TECHNVISION VENTURES LIMITED,HYDERABAD vs. ITO CIRCLE 2(1), HYDERABAD

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ITA 1091/HYD/2024Status: DisposedITAT Hyderabad17 July 2026AY 2021-2228 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal directed the deletion of the adjustment made for interest on outstanding trade receivables, finding that payments were received within 30 days. It also directed the deletion of the addition made for notional interest on loans given to a related party, considering it a revenue-neutral exercise.

What were the facts?

The assessee, engaged in software development services, had international transactions with its US-based Associated Enterprise. The Transfer Pricing Officer (TPO) rejected the assessee's transfer pricing study and proposed adjustments. The Assessing Officer (AO) made additions based on the TPO's findings.

What were the issues?

Whether the adjustment for interest on trade receivables and notional interest on loans to related parties were justified.

Which sections of the Income-tax Act were involved?

Section 92CA,Section 143(3),Section 144C(13),Section 144B,Section 186(7)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad “A” Bench, Hyderabad

आयकर अपीलीय न्यायाधिकरण में, हैदराबाद ‘ए’ बेंच, हैदराबाद IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad “A” Bench, Hyderabad श्री विजय पाल राि, माननीय उपाध्यक्ष एिं श्री मंजूनाथ जी, माननीय लेखा सदस्य SHRI VIJAY PAL RAO, HON’BLE VICE PRESIDENT AND SHRI MANJUNATHA G, HON’BLE ACCOUNTANT MEMBER आयकरअपीलसं./I.T.A.No.1091/Hyd/2024 (निर्धारण वर्ा/ Assessment Year: 2021-22) Technvision Ventures Vs. The Income Tax Officer, Limited, Circle – 2(1), Hyderabad. Hyderabad. PAN : AACCA5943R (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent)

करदाता का प्रतततितित्व/ : Shri PVSS Prasad, C.A. Assessee Represented by राजस्व का प्रतततितित्व/ : Mrs. Seema Meena, CIT-DR Department Represented by सुिवाई समाप्त होिे की ततति/ : 11.06.2026 Date of Conclusion of Hearing घोर्णध की तधरीख/ : 17.07.2026 Date of Pronouncement O R D E R PER MANJUNATHA G., A.M : This appeal filed by the assessee is directed against the final assessment order passed by the Assessing Officer under section 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961 (in short “the Act”), dated 10.10.2024 in pursuant to the order of the

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Learned Transfer Pricing Officer (in short “Ld. TPO”) under section 92CA(3) of the Act, and the Ld. Dispute Panel Resolution (in short “Ld.DRP”) directions dated 10.09.2024 and pertains to the A.Y. 2021-22.

2.

The grounds raised by the assessee company read as under :

“1. The Learned (Ld) Assessing Officer (AO)/Ld Dispute Resolution Panel (DRP) are erroneous in law and on the facts of the case. 2. The Ld. DRP/AO have erred in rejecting the transfer pricing study of the Company and further erred in conducting a separate benchmarking exercise without appreciating the facts and circumstances of the Assessee company. 3. The Ld. DRP/AO are not justified in law in considering wrong comparables and consequently arriving at a high operating profit margin of 26.01% as a ratio of OP/OC. 4. The Ld. DRP/AO are not justified in law in making an adjustment u/s 92CA of Rs.3,69,77,938/- to the price received by the appellant. 5. The Ld. TPO, while including the Companies as comparables has erred in applying the appropriate filters. 6. Without prejudice to the above grounds, the Ld DRP/AO erred in selecting the below mentioned companies as comparables which are in real inappropriate on the basis of functional dissimilarity, super profit, high turnover or other similar inappropriate filter etc. 1 Harbinger Systems Pvt Ltd 2 Evoke Technologies Ltd 3 Mindtree Ltd 4 Sagarsoft (India) Ltd 5 I D S Infotech 6 Great Software Laboratory Pvt Ltd 7 Nihilent Limited 8 LTIMindtree (Formerly L&T Infotech) 9 Wipro Limited

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10 Net4Nuts 11 Systango Technologies Ltd. 12 Tata Elxsi Limited 13 CG VAK Software & Exports Ltd 14 Infosys Limited 15 Robosoft Technologies Ltd 16 Ksolves 17 Cybage Software Pvt Ltd 18 Aptus Software Labs 19 Consilient Technologies 20 Ezee Technosys

7.

The Ld. DRP/AO erred in rejecting the following companies for inclusion by failing to appreciate the fact that the following companies are engaged in Software Development Services (SDS) and are functionally similar: Sl.No. Name of the Company 1 Athena Global Technologies Ltd. (Seg.) 2 G S S Infotech Ltd 3 Cadsys (India) Ltd. 8. The Ld. DRP/AO ought to have appreciated that the receivables arise in the normal course of business and are not to be treated as loans for levy of interest. 9. The Ld. DRP/AO has erred in applying the rate of interest on short term deposit rate of SBI (prevailing in F.Y. 2020-21) on the trade receivables from its associated enterprises by equating it incorrectly with domestic bank deposits and proposing an adjustment of Rs.17,27,321/- as interest on trade receivables. 10. The Ld. DRP/AO erred in confirming disallowance of interest of Rs.17,24,389/- on alleged interest free loans determined having regard to Section 186(7) of the Companies Act, 2013 which is legally unsustainable under Income Tax Laws. 11. Any other ground that may be urged at the time of hearing with the prior approval of the Hon'ble Tribunal.”

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3.

The brief facts of the case are that the assessee, M/s. Technvision Ventures Limited, formerly known as Solix Technologies Limited, is engaged in the business of software development services to Solix Technologies, Inc., USA and it is the first worldwide infrastructure platform to manage data across all segments of enterprise data (structured and unstructured). The assessee is engaged in the concept of unifying all active and inactive data in a single, scalable and compliant data platform for infrastructure optimization, data security and advanced analytics. The assessee has filed return of income for A.Y. 2021- 22 on 08.03.2022, admitting total income of Rs. 17,20,300/- under the normal provisions of the Income Tax Act, 1961. The assessee company has entered into international transactions with its Associated Enterprise, Solix Technologies, Inc., for providing software development services for an amount of Rs. 14,76,42,073/-. The assessee has benchmarked the international transactions in respect of software development services provided to its Associated Enterprise (for short “AE”) by applying Transactional Net Margin Method (TNMM) as the Most Appropriate Method. The Operating Profit to Operating Cost ratio

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has been taken as Profit Level Indicator. The assessee has selected three companies as comparables for software development services on the basis of search conducted in Prowessiq and Capitaline database and claimed that transactions with its AE are at Arm's Length Price.

4.

The case was selected for scrutiny and during the course of assessment proceedings, a reference under section 92CA(1) of the Act, has been made to the Transfer Pricing Officer (“TPO”) for determination of arm's length price in respect of international transactions of the assessee. During the TP proceedings, the learned TPO rejected TP analysis of the assessee on the ground that the assessee has adopted certain incorrect filters. Further, the learned TPO has conducted fresh TP study by applying various filters and has selected final list of 21 comparables with 35th percentile of 19.83 and 65th percentile of 32.56 and a median of 26.01%. Accordingly, a show-cause notice dated 07.09.2023 was issued to the assessee, giving an opportunity to show-cause as to why TP adjustment should not be made by considering 26.01% margin on international transactions with its AE. The assessee has filed objections for fresh TP analysis carried

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out by the learned TPO and also raised objections for selection of 21 comparables on multiple grounds, including on turnover filter and difference in FAR analysis.

5.

The learned TPO, after considering relevant submissions of the assessee and also taking note of transfer pricing provisions, rejected objections filed by the assessee and has selected final set of 21 comparables with 35th percentile of 19.83 and 65th percentile of 32.56 and a median of 26.01% and proposed TP adjustment of Rs. 3,69,77,938/- under section 92CA of the Act, in respect of software development services to its AE. The learned TPO had also made a TP adjustment of Rs. 17,27,321/- in respect of outstanding trade receivables from its AE by applying SBI short-term deposit rate and after allowing 30 days credit period.

6.

In pursuant to TP adjustment as suggested by the learned TPO vide order under section 92CA(3) of the Act, dated 24.10.2023, the A.O. has passed a draft assessment order under section 144C(1) of the Act, on 07.12.2023 and determined total income at Rs. 4,21,60,146/- by making addition towards TP adjustment as suggested by the learned TPO for Rs.

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3,87,05,259/-, and disallowance on account of not charging interest on loan given to group concerns for Rs. 17,24,389/- and further addition of Rs. 10,189/- on account of disallowance of inadmissible expenditure. The assessee has filed objections before the Dispute Resolution Panel-1, Bangalore, against the draft assessment order passed by the A.O. and raised various objections, including the rejection of TP documentation submitted by the assessee, applying incorrect filters for selection of comparables, and also selection of 21 comparables on multiple grounds, including wrong application of turnover filters and FAR analysis. The assessee has also challenged the additions made by the learned TPO on interest on trade receivables from AE and challenged rate of interest applied by the A.O. by considering SBI short-term deposit rate and credit period. Similarly, the assessee has also challenged additions made by the A.O. towards notional interest charged on loans and advances to group concerns.

7.

The learned DRP, vide its directions dated 10.09.2024, issued under section 144C(5) of the Act, rejected the explanation furnished by the assessee in respect of selection of comparables and also rejected the arguments of the assessee on the issue of

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inclusion of comparables on the ground that any company cannot be excluded or included on the basis of turnover and for the purpose of benchmarking analysis, what is to be considered is the functions, assets employed and risk involved in the transactions between the assessee and AE., and therefore, when the assessee has applied TNMM as the Most Appropriate Method, it is resistant to minor differences in product comparability and therefore, the arguments of the assessee that companies having higher turnover should be excluded by applying turnover filter is incorrect.

8.

The learned DRP had also concurred with the findings of the learned TPO in respect of TP adjustment on interest receivable on trade receivables from AE by holding that the arguments of the assessee that once TNMM has been adopted as the Most Appropriate Method for benchmarking international transactions with its AE, then separate adjustment on trade receivables is incorrect. Similarly, the learned DRP has also upheld the addition made by the A.O. towards notional interest charged on loans and advances given to group concerns / Tiebeam Technologies Pvt. Ltd., by holding that as per the provisions of

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section 186(7) of the Companies Act, 2013, the assessee cannot advance loans to group concerns without charging any interest. Therefore, upheld the reasons given by the A.O. for charging interest and rejected the objections filed by the assessee.

9.

In pursuant to the directions issued by the learned DRP under section 144C(5) of the Act, the A.O. had passed the final assessment order under section 143(3) r.w.s. 144C(13) of the Act on 10.10.2024 and determined the total income of the assessee at Rs. 4,21,60,146/- by making addition towards TP adjustment as suggested by the learned TPO in respect of software development services, interest receivable on outstanding trade receivables from AE, addition towards notional interest charged on loans and advances to group concerns, and disallowance on account of inadmissible statutory dues.

10.

Aggrieved by the final assessment order passed by the A.O., the assessee is now in appeal before the Tribunal.

11.

The first issue that came up for our consideration from ground No. 6 of the assessee's appeal is exclusion of 20 comparables as listed in ground No. 6 on multiple grounds,

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including the application of turnover filter on either side of 10 times of the turnover of the assessee company and difference in FAR analysis of the assessee company and comparable companies. The learned counsel for the assessee, referring to the comparable companies considered by the learned TPO in TP analysis, submitted that the learned TPO has considered 21 companies out of which one company, i.e., Harbinger Systems Private Limited, has been accepted by the assessee. In respect of the remaining 20 companies, i.e., Evoke Technologies Ltd., Mindtree Ltd., Sagarsoft (India) Ltd., I D S Infotech, Great Software Laboratory Pvt. Ltd., Nihilent Limited, LTIMindtree (Formerly L&T Infotech), Wipro Limited, Net4Nuts, Systango Technologies Ltd., Tata Elxsi Limited, CG VAK Software & Exports Ltd., Infosys Limited, Robosoft Technologies Ltd., KSolves, Cybage Software Pvt. Ltd., Aptus Software Labs, Consilient Technologies and Ezee Technosys, are not comparable with the assessee company, because the above companies fail turnover filter, if we apply 10 times lower side or 10 times upper side of the assessee company and therefore, the above companies should be excluded from the list of comparables for the purpose

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of computing TP adjustment of international transactions of the assessee company with its AE. In this regard, he relied upon the following judicial precedents :

1) M/s. Barracuda Networks India (P.) Ltd. vs. DCIT, IT(TP) Appeal No. 229 (Bang) of 2021. 2) M/s. Comer Industries India (P.) Ltd., (2023) 150 Taxmann.com 180 (Bangalore - Trib). 3) Radisys India Private Limited vs. ITO. 4) Clinsisia Labs Private Limited, (TS-247-ITAT-2024). 5) iMedX Information Services Private Limited vs. Deputy Commissioner of Income Tax (2023). 6) M/s. OrangeScape Technologies Private Limited, (TS-347- ITAT-2025 (CHNY)-TP). 7) Wipro GE Healthcare (P.) Ltd. v. Deputy Commissioner of Income-tax.

12.

The learned counsel for the assessee further submitted that the ITAT, Hyderabad Benches, in the case of Clinasia Labs Private Limited Vs. ITO in ITA-TP No. 202/Hyd/2021 dated 11.06.2024 reported in (TS-247-ITAT-2024), had also considered the turnover filter and applied an upper turnover threshold of Rs. 200 crores for the purpose of excluding high-turnover companies. Therefore, if the above turnover filter is applied, the companies

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namely, Mindtree Ltd., Orion India Systems Pvt. Ltd., Nihilent Limited, LTIMindtree Ltd., Wipro Limited, Tata Elxsi Limited, Infosys Limited and Cybage Software Private Limited are not comparable with the assessee company and, therefore, on this ground also, the above companies should be excluded from the list of comparables.

13.

The learned counsel for the assessee further submitted that, insofar as the remaining four companies i.e., Net4Nuts, Systango Technologies Ltd., KSolves and Aptus Software Labs, the above four companies are completely different on FAR analysis, which is evident from relevant annual reports, where they have engaged in diversified activities, which is altogether different from the activities carried out by the assessee company. Further, the assessee company is engaged in the business of software development services to its AE on cost plus mark-up basis, and therefore, comparing the companies which have diversified activities, is incorrect. Therefore, he submitted that the above four companies should be excluded from the list of final set of comparables.

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14.

The learned CIT-DR, on the other hand, supporting the order of the learned TPO, submitted that turnover filter is not a criteria for exclusion of any company and what is to be seen is functional comparability depending upon functions performed by the companies, assets employed and risk assumed. Further, when TNMM has been adopted as the Most Appropriate Method, it is resistant to minor differences on account of product comparability and therefore, the arguments of the assessee that higher turnover companies should be excluded for the purpose of comparative analysis, are incorrect. The learned CIT-DR further submitted that in respect of remaining four companies, i.e., Net4Nuts, Systango Technologies Ltd., KSolves and Aptus Software Labs, the above companies are not functionally different to the assessee company, because the assessee company is engaged in providing software development services to its AE on cost plus mark-up basis, whereas the above companies are engaged in diversified activities and providing software development services to various verticals of industries and therefore, the arguments that these companies cannot be considered for the purpose of TP analysis, is incorrect because

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software development services is one activity, but may be in different verticals of industry and therefore, going by the software development services provided to different verticals of industry, it cannot be said that the functions performed by the above companies are different from the assessee company. Therefore, he submitted that the A.O. and the learned TPO has rightly considered the objections filed by the assessee while rejecting the arguments and therefore, the order of the DRP should be upheld.

15.

We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. The assessee had challenged inclusion of 15 comparables, out of which 10 comparables were challenged on turnover filter, 4 comparables on FAR analysis and one comparable on export filter. The assessee had sought to exclude 10 comparables on turnover filter and claimed that the turnover of above companies is more than 10 times either side of the assessee company and therefore, cannot be considered as comparable to the assessee company. We have gone through the relevant submissions made by the assessee, including the comparables selected by the learned TPO, namely, Evoke Technologies Ltd., Mindtree Ltd.,

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Great Software Laboratory Pvt. Ltd., Nihilent Limited, LTIMindtree (Formerly L&T Infotech), Wipro Limited, Tata Elxsi Limited, Infosys Limited, Robosoft Technologies Ltd. and Cybage Software Pvt. Ltd. Upon perusal of annual reports, we find that, the above companies are having turnover of more than 10 times either side of the assessee company. We further note that, various independent researchers and studies conclude that in the software sector, the size of a company's operations have an impact on the margins earned by the companies. The basic conclusion from the analysis shows that operating margins for companies in the software sector increase with increasing size of the company's operations, but at a decreasing rate. Small companies lack competitive strength and operational efficiencies. Such companies are generally plagued by the vicious circle of lower revenue and lower efficiency, leading to higher operating costs and thereby a lower profitability. For medium scale companies, this might not be as acute as the small-scale companies, but the efficiency levels are definitely less when compared to higher turnover companies. Thus, the relationship between the size of the company and the operating margins itself

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is well established. Therefore, in our considered view, when it comes to operating margins, large-scale companies like Mindtree Ltd., Infosys Limited, Nihilent Limited, LTIMindtree (Formerly L&T Infotech), Wipro Limited, Tata Elxsi Limited and Cybage Software Pvt. Ltd. have advantages on account of their operational efficiencies and intangibles and, therefore, the above companies cannot be compared with a small company like the assessee, which is providing software development services to its AE on a cost-plus mark-up basis.

16.

Therefore, in our considered view, while applying the turnover filter, the learned TPO should have applied 10 times either side of the turnover of the assessee company for the purpose of selecting comparables and if we apply 10 times lower side or higher side of the assessee company, then the companies selected by the learned TPO, including Evoke Technologies Ltd., Mindtree Ltd., Great Software Laboratory Pvt. Ltd., Nihilent Limited, LTIMindtree (Formerly L&T Infotech), Wipro Limited, Tata Elxsi Limited, Infosys Limited, Robosoft Technologies Ltd. and Cybage Software Pvt. Ltd., are outside the list of final set of comparables selected by the learned TPO. This principle is also

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consistently accepted by the Tribunal in a number of cases where the high turnover companies have been excluded by applying 10 times higher or lower side of the turnover of the companies. Therefore, we direct the learned A.O./TPO to exclude the following 10 companies from the list of final set of comparables : 1. Evoke Technologies Ltd., 2. Mindtree Ltd., 3. Great Software Laboratory Pvt. Ltd., 4. Nihilent Limited, 5. LTIMindtree (Formerly L&T Infotech), 6. Wipro Limited, 7. Tata Elxsi Limited, 8. Infosys Limited, 9. Robosoft Technologies Ltd. 10. Cybage Software Pvt. Ltd.

17.

Coming back to the remaining four comparables agitated by the learned counsel for the assessee on the basis of FAR analysis, the assessee seeks to exclude Net4Nuts, Systango Technologies Ltd., KSolves and Aptus Software Labs on FAR differences and argued that the above four companies are engaged in diversified activities, including app development, cloud engineering, AI technology and machine learning, which are completely different from the functions performed by the assessee company, which is providing software development services to its AE as a captive

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service provider. Further, if we go by the annual reports of the above companies, they are functioning in multiple activities and also a few companies are having revenue from product sales, which is evident from relevant annual reports of the above companies. Therefore, he submitted that the above companies should be excluded from the list of final set of comparables.

18.

The learned counsel for the assessee has referred to annual reports of the above companies and claimed that these companies are engaged in providing software development services to different verticals of industry, including cloud computing, AI and machine learning, app development, data engineering, etc. We have gone through the relevant annual report extract of KSolves, and upon perusal of relevant description of services provided in the annual report, it appears that the above company is involved in artificial intelligence and machine learning, app development and cloud engineering, which is altogether different from the services rendered by the assessee company. Similarly, the companies, Net4Nuts and Aptus Software Labs are also engaged in providing network operation, cloud computing and infrastructure management. If we go by

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the description of services referred to in the annual reports, it seems that the functions performed by the above companies are different from the functions performed by the assessee company. However, from the description of services referred to in the annual reports, it cannot be ascertained as to what is the exact nature of software development services provided by any company. Further, the information furnished by the assessee also does not show any light on the revenue generated from these verticals of services. Therefore, in our considered view, merely on the basis of extract of annual report, the arguments of the learned counsel for the assessee cannot be accepted. However, fact remains that even the learned TPO has not analyzed the FAR analysis by considering the nature of services rendered by the above companies when compared to the assessee company. The learned TPO had also accepted that the FAR analysis of the above companies is similar to the assessee company without providing any details as to how the revenue generated from the above companies are similar to the assessee company. Therefore, in our considered view, in respect of these four companies, i.e., Net4Nuts, Systango Technologies Ltd., KSolves and Aptus

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Software Labs, a fresh look is required from the learned TPO in light of various objections raised by the assessee, including difference in FAR analysis of the above companies when compared to the assessee company. Thus, we set aside the issue of FAR analysis of these four companies to the file of the learned TPO and direct the learned TPO to reconsider the above companies after considering the objections filed by the assessee and also decide whether the above companies pass all filters required to be applied for selection of a company for the purpose of benchmarking analysis.

19.

The next issue that came up for our consideration from ground No. 7 of the assessee's appeal is inclusion of Athena Global Technologies Limited (Seg.), G S S Infotech Limited and Cadsys (India) Ltd.

20.

The learned counsel for the assessee submitted that the assessee does not wish to press inclusion of Athena Global Technologies Limited. In so far as G S S Infotech Limited, the learned TPO has excluded the above company on the ground of not passing RPT filter. However, as per the annual report of the

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above company, there are no related party transactions for the year under consideration. Therefore, the above company should be included in the list of comparables, because it has passed all the filters and also FAR analysis is similar to the assessee company. The learned counsel for the assessee further submitted that the learned TPO excluded Cadsys (India) Ltd., on the ground of dissimilarities in FAR analysis. However, no explanation has been provided for the same. He submitted that since the A.O. has rejected the above companies without any explanation, the same should be included in the list of comparables.

21.

The learned CIT-DR, on the other hand, supporting the order of the learned TPO and the DRP, submitted that the learned TPO has provided clear details for the exclusion of G S S Infotech Limited and Cadsys (India) Ltd. The assessee has failed to file relevant details and prove RPT filter in case of G S S Infotech Limited. Insofar as Cadsys (India) Ltd., there is no information from the annual report and therefore, the learned TPO has rightly excluded the above company. Therefore, he submitted that the order of the learned TPO and DRP should be

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upheld and the grounds taken by the assessee should be rejected.

22.

We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. The learned TPO rejected G S S Infotech Limited on the ground of failing RPT filter. However, the learned counsel for the assessee furnished the relevant annual report and, as per the annual report of the above company, there are no related party transactions for the year under consideration. Since the learned TPO has not made out any other objections except failing RPT filter, and further, as per the annual report, there are no RPT transactions for the year under consideration, in our considered view, the learned TPO ought not to have excluded G S S Infotech Limited from the list of comparables. Therefore, we direct the learned TPO to include G S S Infotech Limited for the purpose of TP analysis. As regards Cadsys (India) Ltd., the learned TPO has not provided any details, which is evident from para 12.1.3 of the TPO order, where the learned TPO has extracted a para in the annual report and observed that the company's sales service income is greater than 75%. Since the learned TPO has rejected

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the above company without assigning any reasons, in our considered view, the issue needs to be set aside to the file of the learned TPO to carry out further verification in light of the annual report of the above company and the FAR analysis of the assessee. Thus, we direct the learned TPO to re-examine the claim of the assessee in light of relevant annual reports, if any, filed to justify its case.

23.

The next issue that came up for our consideration from ground Nos. 8 and 9 of the assessee's appeal is TP adjustment of Rs. 17,27,321/- on outstanding trade receivables from AE.

24.

The learned counsel for the assessee submitted that this issue is covered in favour of the assessee by the decision of the ITAT, Hyderabad Bench in the case of Mylan Laboratories Private Limited, wherein the Tribunal has directed the learned TPO to compute interest on outstanding receivables by applying LIBOR plus 200 BPS. He further submitted that the learned TPO has considered the average receivables of Rs. 3,30,58,767/-, whereas the actual receivables from the AE as on 31.03.2021 was at Rs. 1,01,45,113/- and further, the same has been received within 30

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days from the date of invoice. Therefore, he submitted that the question of imputing interest on outstanding receivables from AE does not arise.

25.

The learned CIT-DR, on the other hand, supporting the order of the learned TPO/DRP, submitted that the learned TPO has rightly adopted SBI short-term deposit rate after allowing the 30 days credit period and therefore, the order of the learned TPO should be upheld.

26.

We have heard both parties, carefully perused the material available on record and had gone through the orders of the authorities below. The learned TPO has imputed interest of Rs. Rs. 17,27,321/- on outstanding receivables from AE by taking into account the average trade receivables of Rs. 3,30,58,767/- and adopted SBI short-term deposit rate of 5.7% and made adjustment of Rs. 17,27,321/-. The assessee has furnished relevant details of outstanding receivables from AE as on 31.03.2021 and as per the details submitted by the assessee, the outstanding receivables as on 31.03.2021 were at Rs. 1,01,45,113/- and further payment has been received on 01.04.2021. Since the outstanding receivables as on 31.03.2021

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was received within 30 days from the date of invoice, in our considered view, the question of imputing interest on trade receivables does not arise. Since the learned TPO has taken average receivables by taking into account the opening receivables plus closing receivables and also adopted SBI short- term deposit rate, in our considered view, the adjustment made by the learned TPO towards interest on outstanding receivables cannot be upheld. Therefore, we direct the learned A.O./TPO to delete the TP adjustment of Rs. 17,27,321/- on outstanding trade receivables from AE.

27.

The next issue that came up for our consideration from ground No. 10 of the assessee's appeal is addition towards notional interest on loans and advances given to related party M/s. Tiebeam Technologies Pvt. Ltd.

28.

The learned counsel for the assessee submitted that the A.O. computed notional interest @ 12% by relying upon the provisions of section 186(7) of the Companies Act, 2013. Further, as per section 186(7), no loan shall be given under section 186 of the Companies Act, 2013 at a rate of interest lower than the

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prevailing yield of one-year, three-year, five-year or ten-year Government security closest to the tenure of the loan.

29.

It was the argument of the learned counsel for the assessee that loan has been given to M/s. Tiebeam Technologies Pvt. Ltd., out of interest-free funds and the assessee has not debited any interest for the year under consideration, and therefore, the question of disallowance of interest on loans given to group entities does not arise.

30.

We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. The assessee has advanced loans and advances to Tiebeam Technologies Pvt. Ltd., for Rs.4,71,00,000/- without any interest, and said loan has been given out of interest-free funds available with the assessee company. Further, interest-free loans has been given out of commercial expediency, and the assessee and the group concerns are engaged in similar line of activities, and also there was no loss to the revenue for not charging interest by the assessee from group concerns, as the assessee and other group concerns were paying the taxes in the same territory. Further, if at all group company pays interest, the same

27 ITA No.1091/Hyd/2024 Technvision Ventures Limited

can be claimed as deduction, and the assessee company needs to be accounted as income. From the above, it is very clear that it is revenue neutral because both the companies are assessed to tax in India and, therefore, once the assessee made out a case that loans and advances was given out of interest-free funds, and also tax-neutral exercise, charging notional interest is not correct because the revenue cannot justifiably claim to put itself in the armchair of businessman or in the position of Board of Directors and assume the role to decide how much is reasonable interest having regard to the circumstances of the case. Therefore, in our considered view, the A.O. is erred in making addition towards notional interest of Rs.17,24,389/- on loans given to related party. Thus, we direct the A.O. to delete the addition made towards notional interest of Rs.17,24,389/-.

28 ITA No.1091/Hyd/2024 Technvision Ventures Limited

31.

In the result, the appeal filed by the assessee is partly allowed for statistical purposes.

Order pronounced in the Open Court on 17th July, 2026.

Sd/- Sd/- श्री विजय पाल राि (मंजूनाथ जी) (VIJAY PAL RAO) (MANJUNATHA G.) उपाध्यक्ष /VICE PRESIDENT लेखा सदस्य/ACCOUNTANT MEMBER

Hyderabad, dated 17.07.2026. TYNM/sps आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/The Assessee : TECHNVISION VENTURES LIMITED, 1486,12-13-522,LANE NO 13,STREET NO 14, SECUNDERABAD, SECUNDERABAD-500017, TELANGANA 2. रधजस्व/ The Revenue : ITO CIRCLE 2(1), SIGNATURE TOWERS, SY NO.6(P) KONDAPUR, SY NO.37(P) KOTHAGUDA., HYDERABAD-500084, TELANGANA 3. The Principal Commissioner of Income Tax, (IT & TP), Hyderabad. 4. The Disputes Resolution Panel-1, Bangalore 5. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 6. गधर्ाफ़धईल / Guard file

Digitally signed by TIRUPATI TIRUPATI YAMINI YAMINI NAGA NAGA MALLESWARI Date: 2026.07.21 MALLESWARI 14:35:20 +05'30'

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