NEOVANTAGE INNOVATION PARK PRIVATE LIMITED,HYDERABAD vs. INCOME-TAX OFFICER, WARD 16(3), HYDERABAD

आयकर अपीलीय अधिकरण, हैदराबाद पीठ
IN THE INCOME TAX APPELLATE TRIBUNAL
Hyderabad ‘B’ Bench, Hyderabad

श्री विजय पाल राि, उपाध् यक्ष एिं
श्री मिुसूदन सािडिया, लेखा सदस् य के समक्ष ।
BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER

आ.अपी.सं /ITA Nos.923 & 924/Hyd/2024
(निर्धारण वर्ा/Assessment Years:2020-21)

M/s. Neovantage Innovation
Park Private Limited,
Hyderabad.
PAN: AAKCM4735D

Vs.
Income Tax Officer,
Ward-16(3), Hyderabad.
M/s. Neovantage Bio-
Technology Private Limited,
Hyderabad.
PAN: AAKCM4430F

Vs.
Asst. Commissioner of Income
Tax,
Circle 5(1), Hyderabad.
(Appellants)

(Respondents)

निर्धाररती द्वधरध/Assessees by: Shri Padamchand Khincha, C.A.
रधजस् व द्वधरध/Revenue by: Dr. Narendra Kumar Naik,
CIT-DR

सुिवधई की तधरीख/Date of hearing: 18/08/2025
घोर्णध की तधरीख/Pronouncement: 10/09/2025

आदेश/ORDER
PER MADHUSUDAN SAWDIA, A.M. :

These appeals are filed by M/s. Neovantage Innovation Park
Private Limited and M/s. Neovantage Bio-Technology Private
Limited (“the assessees”), feeling aggrieved by the separate final assessment orders passed by the respective Learned Assessing Officer

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(“Ld. AO”) u/s. 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income
Tax Act, 1961 (“the Act”) dated 19.07.2024 & 23.07.2024 for the A.Y. 2020-21 respectively.
2. The assessee has raised the following grounds of appeal :

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income for the assessment year 2020-21 on 13.02.2021 declaring total income of Rs.Nil. The case of the assessee was selected for scrutiny and notice under section 143(2) of the Income Tax Act, 1961 (“the Act”) was issued on 29.06.2021. In view of involvement of international transactions, the matter was referred to the Learned
Transfer Pricing Officer (“Ld. TPO”) under section 92CA of the Act for determining the arm’s length price. The Ld. TPO, vide order dated
30.12.2022, proposed an adjustment of Rs.13,28,00,656/- on account of interest paid on Non-Convertible Debentures (“NCDs”) and Rs.86,88,495/- on account of interest paid on Compulsory Convertible
Debentures (“CCDs”). Accordingly, the Ld. AO making certain non-
TP addition, in addition to the adjustment suggested by Ld. TPO, passed the draft assessment order under section 143(3) r.w.s. 92CA(3) of the Act on 22.09.2023. 4. Aggrieved with the draft assessment order of Ld. AO, the assessee preferred objections before the Ld. DRP, which issued directions under section 144C(5) of the Act on 26.06.2024. In accordance with the directions of Ld. DRP, the Ld. AO passed the final assessment order on 19.07.2024 under section 143(3) r.w.s.

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144C(13) r.w.s. 144B of the Act, making TP additions of Rs.13,28,00,656/- on account of interest paid on NCDs and Rs.86,88,495/- on account of interest paid on CCDs and non‑TP addition of Rs.37,75,420/- on account of disallowances under section 14A of the Act and Rs.11,66,42,462/- on account of disallowance of set off of unabsorbed depreciation. Accordingly, the Ld. AO computed the total income of the assessee at Rs.12,04,17,883/-.
5. Aggrieved with the final assessment order of Ld. AO, the assessee is in appeal before this Tribunal. At the outset, the Ld. AR submitted that, the ground no.1 of the assessee is general in nature and the assessee is not pressing ground nos.3, 4 & 5. Accordingly, the ground nos.1,3,4 & 5 are dismissed as no separate adjudication is required on the same.
6. Ground No. 2 of the assessee pertain to a legal issue. During the course of hearing, the Learned Authorised Representative (“Ld. AR”) submitted that the legal issue involved in this ground pertains to the question of judicial discipline and is identical to the issue decided by the Hon’ble Madras High Court in the case of CIT Vs. Roca

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Bathroom Products Pvt. Ltd. (2022) 140 taxmann.com 304 dated
09.06.2022. He further submitted that, the decision of the Hon’ble
Pvt. Ltd. (supra) is presently under challenge before the Hon’ble
Supreme Court and the matter is sub judice. The Ld. AR, therefore, requested that this legal ground be kept open and a suitable direction be issued to the Ld. AO/TPO to follow the outcome of the decision of the Hon’ble Supreme Court, while giving effect to the present order of the Tribunal.
7. Per contra, the Learned Department Representative (“Ld. DR”) did not raise any objection to the request of the Ld. AR.
8. We have heard the rival contentions and also gone through the record in the light of the submissions made by either side.
Considering the pendency of the identical legal issue before the Hon’ble Supreme Court and no-objection from the Ld. DR, we are inclined to accept the request of the assessee. Accordingly, the issue raised in ground no.2 is set aside to the Ld. AO with the direction to follow the outcome of the decision of the Hon’ble Supreme Court in ITA Nos.923 & 924/Hyd/2024 19
9. The Ld. AR fairly submitted that the issue of addition made on account of interest paid on NCDs under ground no. 6 and issue related to ground no.8 of the assessee are covered by the decision of this Tribunal in assessee’s own case for AYs 2017–18 and 2018–19 in ITA Nos.340 & 456/Hyd/2022 dated 27.09.2023. He further submitted that the revenue had filed an appeal before the Hon’ble juri ictional High Court against the Tribunal’s consolidated order for AYs 2017–18 and 2018–19. The Hon’ble High Court admitted the appeal only on the issue of disallowance under section 14A of the Act i.e. present ground no.8 of the assessee. Although the Revenue had also raised a ground relating to the benchmarking of interest paid on NCDs, the same was not admitted by the Hon’ble High Court. There was no appeal filed by the assessee on this issue before the Hon'ble
High Court. Consequently, the issue of benchmarking of interest paid on NCDs as decided by this Tribunal in assessee’s own case for AYs
2017–18 and 2018–19 (supra) has attained finality.

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51% of the book value of total assets on the date of agreement.
Accordingly, the lender and the assessee cannot be treated as Associated Enterprises (“AEs”), and no benchmarking is permissible.
In their second contention, the Ld. AR submitted that the credit rating of the assessee was BB–, and therefore under Rule 10TD, safe harbour rate of SBI lending rate + 475 basis points should be applied.
It was also submitted that grossing up of TDS should not be considered for benchmarking. In their third contention the Ld. AR argued that the redemption premium of Rs.10,95,99,615/- pertains to the entire tenure of NCDs and the same has already been disallowed proportionately in earlier years. Hence, the addition of the entire redemption premium of Rs.10,95,99,615/- in this year will amount to double addition in the hands of the assessee. In their fourth contention, it was submitted that while giving effect to the Tribunal’s order, the Ld. TPO may be directed to considered the effect of benchmarking while making adjustment under section 94B of the Act.
11. Per contra, the Ld. DR relied on the order of the Ld. AO/TPO.

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Ld. AR that it was BB– is factually incorrect. Further, we found that this Tribunal in assessee’s own case for A.Ys. 2017-18 & 2018-19
(supra) has dealt with the identical issue at para no. 18.3 of the order, which is to the following effect :

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DCIT (ITA No.1189/Hyd/2024 for A.Y. 2021-22 dated 18.03.2025), wherein following the Special Bench, it was again held that CCDs are to be benchmarked by applying SBI PLR. The Ld. AR further invited our attention to page no.665 of the case law paper book wherein SBI
PLR rates for different periods are placed, showing that for the relevant year the SBI PLR ranged between 12.90% to 13.45%. Since the assessee paid interest only at 10%, which is significantly lower than the SBI PLR, it was contended that the transaction is at arm’s length and therefore, no adjustment is warranted.
13.1 In their alternate contention, the Ld. AR further submitted that the assessee had not deducted tax at source on the payment of interest on CCDs. Consequently, while computing its taxable income, the assessee itself disallowed the said expenditure under section 40(a)(i) of the Act. Reference was drawn to the computation of income placed at page no.38 of the paper book. It was further pointed out that in subsequent years, no deduction was claimed since the lender had waived the interest. Hence, as the assessee has not been allowed any deduction, no transfer pricing adjustment can be made on such disallowed expenditure. In support, reliance was placed on the ITA Nos.923 & 924/Hyd/2024 32

decision of the Coordinate Bench of Tribunal in Eaton Technologies
Pvt. Ltd. v. DCIT (ITA No.1621/PN/2011, AY 2007–08, order dated
11.01.2013), wherein the Tribunal held that where the assessee had suo motu added back certain expenditure while computing its taxable income and had not derived any benefit either by capitalising it or by claiming depreciation, no adjustment could be made to determine the ALP in respect of such transaction.
14. Per contra, the Ld. DR relied on the order of the Ld. AO/TPO and supported the adjustment made by applying LIBOR + 200 bps.
15. We have heard the rival submissions and perused the material available on record. The primary contention of the Ld. AR is that the issue is squarely covered by the decision of the Special Bench of the Tribunal in the case of Hyderabad Infratech Pvt. Ltd. Vs. DCIT in ITA-TP no.1856/Hyd/2019 for A.Y. 2015-16 dated 29.01.2015, wherein at para no.23 of the order, it is held that interest on CCDs is to be benchmarked with reference to domestic Prime Lending Rate
(PLR) and not LIBOR-based rates. He further relied upon the decision of this Tribunal in Sanchore Renewable Pvt. Ltd. v. DCIT (ITA

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No.1189/Hyd/2024 for A.Y. 2021-22 dated 18.03.2025), wherein following the Special Bench, it was again held that CCDs are to be benchmarked by applying SBI PLR. In this regard, we have gone through the para no.23 of the order of the Special Bench of the Tribunal in Hyderabad Infratech Pvt. Ltd. Vs. DCIT (supra), which is to the following effect :
“23. In view of this matter and considering the facts of the present cases, and also by considering ratios of various High Courts, we are of the considered view, that once the CCDs issued by the appellant are denominated in Indian currency, the interest payment on the said CCDs is to be benchmarked with reference to the rate of interest applicable to the loans extended in currency concerned. Since the CCDs issued by the appellant are in the nature of rupee denominated loan, in our considered view, FCCD/CCD cannot be construed on par with the foreign currency loan for the purpose of benchmarking. Further, LIBOR plus 200 basis points being the interest rate prevalent in the international market and applicable to foreign curreny loans cannot be applied to benchmark interest on the appellants CCDs. Further, the said interest has to be benchmarked against the interest rates prevailing in the domestic market and similar debt instrument, such as the domestic prime lending rate
(PLR). Therefore, we are of the considered view that as regards TP adjustment made in respect of interest paid / payable on CCD/NCD/other debentures, which are denominated in Indian currency, the benchmark is to be by applying PLR against LIBOR. Accordingly, we answer the question referred to for the Special Bench as under :

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Whether as regards TP adjustment made in respect of interest paid /
payable on FCCDs / NCDs / other debentures, which are denominated in Indian currency the benchmarking is to be made by applying PLR as against
LIBOR?”
(i) Yes, in favour of the assessees.
(ii) Interest paid / payable on FCCDs / NCDs / other debentures, which are denominated in Indian currency to be bench marked by applying PLR rates.
15.1
On perusal of above, we find that the Special Bench of Tribunal has categorically held that if the CCDS are denominated in Indian Currency, the arm’s length rate of interest has to be determined with reference to the SBI PLR rates and not international LIBOR rates. This view has been consistently followed by this Tribunal in subsequent decisions, including Sanchore Renewable Pvt. Ltd. Vs.
PLR. Further, we find that, in the present case, the SBI PLR for the relevant year was between 12.90% to 13.45%, whereas the assessee had paid interest only at 10%. Since the rate paid is below the ITA Nos.923 & 924/Hyd/2024 35

applicable PLR, the payment of interest is at arm’s length.
Accordingly, we hold that the adjustment made by the Ld. AO/TPO is liable to be deleted.
15.2 On the alternative contention, we have gone through the computation of income of the assessee placed at page no.38 of the paper book, which is to the following effect :

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principle of consistency, we hold that no disallowance can be made in the present year also under section 14A of the Act, as there is no exempt income earned by the assessee. Accordingly, the Ld. AO is directed to delete the disallowance of Rs.37,75,420/-.
19. Ground No.8 of the assessee’s appeal relates to non-grant of set- off of unabsorbed depreciation. The assessee contends that the Ld.
AO has not granted proper benefit of carry forward and set-off of unabsorbed depreciation in the assessment year under consideration.
In this regard, the first contention of Ld. AR is that the assessee had unabsorbed depreciation available at the end of AY 2020–21, but the Ld. AO did not allow its set-off in the present year on the ground that the assessee had claimed such set-off in subsequent years. He further submitted that while working out the balance of unabsorbed depreciation, due effect is required to be given to the orders of this Tribunal for AYs 2017–18, 2018–19 and 2020-21. 19.1 As regards the second contention, the Ld. AR submitted that in AY 2017–18, the assessee had entered into a scheme of demerger wherein Takshila Tech Park & Incubators India Pvt. Ltd. and Genome

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Valley Tech Parks & Incubators Pvt. Ltd. were demerged, and the assessee is the resultant company. As per section 72A of the Act, the assessee is entitled to carry forward and set-off of unabsorbed depreciation pertaining to the demerged companies which stands transferred to the assessee. He therefore prayed for necessary direction to the Ld. AO to allow the set-off and carry forward of such depreciation in accordance with section 72A.
20. Per contra, the Ld. DR relied on the order of the Ld. AO/TPO.
21. We have considered the rival submissions and perused the material available on record. As far as the first contention of the assessee is concerned, it is an admitted position that the Ld. AO has not granted set-off of unabsorbed depreciation on the reasoning that the assessee had claimed such set-off in subsequent assessment years.
In our considered view, this approach of the Ld. AO is not in accordance with law. As per the settled principle, the set-off of unabsorbed depreciation is to be allowed in chronological order, i.e., from the earliest year of availability, and not postponed at the discretion of the assessee or the Revenue. Further, while determining

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the quantum of unabsorbed depreciation available for set-off in the impugned year, the Ld. AO is duty-bound to give due effect to the orders of this Tribunal in the remand proceedings, as they directly impact the computation of available depreciation. We, therefore, direct the Ld. AO to recompute the balance of unabsorbed depreciation after giving effect to the Tribunal’s orders, allow its set- off in the year under consideration, and carry forward the remaining balance, if any, for subsequent years as per law.
21.1 On the second contention, the assessee has contended that pursuant to the scheme of demerger in AY 2017–18, the unabsorbed depreciation of the demerged companies, namely Takshila Tech Park
& Incubators India Pvt. Ltd. and Genome Valley Tech Parks &
Incubators Pvt. Ltd., stood transferred to the assessee as the resultant company, and therefore, the assessee is entitled to its set-off under section 72A of the Act. This claim requires factual verification. We accordingly direct the Ld. AO to verify the demerger scheme and the quantum of unabsorbed depreciation pertaining to the demerged undertakings that are legally transferable, and allow the assessee’s claim in accordance with the provisions of section 72A of the Act.

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No.923/Hyd/2024 may mutatis mutandis apply to this appeal also.
Therefore, we hold that our findings in ITA No.923/Hyd/2024 for ground nos.2 & 6 shall mutatis mutandis apply to ground nos.2 & 6
of this appeal also. Accordingly, the issue raised in ground no.2 is set aside to the Ld. AO with the direction to follow the outcome of the decision of the Hon’ble Supreme Court in the case of Roca Bathroom
Products Pvt. Ltd.(supra) while giving effect to the order of the Tribunal in the present appeal. As such, Ground No. 2 is kept open, with the above direction.
25.1 Further, in view of above discussion, the issue of addition made on account of interest paid on NCDs/CCDs under ground No.6
of the assessee is partly allowed for statistical purposes.
26. Ground No.7 of the assessee relates to the addition of notional interest on interest-free advance to subsidiary company. In this regard, the Ld. AR submitted that, the assessee had advanced a sum of Rs.8.46 crores to MN Science & Technology Park Pvt. Ltd. (“MN
Science”), a subsidiary of the assessee, without charging any interest.

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The Ld. AO has made an addition of Rs.1,01,52,000/- towards notional interest, treating it as income of the assessee. The Ld. AR further submitted that the advance to MN Science was a strategic investment aimed at securing long-term business advantages, and there was no stipulation for charging of interest. Relying on the decision of the Hon’ble Supreme Court in CIT v. Excel Industries
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had advanced funds to its subsidiary for strategic business purposes.
There is no agreement or stipulation under which the assessee is entitled to receive interest. As held by the Hon’ble Supreme Court in Excel Industries Ltd. (supra), only real income can be brought to tax and not hypothetical or notional income. In the present case, neither any income has been accrued in the hands of the assessee, nor any obligation has been created on the part of MN Scinece. Therefore, there is absence of real income in the present case. Further, the principle laid down in Dalmia Bharat Pvt. Ltd. (supra) also supports the assessee’s case that business prudence cannot be questioned by the Revenue. Therefore, we are of the considered view that no real income has been accrued in the hands of the assessee during the year under consideration. Accordingly, we direct the Ld. AO to delete the addition of Rs.1,01,52,000/- made on account of notional interest.
29. In the result, the appeal of the assessee in ITA No.924/Hyd/2024
is partly allowed for statistical purposes.

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Copy of the Order forwarded to :

BY ORDER,