NEOVANTAGE BIO-TECHNOLOGY PRIVATE LIMITED,HYDERABAD V. ACIT., CIRCLE 5(1), HYDERABAD

ITA 924/HYD/2024

AI Insights

The case involves M/s. Neovantage Innovation Park Private Limited and M/s. Neovantage Bio-Technology Private Limited, which appealed against the final assessment orders passed by the Income Tax Officer and Assistant Commissioner of Income Tax, respectively. The primary issues revolved around the transfer pricing adjustments made on interest payments for NCDs and CCDs, and the disallowance of unabsorbed depreciation. The Tribunal considered previous rulings and the ongoing legal discourse at the Supreme Court level regarding similar issues, leading to a decision that partly favored the assessees by adjusting the transfer pricing methodology and directing a re-evaluation of the disallowed depreciation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 775478 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Assessment Year: 2020-2021
• Appeal Filed On: 16-09-2024
• Other Referred Cases: CIT Vs. Roca Bathroom Products Pvt. Ltd., Hyderabad Infratech Pvt. Ltd. Vs. DCIT, Sanchore Renewable Pvt. Ltd. v. DCIT, Eaton Technologies Pvt. Ltd. v. DCIT, Excel Industries Ltd. v. CIT, Dalmia Cement Pvt. Ltd. v. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KUMAR NAIK
• Keywords: Set aside; Transfer pricing; International transaction; Depreciation; Rule of consistency; Commercial expediency; TDS; Earning of tax free income; Notional interest; Unabsorbed depreciation
• Section: 143(3); 2; 14A; 92A

Judgement Text

"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 क े 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 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 2 (“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. ITA No.923/Hyd/2024 2. The assessee has raised the following grounds of appeal : Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 3 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 4 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 5 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 6 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 7 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 8 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 9 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 10 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 11 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 12 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 13 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 14 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 15 3. The brief facts of the case as culled out from the record are that, Neovantage Innovation Park Private Limited (“the assessee”) is a company engaged in the business of developing, building and leasing of life sciences and biotechnology parks in India. It filed its return of Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 16 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. Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 17 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 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 18 Bathroom Products Pvt. Ltd. (2022) 140 taxmann.com 304 dated 09.06.2022. He further submitted that, the decision of the Hon’ble Madras High Court in the case of CIT Vs. Roca Bathroom Products 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 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 19 the case of CIT Vs. Roca Bathroom Products Pvt. Ltd.(supra) while giving effect to the order of the Tribunal in the present appeal. Accordingly, Ground No. 2 is kept open, with the above direction. 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 jurisdictional 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. Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 20 10. The Ld. AR further submitted that, under ground no.6, the assessee has raised two issues i.e. (a) addition made on account of interest paid on NCDs and (b) addition made on account of interest paid on CCDs. As far as the issue of addition made on account of interest paid on NCDs is concerned, the Ld. AR submitted that the assessee had issued NCDs in 2016 to DB International (Asia) Ltd., Singapore (“lender”), and paid an aggregate sum of Rs.24,55,75,315/- comprising interest of Rs.13,59,75,700/- at 11% and redemption premium of Rs.10,95,99,615/- at 1.5%. Since the assessee had borne the tax liability (TDS) on behalf of the lender, after grossing up the interest, the effective rate came to 13.18%. The Ld. TPO benchmarked the interest by adopting SBI MCLR rate of 7.90% and premium of 1.75%, aggregating to 9.65%, resulting in an adjustment of Rs.13,28,00,656/-. 10.1 In their first contention the Ld. AR submitted that the lender is a foreign bank in the business of financing, the negotiations were conducted on principal-to-principal basis, and on the date of agreement dated 16.08.2016, the condition under section 92A(2)(c) of the Act was not satisfied since the loan advanced did not constitute Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 21 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. Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 22 12. We have considered the rival submissions and perused the material on record. On the first contention of the assessee, it has been contended that the lender is a foreign bank in the business of financing, the negotiations were conducted on principal-to-principal basis, and at the time of agreement dated 16.08.2016, the condition under section 92A(2)(c) of the Act was not satisfied since the loan advanced did not constitute 51% of the book value of total assets as on the date of agreement. Accordingly, it is argued that, the lender and the assessee cannot be treated as AEs as per the provisions of section 92A (2) (c) of the Act, and no benchmarking is permissible. In this regard, we find that identical issue has been decided by this Tribunal in assessee’s own case for AYs 2017–18 and 2018–19 (supra), wherein at para nos. 15 to 16.1, this Tribunal has dealt with the issue as under : Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 23 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 24 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 25 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 26 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 27 12.1 On perusal of above, we find that this Tribunal has held that the assessee and the lender are to be treated as AEs and benchmarking of the transaction is justified. Therefore, respectfully following the same reasoning, we reject this first contention of the assessee. 12.2 On the second contention, the Ld. AR has 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 is also prayed before the bench that the grossing up of TDS should not be considered for benchmarking. In this regard, we have gone through para no. 6.4.2 of page no. 13 of the order of the Ld. TPO, which is to the following effect : “6.4.2 Accordingly, considering the credit rating of the taxpayer being BBB- and the MCLR being 7.90, vide show cause notice it was proposed to apply / benchmark the transaction of interest on NCDs (including premium of redemption) at 9.65% (7.90 + 1.75) under CVUP method as against the 13.18% rate adopted by the taxpayer.” 12.3 On perusal of above, we find that the Ld. TPO has stated the credit rating of the assessee at BBB–. Therefore, the contention of the Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 28 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 : Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 29 12.4 On perusal of above, we find that this Tribunal has adopted a consolidated rate of 12.275% for interest and redemption premium of NCDs including grossing up of TDS, considering safe harbour rules and section 194LD of the Act. Therefore, respectfully following the same and applying the principle of consistency, we direct the Ld. TPO to benchmark the impugned transaction at 12.275%. 12.5 On the third contention, the facts have not been disputed that the redemption premium of Rs.10,95,99,615/- relates to the entire tenure of NCDs and has been apportioned in earlier years also, wherein corresponding adjustments have already been made by the Ld. TPO. We, therefore, direct the Ld. AO/TPO to exclude such portion of redemption premium which has already been considered in earlier years to avoid double addition. 12.6 On the fourth contention, we direct the Ld. AO/TPO to give effect to the benchmarking adjustment made in the remand proceedings in accordance with law while computing disallowance, if any, under section 94B of the Act. Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 30 12.7 In view of our above directions, the issue of addition made on account of interest paid on NCDs under ground No.6 of the assessee is partly allowed for statistical purposes. 13. As far as the issue of addition made on account of interest paid on CCDs under ground No.6 of the appeal is concerned, it is submitted that, the assessee had issued CCDs in the year 2016 for a tenure of 12 years, which were compulsorily convertible into equity shares, carrying interest at 10% per annum. During the year under consideration, the assessee paid total interest of Rs.1,45,05,000/-. However, the Ld. TPO benchmarked the interest by applying LIBOR + 200 basis points and accordingly made an adjustment of Rs.86,88,495/-. In this regard, the primary contention of the assessee 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. Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 31 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 Printed from counselvise.com 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 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 33 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 : Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 34 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. DCIT (supra), wherein it was held that interest on CCDs should be benchmarked with SBI PLR. In the present case, there is no dispute about the facts that the CCDs issued by the assessee are not denominated in Indian Currency. Therefore, respectfully following the decision of Special Bench of Tribunal in the case of Hyderabad Infratech Pvt. Ltd. Vs. DCIT (supra), we hold that the interest on CCDs in the case of the assessee should be benchmarked with SBI 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 Printed from counselvise.com 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 : Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 36 15.3 On perusal of above, we find that the assessee has suo motu disallowed the interest on CCDs under section 40(a)(i) of the Act, on account of non-deduction of TDS. It is also not in dispute that in subsequent years, no deduction was claimed as the lender waived the interest. Thus, the assessee has not derived any tax benefit from the impugned payment. Further, the principle laid down by the Coordinate Bench of Tribunal in Eaton Technologies Pvt. Ltd. v. DCIT (supra) squarely applies here. In that case, the Tribunal held that once an assessee has voluntarily disallowed an expenditure and has not derived any benefit, either by claiming deduction or by capitalisation, there is no occasion to benchmark such transaction under transfer pricing provisions. Respectfully following the same, we hold that no adjustment is warranted in the present case. 15.4 In view of the above findings, we hold that the adjustment made by the Ld. AO/TPO in respect of interest on CCDs is unsustainable both on primary as well as on the alternative ground. Accordingly, the issue of addition made on account of interest paid on CCDs under ground No.6 of the assessee is allowed. Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 37 16. Ground No.7 of the assessee’s appeal relates to the disallowance of Rs.37,75,420/- made by the Ld. AO under section 14A of the Act. In this regard, the Ld. AR submitted that the assessee had not earned any exempt income during the year under consideration. Hence, no disallowance can be made under section 14A of the Act. He further submitted that the issue is squarely covered in favour of the assessee by the order of this Tribunal in assessee’s own case for assessment years 2017-18 & 2018-19 (supra), wherein this Tribunal has decided the issue in favour of the assessee. 17. Per contra, the Ld. DR relied on the order of the Ld. AO/TPO. 18. We have heard the rival submissions and perused the material available on record. It is not in dispute that the assessee has not earned any exempt income during the year under consideration. Further, we have gone through the para nos.44 to 45 of the order of this Tribunal in assessee’s own case for A.Ys. 2017-18 & 2018-19 (supra), which are to the following effect : Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 38 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 39 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 40 18.1 On perusal of above, we find that this Tribunal has held that when no exempted income has been earned by the assessee from the investment made by it, no disallowance under section 14A of the Act can be made by Ld. AO. Therefore, respectfully following the aforesaid decision in assessee’s own case (supra), and applying the Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 41 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 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 42 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 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 43 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. Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 44 21.2 In view of the above discussion, ground no.8 of the assessee’s appeal is allowed for statistical purposes, with the directions to the Ld. AO as set out hereinabove. 22. In the result, the appeal of the assessee in ITA No.923/Hyd/2024 is partly allowed for statistical purposes. ITA No.924/Hyd/2024 23. The assessee has raised the following grounds of appeal : Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 45 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 46 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 47 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 48 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 49 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 50 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 51 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 52 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 53 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 54 Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 55 24. At the outset, the Ld. AR submitted that, the ground nos. 1 & 8 of the assessee are general in nature and the assessee is not pressing ground nos.3, 4 & 5. Accordingly, the ground nos.1, 3, 4, 5 & 8 are dismissed as no separate adjudication is required on the same. 25. The Ld. AR further submitted that, the ground nos.2 & 6 of the assessee are identical to ground nos.2 & 6 of appeal in ITA No.923/Hyd/2024. He also submitted that, although there is no order of this Tribunal in assessee’s own case for earlier years, the assessee rely on the decision of this Tribunal in the case of Neovantage Innovation Park Private Limited in ITA No.340 & 456/Hyd/2022 for A.Ys. 2017-18 & 2018-19 dated 27.09.2023. He also submitted that the findings of the Tribunal for ground nos.2 & 6 in ITA Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 56 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. Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 57 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 Ltd. (358 ITR 295), it was submitted that income cannot be taxed on a hypothetical basis unless there is a real accrual of income in the hands of the assessee and obligation to pay the same on the part of MN Science. Further reliance was placed on CIT Vs. Dalmia Cement Pvt. Ltd. (254 ITR 377), wherein it was held that commercial expediency lies within the domain of the assessee, and business decisions are not to be substituted by the Revenue. Accordingly, the Ld. AR prayed before the bench to delete the addition made by the Ld. AO. 27. Per contra, the Ld. DR relied on the orders of revenue authorities. 28. We have considered the rival contentions and gone through the material available on record. It is an undisputed fact that the assessee Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 58 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. Printed from counselvise.com ITA Nos.923 & 924/Hyd/2024 59 30. To sum up, the appeals of the assessees in ITA Nos.923 & 924/Hyd/2024 are partly allowed for statistical purposes. Order pronounced in the open Court on 10th Sept., 2025. Sd/- Sd/- (VIJAY PAL RAO) (MADHUSUDAN SAWDIA) VICE PRESIDENT ACCOUNTANT MEMBER Hyderabad. Dated: 10.09.2025. * Reddy gp Copy of the Order forwarded to : 1. 1. M/s. Neovantage Innovation Park Private Limited 2. M/s. Neovantage Bio-Technology Private Limited, Building 450, Genome Valley, Turkapally Village, Shamirpet Mandal, Telangana- 500078 2. The ACIT, Ward 16(3) / ACIT, Circle 5(1), Hyderabad. 3. Pr.CIT, Hyderabad. 4. DR, ITAT, Hyderabad. 5. Guard file. BY ORDER, Printed from counselvise.com "