TSI Yatra Private Limited Vs DCIT (ITAT Delhi)
ESOP Cost Is Allowable Business Expenditure: ITAT Applies Lemon Tree Ruling and Deletes ₹93 Lakh Disallowance
The Delhi ITAT partly allowed the assessee’s appeal and deleted the disallowance of ₹93 lakh made towards ESOP expenses claimed under Section 37(1). The Assessing Officer and the CIT(A) had denied the claim on the ground that the issue was sub-judice before the Supreme Court in view of the pending SLP against the Delhi High Court judgment in Lemon Tree Hotels Ltd..
The Tribunal held that mere pendency of an SLP does not dilute the binding nature of the jurisdictional High Court decision so long as there is no stay by the Supreme Court. Relying on Lemon Tree Hotels Ltd. (Delhi HC), Biocon Ltd. (Karnataka HC) and other precedents, it was held that ESOP cost represents employee compensation and is an allowable revenue expenditure incurred wholly and exclusively for business purposes.
On the jurisdictional grounds relating to notice under Section 143(2) and framing of draft order, the Tribunal rejected the assessee’s challenge, holding that the ESOP issue had been properly raised through notice under Section 142(1). Accordingly, the appeal was partly allowed with relief on the ESOP disallowance, while jurisdictional grounds were dismissed.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the assessee is directed against the order of the NFAC, Delhi dated 03.01.2025 pertaining to A.Y 2018-19.
