated Enterprise (AE), M/s Winwind OY Ltd., Finland ("Winwind OY"). It was emphasized that no counter- guarantee agreement was executed between the Appellant and Winwind OY in the event of default. During FY 2013-14, Winwind OY filed for bankruptcy and defaulted on repayment of the credit facilities availed from IDBI. The Board of Directors of Winwind OY passed a resolution on 30.09.2013 recommending the filing of a bankruptcy petition and the appointment of an administrator. This was followed by a letter dated 01.10.2013 from IDBI, a major creditor, confirming the appointment of an attorney to act as administrator in the bankruptcy proceedings. Subsequently, Winwind OY was wound up and ceased to exist with effect from 14.02.2017. Consequently, the Appellant was required to honour the corporate guarantee and paid Rs.3,90,29,25,000/- to IDBI, Dubai on behalf of Winwind OY. The Appellant contended that no additional cost was incurred for this repayment, as the funds were sourced from internal means, including redemption of OFCDs, repayment of loans from other AEs, and surrender of equity investments. The Appellant further submitted that, due to the uncertainty surrounding recovery, a provision was created in FY 2013-14 treating the entire amount as a bad and doubtful Page - 8 - of 30 IT (TP)A 28 & 29/Chny/2025 (AY 2015-16) Siva Industires & Holdings Limited VS DCIT C 3(1) :: - 9 - ::
advance. Accordingly, no interest income was recognized in FY 2014-15. As no recoveries were made in subsequent years, the outstanding dues were ultimately written off in the books on 31.03.2020 following the winding up of Winwind OY. Relying on Accounting Standard 9 (AS-9), the Appellant argued that revenue recognition may be postponed where there is significant uncertainty regarding ultimate collection. In support, reliance was placed on the judgment of the Hon'ble Supreme Court in UCO Bank v. CIT, wherein it was held that interest on sticky loans does not accrue if its recovery is uncertain. The Appellant also invoked the "real income" theory, contending that only real income, and not hypothetical or notional income, can be subjected to tax.
Various judicial precedents were cited to support the proposition that interest income cannot be taxed where its realization is doubtful. On this basis, it was argued that since no income had actually arisen from the said international transaction, the provisions of transfer pricing ought not to be invoked. Without prejudice, the Appellant submitted that, even if interest were to be imputed, the arm's length rate for a foreign currency loan should be restricted to LIBOR (0.58%), relying on the decision of the Hon'ble ITAT in the Appellant's own case for AY 2014-15 (Order dated 04.11.2022 in ITA Nos. 18/CHNY/2019 and 19/CHNY/2019). However, the Ld. CIT(A) rejected the above contentions and upheld the addition made by the TPO/AO. In view of the above, the Appellant prayed that the addition be deleted in full or, in the alternative, be restricted to the LIBOR rate.
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3.4 Ground No.6- TP Issue- Upward adjustment towards interest on Loan Receivable amounting to Rs. 129,08,08,055/- from Siva Skylink Global Ltd. Mauritius RS, 3,02,27,070/-:
The ld.DR-CIT contended that the Ld.CIT(A) concurred with the findings of the TPO, observing that the Appellant had not substantiated its treatment of the amount of Rs.128.08 crores, paid towards repayment of the AE's debt, as an advance in FY 2013-14. The CIT(A) further noted that the Appellant had, in the same financial year, created a provision for bad and doubtful debts in respect of this amount without placing on record adequate details regarding the financial position of the AE or the efforts undertaken to recover the dues. Additionally, the CIT(A) emphasized that, given the Appellant's adoption of the mercantile system of accounting, the absence of such supporting evidence was significant. The CIT(A) held that where the Appellant had incurred substantial finance costs, the failure to charge interest on such advances could not be regarded as being at arm's length. It was observed that such an arrangement would not ordinarily arise between independent parties operating under comparable circumstances. Consistent with the reasoning adopted in Ground Nos. 4 and 5, the CIT(A) distinguished the present issue from earlier Tribunal decisions in the Appellant's own case. It was noted that, in respect of the loan receivable amounting to Rs.129,08,08,055/- from Siva Skylink Global Ltd., Mauritius, no interest rate had been fixed or provided for. Accordingly, the CIT(A) upheld the TPO's computation of interest at 2.36% (EURIBOR plus 200 basis points) on the outstanding amount for FY 2014-15.
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The Ld. Authorised Representative (AR) submitted that the Appellant had utilized its own funds for advancing monies to its Associated Enterprise, M/s Siva Skylink Global Ltd., Mauritius, and therefore had not incurred any cost in raising such funds. It was further submitted that, owing to uncertainty regarding realization, no interest income was recognized in FY 2014-15 in respect of the said loan. The Appellant placed reliance on Accounting Standard 9 (AS-9), which permits postponement of revenue recognition where there exists significant uncertainty regarding the ultimate collection or realization of income. The Appellant contended that the TPO erred in presuming the existence of a legally enforceable right to recover the advance, particularly when the Associated Enterprise had subsequently ceased to exist upon dissolution. It was further argued that the provisions relating to Transfer Pricing are applicable only where income arises from an international transaction. In the present case, since no income had actually arisen, the invocation of Transfer Pricing provisions was unwarranted. In view of the above, it was prayed that the upward adjustment of Rs.3,02,27,070/- towards imputed interest on the loan receivable amounting to Rs.129,08,08,055/- from M/s Siva Skylink Global Ltd., Mauritius, be deleted.
3.5 Ground No.7-Corporate Tax Issue-Disallowance of foreign exchange fluctuation loss amounting to RS. 2,41,75,046/-:
The Ld. DR/CIT submitted that the Assessing Officer (AO) observed that the Appellant had claimed Rs.2.75 crores as unrealized foreign exchange loss for AY 2015-16. This included Rs.2,31,77,586/- arising from foreign exchange loss on reinstatement of advances given to M/s Rudra Minerals Pte. Ltd.
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("RMPL") and Rs.9,97,460/- pertaining to an outstanding loan to RMPL. The AO contended that the foreign exchange loss arising on reinstatement of such advances could not be treated as a business expenditure, as the underlying transactions were capital in nature. Accordingly, the total forex loss of Rs.2,41,75,046/- was characterized as capital expenditure and disallowed as a deductible business expense. During the appellate proceedings, the Appellant submitted that the impugned amounts represented foreign exchange losses arising on revenue account. Considering this contention, and in the interest of natural justice, the CIT(A) directed the Appellant to furnish the necessary details before the AO. The AO was accordingly instructed to verify the nature of the losses and allow the claim if it is found that such losses were incurred on revenue account.
The Ld. Authorised Representative (AR) submitted that, during the appellate proceedings, the Appellant had clarified that the impugned amounts represented foreign exchange losses arising on revenue account. It was explained that a sum of Rs.2,31,77,586/- pertained to trade transactions with Rudra Agro, while the balance amount of Rs.9,97,460/- related to procurement of iron and coal. It was further submitted that M/s Rudra Minerals Pte. Ltd. (RMPL), a Singapore-based entity, was a supplier of coal to the Appellant at the relevant time. The outstanding dues payable in foreign currency across various divisions of the Appellant were reinstated in Indian Rupees in accordance with the applicable accounting standards. This reinstatement resulted in a foreign exchange fluctuation loss of Rs.2.75 crores, which included the disputed amount of Rs.2,41,75,046/-. After considering the submissions, Page - 12 - of 30 IT (TP)A 28 & 29/Chny/2025 (AY 2015-16) Siva Industires & Holdings Limited VS DCIT C 3(1) :: - 13 - ::
the CIT(A) set aside the issue to the file of the Assessing Officer (AO), directing the Appellant to furnish necessary details for verification. However, it was contended that the CIT(A) failed to adjudicate the issue on merits and merely remitted the matter to the AO without calling for a remand report or rendering a conclusive finding. In view of the above, it was prayed that the disallowance of foreign exchange fluctuation loss amounting to Rs.2,41,75,046/- be deleted, or in the alternative, the matter be set aside to the AO for proper verification and adjudication.
3.6 Ground No.8 & 9: Corporate Tax Issue- Addition to the Value of Closing Stock amounting to Rs. 98,25,442/-:
The Ld.DR-CIT submitted that the Assessing Officer (AO) observed that the average value of the closing stock reported by the Appellant was lower than the average purchase cost. In the absence of any response or clarification from the Appellant regarding this discrepancy, the AO proceeded to value the closing stock at its average purchase cost. Consequently, an addition of Rs.98,25,442/- being the differential arising from such valuation was made to the total income of the Appellant. The CIT(A) upheld the AO's method of valuation, observing that the Appellant had failed to furnish corroborative evidence or reliable market data to substantiate the Net Realisable Value (NRV) of Rs.2,000/- per metric tonne as claimed.
The ld AR for the assessee contended that The Appellant submitted that its Iron & Coal (Rudhra Division) had, during FY 2014-15, purchased 40,566.674 MT of steam (non-coking) coal from VM Coal Logix Pvt. Ltd. for a total consideration of Rs.9,82,10,701/-. The said coal was stored at a leased plot at Page - 13 - of 30 IT (TP)A 28 & 29/Chny/2025 (AY 2015-16) Siva Industires & Holdings Limited VS DCIT C 3(1) :: - 14 - ::
Visakhapatnam Port. Out of the total quantity, 17,257.910 MT was sold during the year, while the remaining 23,308.764 MT remained unsold due to a prolonged market downturn, which led to a significant decline in coal prices. In view of the depressed market conditions, the Net Realisable Value (NRV) was estimated at Rs.2,000/- per MT, and accordingly, the closing stock was valued at Rs.46,617,258/- as on 31.03.2015, being lower than the actual purchase cost, in accordance with the applicable accounting standard on valuation of inventories. It was further submitted that, over time, the Visakhapatnam Port Authorities detained the remaining stock due to non-payment of overdue plot rent. The Appellant was unable to clear the dues, resulting in issuance of notices and prolonged settlement discussions. Despite repeated efforts, no resolution could be reached. During this period, the coal stock deteriorated in quality and became non-saleable, ultimately rendering it obsolete. It was contended that the addition made by the Assessing Officer is contrary to the applicable accounting standards and tax provisions. Under generally accepted accounting principles (GAAP) as well as IFRS, inventories are required to be valued at the lower of cost or Net Realisable Value (NRV). The Appellant's method of valuing closing stock at NRV is in conformity with these principles, particularly where NRV is lower than cost. This approach is also consistent with Section 145A of the Income Tax Act. It was submitted that the AO failed to consider that the Appellant had valued its inventory at NRV in accordance with the principle of conservatism. A mere difference in valuation, by itself, does not justify any addition unless it is demonstrated that the valuation has been Page - 14 - of 30 IT (TP)A 28 & 29/Chny/2025 (AY 2015-16) Siva Industires & Holdings Limited VS DCIT C 3(1) :: - 15 - ::
made contrary to recognized accounting standards or is otherwise incorrect. The principle of consistency in accounting policies requires that valuation methods consistently followed over the years should not be disturbed, and there was no change in the Appellant's valuation methodology. The Appellant placed reliance on various judicial precedents of Hon'ble High Courts, which have consistently held that closing stock must be valued at cost or market price, whichever is lower, and that such method must be consistently followed year to year. In view of the above, it was prayed that the addition made towards valuation of closing stock amounting to Rs.98,25,442/- be deleted.
3.7 Ground No.10: Corporate Tax Issue- Addition being difference between 26AS and Income as per P&L A/c amounting to Rs.
9,50,014/-:
The ld.DR-CIT submitted that the Assessing Officer (AO) observed that the Appellant had failed to offer income of Rs.9,50,014/- received from Nielson Org-Marg (P) Ltd., as reflected in the reconciliation between gross receipts reported in Form 26AS and those recorded in the Profit & Loss Account. Since the said income was not offered to tax by the Appellant, the AO made an addition of Rs.9,50,014/- to the total income of the Appellant. The Ld. CIT(A), after considering the additional reconciliation statement furnished during appellate proceedings, directed the Appellant to submit the said reconciliation along with relevant ledger accounts before the AO for verification, with a direction to delete the addition if the claim is found to be in order.
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The ld.AR for the assessee submitted that the ld.CIT(A) directed the Appellant to furnish the requisite details before the Assessing Officer (AO) for verification. However, it was contended that the CIT(A) did not adjudicate the issue on merits and instead merely directed the AO to verify the claim, without calling for a remand report or arriving at a conclusive finding. In view of the above, it is prayed that the matter be set aside to the file of the AO for proper verification.
3.8 Ground No.11-Corporate Tax Issue - Erroneously considered the depreciation at Rs. 2,55,78,582 instead of actual depreciation of Rs. 3,29,72,545 resulting in a disallowance of Rs. 73,93,963/-:
The Ld.DR-CIT submitted that the Assessing Officer (AO) had considered depreciation for the relevant assessment year at Rs.2,55,78,582/- instead of the actual depreciation claimed by the Appellant amounting to Rs.3,29,72,545/-, resulting in a disallowance of Rs.73,93,963/- due to the difference in the claim allowed. The CIT(A) directed the Ld. AO to verify the availability of losses under various heads for the relevant assessment year and to re-compute the set-off and carry forward of business loss and unabsorbed depreciation in accordance with law, as the submissions made by the Appellant required detailed examination and verification.
The Ld.Authorised Representative (AR) submitted that the actual unabsorbed depreciation for the relevant assessment year amounted to Rs.3,29,72,545/-, as reflected in the memorandum of computation of taxable income furnished during the assessment proceedings. However, the Ld. Assessing Officer (AO) had considered only Rs.2,55,78,582/- and set it off against income Page - 16 - of 30 IT (TP)A 28 & 29/Chny/2025 (AY 2015-16) Siva Industires & Holdings Limited VS DCIT C 3(1) :: - 17 - ::
from house property, thereby resulting in a disallowance of Rs.73,93,963/- from the eligible depreciation claim. It was further submitted that although the CIT(A) directed the Appellant to furnish the necessary details before the AO for verification, the CIT(A) failed to adjudicate the issue on merits and merely remitted the matter to the AO without calling for a remand report or passing a reasoned finding. In view of the above, it is prayed that the depreciation claim be allowed, or in the alternative, the issue be set aside to the file of the AO for proper verification and adjudication in accordance with law.
3.9 Ground NoS.12 & 13-Corporate Tax Issue-Disallowance of Long-term Capital Loss and Short-term Capital Loss by adopting fair market value, amounting to Rs. 39,10,17,000/- and Rs.
5,78,85,850/-respectively:
The Ld.DR-CIT submitted that the Assessing Officer (AO) disputed the Appellant's claim of Short-Term Capital Loss (STCL) and Long- Term Capital Loss (LTCL) arising from the transfer of shares, by adopting the Fair Market Value (FMV) as the basis of valuation. The AO observed that the Appellant had failed to justify and substantiate its valuation with adequate supporting evidence and proper explanation. Disagreeing with the Appellant's adoption of resale value, the AO held that the sale consideration was not in accordance with Section 48 of the Income-tax Act, as the value of the shares ought to have been determined based on FMV. Accordingly, the AO made additions of Rs.39,10,17,000/- under Long-Term Capital Gains (LTCG) and Rs.5,78,85,850/- under Short-Term Capital Gains (STCG), by disallowing the STCL and LTCL claimed on the sale of shares of Tradco BV held by the Page - 17 - of 30 IT (TP)A 28 & 29/Chny/2025 (AY 2015-16) Siva Industires & Holdings Limited VS DCIT C 3(1) :: - 18 - ::
Appellant. During appellate proceedings, the Ld. CIT(A) observed that the Appellant had not furnished adequate justification for deviating from the Net Asset Value (NAV) method adopted for other shares in the same valuation report. The CIT(A) further noted a significant and unexplained reduction in valuation within a short period and concluded that the valuation appeared to have been artificially reduced to avoid tax liability. The CIT(A) also rejected the Appellant's reliance on Section 50CA, observing that the AO had not invoked the said provision in the assessment order.
The Ld. Authorised Representative (AR) submitted that the Assessing Officer (AO) disallowed the Appellant's claim by invoking Section 50CA of the Income-tax Act. The Appellant contended that Section 50CA was introduced by the Finance Act, 2017 and is applicable only to transactions undertaken on or after Assessment Year 2018-19. Since the impugned transaction relating to the sale of shares of Tradco BV had occurred prior to the introduction and applicability of Section 50CA, the application of the said provision to the present case is not legally sustainable. It was further submitted that the mandatory mechanism for substituting sale consideration with Fair Market Value (FMV) was introduced only with effect from AY 2018-19. Since the present assessment year is AY 2015-16, no such statutory mandate existed at the relevant time. Therefore, the Appellant's adoption of resale value was fully in accordance with the law prevailing at that point in time. Reliance was placed on the following judicial precedents (copies of which were furnished in the Paper Book dated 02.02.2026):
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(i) Hon'ble High Court of Karnataka in Bhoruka Engineering Industries Ltd. v. DCIT, Circle 11(2) [2013] 36 taxmann.com 82 (Karnataka), wherein it was held that a taxpayer is free to choose between permissible alternatives and adopt a tax-efficient structure, and such arrangement cannot be disregarded unless specifically prohibited by law. It was further held that tax planning within the framework of law is permissible, and no fault can be found if arrangements are made within the four corners of the statute.
(ii) Hon'ble ITAT, Chennai Bench in DCIT v. Maya Appliances (P.) Ltd. (2017) 82 taxmann.com 447 (Chennai Trib.).
(iii) Hon'ble ITAT, Ahmedabad Bench in Shreno Limited v. ACIT, ITA No. 688/Ahd/2016 (AY 2012-13) and ITA Nos. 622 & 623/Ahd/2018 (AYs 2013-14 & 2014-15), wherein it was held that prior to insertion of Section 50CA, the Revenue had no authority to substitute actual sale consideration with FMV of shares.
The Appellant further submitted that the sale of equity shares in an overseas subsidiary operates under a different regulatory framework, including FEMA and transfer pricing provisions (where applicable in related party contexts), and is distinct from the domestic provisions relating to unlisted shares u/s. 50CA. In view of the above, it was prayed that the additions made by substituting FMV and thereby disallowing Long-Term Capital Loss of Rs.39,10,17,000/- and Short-Term Capital Loss of Rs.5,78,85,850/- be deleted.
3.10 Ground No.14: Corporate Tax Issue- Disallowance of Rs.37,08,083/- towards TDS claimed not given the due credit.
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The ld.DR-CIT submitted that the Assessing Officer (AO) allowed TDS credit of Rs.40,38,621/- only, as against the total TDS credit claimed by the Appellant, thereby effectively rejecting a portion of the claim without providing specific reasons or justification. During appellate proceedings, the Ld. CIT(A) observed that grant of TDS credit is governed by Section 199 of the Income-tax Act read with Rule 37BA of the Income-tax Rules, which provides that credit for tax deducted at source shall be allowed in the assessment year in which the corresponding income is assessable. Accordingly, the CIT(A) upheld the action of the AO in denying TDS credit of Rs.37,08,083/-, on the ground that the same pertained to income assessable in other assessment years.
The Ld. Authorised Representative (AR) submitted that the relevant income had already been duly disclosed and offered to tax in the earlier assessment years, and accordingly, the Appellant had correctly claimed the corresponding TDS credit in the appropriate year. It was contended that the action of the Ld. AO in restricting the TDS credit was unjustified and contrary to settled principles of taxation. In view of the above, it was prayed that the Appellant be allowed the due TDS credit in its hands for the relevant Assessment Year 2015-16.
4. IT(TP)A No.29/Chny/2025 (Revenue appeal):
4.1 Ground Nos. 2 & 3: TP Issue- Upward adjustment of Corporate Guarantee commission made at Rs.34,59,32,710/- restricted to Rs. 7,39,17,246/-:
The ld.DR-CIT submitted that the CIT(A) had restricted the corporate guarantee commission to 0.5% as against the TPO's benchmarking of 2.34%, which was based on the average banking Page - 20 - of 30 IT (TP)A 28 & 29/Chny/2025 (AY 2015-16) Siva Industires & Holdings Limited VS DCIT C 3(1) :: - 21 - ::
rates prevailing during the relevant previous year. In this context, reliance was placed on the decision of the Hon'ble Madras High Court in PCIT v. Redington (India) Ltd. [2021] 430 ITR 298, wherein an arm's length rate of 0.85% for corporate guarantee commission was upheld.
The Ld. Authorised Representative (AR) for the assessee placed reliance on the decision of the Hon'ble Tribunal in the Appellant's own case for AY 2011-12 in ITA No. 919/Chny/2018 dated 12.08.2022, wherein the transaction was held to be an international transaction and the corporate guarantee commission was restricted to 0.5%. Further reliance was placed on the decision of the Hon'ble Chennai ITAT in M/s SAS Hotels and Enterprises v. DCIT [IT(TP)A No. 29/CHNY/2024 dated
05.11.2024], wherein the Hon'ble Tribunal, Chennai, has held as under:
"We find that the issue of ALP of corporate guarantee is covered by the decision of this Tribunal in the case of M/s Indian Public School Pvt. Ltd. (IT(TP) No.34/Chny/2018 dated 15-06-2022]. The bench, following the decision of Hon'ble Bombay High Court in the case of CIT v Everest Kento Cylinders Ltd. (58) Taxmann.com 254), restricted the TP adjustment to 0.5%. Respectfully following the binding decision of Hon'ble High Court of Bombay, we direct Ld. AO to restrict the ALP adjustment of corporate guarantee to the extent of 0.5%. The corresponding grounds stand partly allowed."
Further, the Department placed reliance on the decision of the Hon'ble Madras High Court in PCIT v. Redington (India) Ltd. [2021] 430 ITR 298, wherein an arm's length rate of 0.85% was upheld. In this regard, ld.AR for the assessee submitted that the said rate was determined based on the specific facts of that case, Page - 21 - of 30 IT (TP)A 28 & 29/Chny/2025 (AY 2015-16) Siva Industires & Holdings Limited VS DCIT C 3(1) :: - 22 - ::
particularly for Assessment Year 2009-10, and therefore cannot be applied to the present case of the assessee for Assessment Year 2015-16, which involves different factual and temporal circumstances.
4.2 Ground Nos. 4 & 5 -TP Issue- Upward Adjustment towards interest receivable on investment made in Optionally and Fully Convertible Debentures ("OFCD") - Rs. 6,22,05,255/-:
The ld.DR-CIT submitted that the CIT(A) concurred with the TPO's view that interest ought to be imputed, in view of the assessee's consistent practice of advancing funds to its Associated Enterprises (AEs) and subsequently writing off both principal and interest amounts. However, relying on the decision of the Hon'ble Tribunal in the assessee's own case for AY 2014-15, wherein it was held that charging interest above LIBOR would preclude any transfer pricing adjustment, the TPO/AO was directed to restrict the adjustment to 2%, being the applicable interest rate on OFCDs, as it was higher than the LIBOR rate of 0.58%, as against the original adjustment computed at 2.58%. It was further contended that Optionally Fully Convertible Debentures (OFCDs) are akin to investments or loans and therefore ought to be benchmarked with LIBOR plus appropriate basis points. The Department also submitted that the CIT(A) ought not to have relied upon the decision of the ITAT in the assessee's own case in IT(TP)A Nos. 18 & 19/Chny/2019 dated 04.11.2022 for AY 2014- 15, as the said order was not accepted by the Department and further appeal has been preferred before the Hon'ble High Court of Madras.
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The ld.AR for the assessee submitted that the Assessee had submitted that the investment in OFCDs of M/s Siva Skylink Global Ltd. was for strategic overseas acquisitions and carried an interest rate of 2% p.a. The OFCDs were issued with an inherent option to convert the same into equity shares. The Assessee had provided for the total investment and interest receivable outstanding as at 31.03.2014; due to the uncertainty regarding its realization, no interest income was recognized in FY 2014-15. The Assessee relied on Accounting Standard 9 (AS 9), which permits the postponement of revenue recognition when significant uncertainties exist regarding collection or realization of revenue.
Reliance was placed on the decision of the Hon'ble Supreme Court in the case of UCO Bank v. CIT, wherein it was laid down that interest on sticky or doubtful loans would not be said to accrue for the purpose of taxation, if such interest is not recoverable and there is uncertainty regarding its realization. The Assessee also emphasized the "real income" theory, arguing that only real income is taxable, not notional income, and cited various court decisions supporting the non-taxability of interest when collection is uncertain. It was submitted that the said OFCDs were never redeemed / converted in the subsequent years and on 31.03.2020, the dues outstanding as at that date were written off in the books of accounts of the Assessee company as permanent diminution in the value of investments held overseas. Without prejudice to the above, the Assessee relies upon the ITAT's order in its own case for AY 2014-15 (dated 04.11.2022) in ITA Nos. 18/CHNY/2019 and 19/CHNY/2019, where the Tribunal had directed the TPO/Assessing Officer to revisit the issue and fix the Page - 23 - of 30 IT (TP)A 28 & 29/Chny/2025 (AY 2015-16) Siva Industires & Holdings Limited VS DCIT C 3(1) :: - 24 - ::
correct LIBOR rate before deciding on any arm's length pricing adjustment, noting that the Assessee's charged rate of 2% was more than the LIBOR rate of 0.95% considered by the TPO. The mere fact that the Department had filed further appeal before the Hon'ble High Court of Madras does not alter the legal position that the decision on the subject issue as on date stands in favour of the Assessee that had been rightly considered by the Ld. CIT(A). Further, with respect to the Department's contention that OFCDs are similar to investment/Loan which are required to be benchmarked with LIBOR plus appropriate basis, reliance is placed on the decision of the Hon'ble Delhi High Court in the case of Commissioner of Income-tax -I v. Cotton Naturals (1) (P.) Ltd. [2015] 55 taxmann.com 523 (Delhi) wherein, in a similar scenario, it had been observed that:
32. On the question of adjustment made on account of the transaction cost, we do not appreciate the reasoning given by the TPO and find it difficult to accept. The transaction or hedging cost is borne and paid by the borrower. These are undertaken when they take loans in US Dollars or other foreign currencies because the borrower wants to cover any loss on account of the depreciation of the Indian Rupee vis-a-vis the foreign currency. The assessee in the present case is not the borrower, but the lender. Transaction cost is not, therefore, applicable in the case in question, as the loan had to be repaid in US Dollars. Mark up towards the transaction cost is exorbitant and even comparison with banks is unsound and unintelligible, Risk factor adjustment is also stretched, for it ignores the close relationship between the two AEs and the funds were the shareholder funds, and not borrowed money." (emphasis supplied) Page - 24 - of 30 IT (TP)A 28 & 29/Chny/2025 (AY 2015-16) Siva Industires & Holdings Limited VS DCIT C 3(1) :: - 25 - ::
Hence, based on the above, it is submitted that no markup can be made to LIBOR rate for computing interest on OFCDs.
5. We have heard the rival submissions, perused the material available on record and carefully considered the orders of the lower authorities. The issues arising in the cross appeals are adjudicated as under, in the light of the contentions advanced by the assessee.
Assessee's Appeal - IT(TP)A No.28/Chny/2025 Ground No.1 - General This ground being general in nature does not require adjudication and is dismissed.
Ground Nos.2 & 3 - TP Adjustment on OFCDs (Rs.6,22,05,255/-):
The core issue relates to whether notional interest can be imputed on investment made in Optionally Fully Convertible Debentures (OFCDs). It is an undisputed fact that the assessee invested in OFCDs of its AE carrying a coupon rate of 2% with an option for conversion into equity. It is also not in dispute that the assessee, considering the uncertainty in recovery, did not recognize interest income in the impugned assessment year and had subsequently written off the investment. The authorities below have proceeded on the premise that the transaction is in the nature of a loan and hence requires benchmarking by imputing interest. However, we find merit in the contention of the assessee that:
• the instrument partakes the character of quasi-equity, • there existed significant uncertainty in realization, and • interest income was not recognized in accordance with recognized accounting principles (AS-9).
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The doctrine of real income cannot be ignored while determining taxable income. Where recovery itself is doubtful, accrual of income becomes questionable. The reliance placed on judicial precedents including the principle laid down in UCO Bank supports the proposition that interest on doubtful advances does not accrue in real terms.
Further, we note that in assessee's own case for earlier assessment years, the Tribunal has consistently held that where the interest charged is at or above LIBOR, no further adjustment is warranted.
In the present case, the agreed rate is 2%, the relevant LIBOR is lower, and the CIT(A) has already restricted the adjustment to 2%. In our considered view, once the transaction itself suffers from uncertainty of realization and is in the nature of quasi-equity, no notional interest can be brought to tax. Accordingly, the addition sustained by the CIT(A) is deleted.
Ground Nos.4 & 5 - TP Adjustment on Loan to Winwind OY (Rs.10,06,95,465/-):
The undisputed facts reveal that the assessee honoured a corporate guarantee obligation. The AE had already entered bankruptcy proceedings, and the amount was treated as doubtful and eventually written off. The TPO treated the payment as a loan and imputed interest thereon. We are unable to agree with this approach. The transaction arises not out of a lending activity but out of invocation of a corporate guarantee in respect of an already insolvent AE. Once the AE is in bankruptcy and recovery is highly improbable, the very foundation for charging interest collapses. The recognition of income under the Act must be governed by real Page - 26 - of 30 IT (TP)A 28 & 29/Chny/2025 (AY 2015-16) Siva Industires & Holdings Limited VS DCIT C 3(1) :: - 27 - ::
income theory. Hypothetical income cannot be taxed merely on the basis of notional computations under transfer pricing provisions. Further, the assessee has demonstrated that no fresh funds were borrowed for making the payment, and the amount was treated as irrecoverable. In such circumstances, imputing interest would be contrary to commercial reality. Therefore, we hold that no TP adjustment is warranted, and the addition is deleted.
Ground No.6 - TP Adjustment on Loan to Siva Skylink Global Ltd. (Rs.3,02,27,070/-):
This issue is substantially similar to Ground Nos.4 & 5. The assessee has demonstrated that funds were advanced out of own resources, recovery was uncertain, and the AE has subsequently ceased to exist. In such a scenario, the assumption of accrual of interest income is untenable. Transfer pricing provisions cannot be invoked to tax non-existent income. Accordingly, the adjustment made by the TPO and sustained by the CIT(A) is deleted. Ground No.7 - Forex Loss (Rs.2,41,75,046/-): The CIT(A) has set aside the issue to the file of the AO without rendering a finding on merits. We find that the assessee has explained that the loss pertains to trade transactions and is therefore on revenue account. However, since the necessary factual verification is required, we deem it appropriate to restore the issue to the file of the AO with a direction to examine the claim in the light of supporting documents and decide the issue in accordance with law.
Ground Nos.8 & 9 - Valuation of Closing Stock (Rs.98,25,442/-):
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The AO has substituted the valuation adopted by the assessee without conclusively disproving the basis of NRV adopted. It is a settled principle that inventory is to be valued at cost or NRV, whichever is lower, and consistent method followed by the assessee cannot be disturbed unless found to be incorrect. The assessee has demonstrated adverse market conditions, deterioration in stock, and inability to realize the expected value. In the absence of contrary evidence brought on record by the Revenue, the addition made is unsustainable. Accordingly, the addition is deleted.
Ground No.10 - Difference in Form 26AS (Rs.9,50,014/-): The CIT(A) has remitted the issue for verification without adjudication. Considering the nature of the issue, we restore the matter to the file of the AO with a direction to verify reconciliation and grant relief if the income has already been offered. Ground No.11 - Depreciation (Rs.73,93,963/-): Since the issue involves factual verification of depreciation claim, we restore the matter to the AO for proper verification and allow the claim in accordance with law.
Ground Nos.12 & 13 - Capital Loss (LTCL & STCL): The AO has substituted sale consideration with FMV in the absence of any enabling provision applicable to the relevant assessment year. We find merit in the contention of the assessee that section 50CA is not applicable to AY 2015-16. There was no statutory mandate to substitute FMV, and the assessee is entitled to adopt actual consideration. Judicial precedents have consistently held that prior to insertion of Section 50CA, such substitution is Page - 28 - of 30 IT (TP)A 28 & 29/Chny/2025 (AY 2015-16) Siva Industires & Holdings Limited VS DCIT C 3(1) :: - 29 - ::
impermissible. Accordingly, the disallowance of capital loss is deleted.
Ground No.14 - TDS Credit (Rs.37,08,083/-):
If the corresponding income has already been offered to tax, denial of TDS credit would lead to double taxation. We therefore restore this issue to the AO with a direction to verify the claim and allow credit in accordance with Section 199 read with Rule 37BA. Revenue's Appeal - IT(TP)A No.29/Chny/2025: Ground Nos.2 & 3 - Corporate Guarantee Commission:
The CIT(A) has restricted the rate to 0.5% following the Tribunal's decision in assessee's own case. We find that the issue is squarely covered by earlier Tribunal orders. Corporate guarantee by a parent company cannot be equated with bank guarantees, and consistency demands following earlier decisions. The reliance placed by the Revenue on higher rates is distinguishable on facts. Accordingly, we uphold the order of the ld.CIT(A) and dismiss the Revenue's grounds.
Ground Nos.4 & 5 - TP Adjustment on OFCDs:
In view of our findings in the assessee's appeal (Ground Nos.2 &
3), wherein the entire adjustment has been deleted, the corresponding grounds raised by the Revenue become infructuous and are dismissed.
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6. In the result, assessee's Appeal is partly allowed and revenue's Appeal is dismissed.
.Order pronounced in open court 27th day of April, 2026 in Chennai.
Sd/- Sd/-
(एस. आर. रघुनाथा) (मनु कुमार िग र)
(S.R.RAGHUNATHA) (MANU KUMAR GIRI)
लेखा सद)य/ACCOUNTANT MEMBER या यक सद)य/JUDICIAL MEMBER
चे नई/Chennai,
*दनांक/Dated: 27th April, 2026
SNDP, Sr. PS
आदे श क! त+ल,प अ-े,षत/Copy to:
1. अपीलाथ /Appellant
2. थ /Assessee
3. आयकरआयु /CIT, Chennai / Madurai / Salem / Coimbatore.
4. िवभागीय ितिनिध/DR
5. गाडफाईल/GF Page - 30 - of 30