DCIT Vs Axis Bank Limited (ITAT Ahmedabad)
Axis Bank’s Rs. 61.90 Crore ESOP Deduction Upheld: ITAT Follows Earlier Orders Despite Pending Revenue Appeals
The Income Tax Appellate Tribunal, Ahmedabad “D” Bench, in DCIT v. Axis Bank Limited, ITA No. 2920/Ahd/2026, upheld relief concerning Rs. 61.90 crore in Employee Stock Option Plan expenses for Assessment Year 2009–10. The Tribunal followed decisions in the bank’s own cases for subsequent years and dismissed the Revenue’s appeal.
The order, pronounced on 22 October 2026, was delivered by Shri Tapas Ram Misra, Judicial Member, and Shri Gangadhar Panda, Accountant Member. Although the Revenue stated that its challenges to earlier Tribunal orders were pending before the Gujarat High Court, it accepted that the issue in the present appeal was identical to those already decided.
Background of the ESOP Deduction Claim
The dispute concerned deduction for the discount offered to employees under the bank’s ESOP scheme.
During appellate proceedings arising from the original assessment, Axis Bank raised an additional ground before the Tribunal, seeking deduction for that discount. The Tribunal admitted the ground and restored the matter to the Assessing Officer for factual verification.
The Revenue challenged that decision before the Gujarat High Court. The High Court directed the Assessing Officer to decide the issue de novo.
Consequently, the assessment underlying the present appeal was passed under Sections 143(3), 254 and 260A of the Income-tax Act, 1961, pursuant to the High Court’s directions.
Assessing Officer Relied on Ranbaxy Laboratories
While deciding the remitted issue, the Assessing Officer relied on the Delhi Tribunal’s decision in ACIT v. Ranbaxy Laboratories Ltd. [2010] 38 SOT 17.
The order records that this reliance was preferred over the Tribunal Special Bench decision in Biocon Ltd. v. DCIT [2013] 35 taxmann.com 335.
The resulting disallowance concerned Rs. 61.90 crore in ESOP expenses.
The present Tribunal order did not reproduce a detailed comparison of those decisions. Instead, its adjudication focused on the subsequent decisions already rendered in Axis Bank’s own cases concerning the same deduction issue.
CIT(A) Followed Decisions in the Bank’s Own Cases
By the time the first appellate authority considered the dispute, the Ahmedabad Tribunal had already decided the ESOP deduction issue in the bank’s favour for several subsequent assessment years.
These included AYs 2010–11 and 2011–12, in ITA Nos. 48 and 49/Ahd/2024, and AYs 2012–13 to 2015–16, in ITA Nos. 385–387/Ahd/2024 and 342/Ahd/2024.
Following those decisions, the Additional/Joint Commissioner of Income Tax (Appeals)-2, Noida, accepted the deduction claim through an order dated 30 June 2026.
The Revenue appealed against that relief, seeking restoration of the Assessing Officer’s disallowance.
Revenue Sought Independent Examination of the Claim
The Revenue argued that the proceedings arose from a specific High Court direction requiring fresh adjudication.
According to its grounds, the CIT(A) should have independently examined whether the claim for the relevant year satisfied the necessary requirements, rather than relying on subsequent-year orders.
It identified several matters requiring examination, including the ESOP scheme terms, vesting conditions, exercise pattern, forfeiture rate and valuation mechanism.
The Revenue also challenged the treatment of the difference between the market price on exercise and the exercise price as an ascertained and accrued liability deductible under Section 37.
It characterised the amount as notional or contingent. These were the Revenue’s contentions; the Tribunal did not endorse them.
Pending High Court Challenges Were Cited
The Revenue further submitted that it had challenged the earlier favourable Tribunal orders before the Gujarat High Court and that those decisions had not attained finality.
At the hearing, the Departmental Representative reiterated that the subsequent-year decisions had not been accepted by the Department.
However, he also expressly accepted that the issue involved in the present appeal was identical to the issues decided by the coordinate Bench.
That acknowledgment supported the Tribunal’s application of the existing decisions in the assessee’s own cases. The Tribunal proceeded to follow them despite the pending challenges identified by the Revenue.
Additional Precedents Produced by Axis Bank
The bank’s representative submitted a compilation of authorities supporting the claim.
Besides the earlier orders already considered by the CIT(A), the compilation included another Ahmedabad Tribunal order in the bank’s own cases for AYs 2020–21 and 2021–22, in ITA Nos. 563 and 564/Ahd/2024.
The Tribunal therefore had before it a series of decisions concerning the same assessee and the same ESOP deduction issue.
Its conclusion rested on following these precedents. The present order did not undertake a separate recalculation of the deduction or reproduce fresh findings on each scheme feature mentioned in the Revenue’s grounds.
Final Decision
Following the decisions in Axis Bank’s own cases, the Tribunal confirmed the CIT(A)’s order and dismissed the Revenue’s appeal.
The relief concerning the Rs. 61.90 crore ESOP expense disallowance consequently remained intact for AY 2009–10.
The ruling demonstrates the Tribunal’s adherence to coordinate Bench decisions on an admittedly identical issue. The pending High Court appeals mentioned by the Revenue did not persuade it to depart from those precedents in this appeal.
Cases Discussed
- ACIT vs. Ranbaxy Laboratories Ltd. — ITA Nos. 2613 and 3871/Del/2004; [2010] 38 SOT 17 (Del). The Assessing Officer relied on this decision while considering the ESOP deduction claim.
- Biocon Ltd. vs. DCIT (LTU) — [2013] 35 taxmann.com 335 (Bangalore-Trib.) (Special Bench). The order records that the Assessing Officer preferred Ranbaxy Laboratories over this decision.
- Axis Bank Limited — ITA Nos. 48 and 49/Ahd/2024 — ITAT Ahmedabad; AYs 2010-11 and 2011-12; order dated 24.07.2024. Earlier decisions in the assessee’s favour concerning ESOP deduction.
- Axis Bank Limited — ITA Nos. 385, 386, 387 and 342/Ahd/2024 — ITAT Ahmedabad; AYs 2012-13 to 2015-16; order dated 10.09.2024. Earlier decisions followed by the CIT(A).
- Axis Bank Limited — ITA Nos. 563 and 564/Ahd/2024 — ITAT Ahmedabad; AYs 2020-21 and 2021-22. Additional decisions produced by the assessee in support of the ESOP deduction.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The present appeal has been filed by the Revenue against the order of the Ld. Addl/Joint Commissioner of Income Tax (Appeals)-2, Noida, (hereinafter referred to as “CIT(A)”), dated 30.06.2026 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2009-10.
2. The Revenue has raised the following Grounds of appeal:
1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT Appeals erred in deleting the addition of Rs.61.90 Crore made on account of disallowance of ESOP expenses, without appreciating that the present proceedings arose from a specific direction of the Honorable Gujarat High Court in Tax Appeal No.541 of 2018, remitting the issue to the Assessing Officer to be decided de novo, and without independently examining whether the claim, on the facts of the year under consideration, satisfied the requirements directed by the Honorable High Court.
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT Appeals erred in deleting the addition by relying on the ITAT orders dated 24.07.2024, ITA Nos. 48 & 49 Ahd 2024 and 10.09.2024, ITA Nos.385, 386, 387 & 342Ahd2024 in the assessee own case, without appreciating that the said orders have themselves been challenged by the Department before the Honorable Gujarat High Court vide Tax Appeal Nos.678 of 2025, 688 of 2025, 78 of 2025, 81 of 2025. 83 of 2025 and 89 of 2025, and have not attained finality.
3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT Appeals erred in deleting the addition merely by relying on the decisions of the Honorable ITAT in the assessee own case for subsequent assessment years, without independently examining the facts and computation methodology, including the terms of the ESOP scheme, vesting conditions, exercise pattern, forfeiture rate and valuation mechanism, applicable during the year under consideration
4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT Appeals erred in holding that the difference between the market price of shares on the date of exercise of options and the exercise price represents an ascertained and accrued liability allowable as deduction under section 37 of the Act, without appreciating that the same is a notional, contingent, book entry adjustment dependent upon future exercise of options by employees and lacking certainty of crystallization during the relevant previous year.
5. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary.
6. It is, therefore, prayed that the order of Ld. CIT (Appeals) may be set aside and that of the Assessing Officer be restored.
2.1 The assessment order in this case was passed under section 143(3)/254/260A pursuant to direction of the Hon’ble Gujarat High Court. In the appeal arising out of the original assessment, the assessee had raised an additional ground before the ITAT claiming deduction in respect of the discount offered to the employees as part of the ESOP Scheme. The Revenue had challenged the decision of the ITAT to allow this ground and restore the matter to the A.O. for factual verification. In appeal, the Hon’ble Gujarat High Court directed the A.O. to decide the issue de novo.
3. In the assessment made pursuant to direction of the Hon’ble High Court, the A.O. preferred to place reliance on the decision of Delhi Bench of ITAT in the case of ACIT vs. Ranbaxy Laboratories Ltd.: ITA No. 2613 and 3871/Del/2004: [2010] 38 SOT 17 (Del) instead of the decision of ITAT Special Bench in the case of Biocon Ltd. vs. DCIT (LTU): [2013] 35 taxmann.com 335 (Bangalore-Trib.).
4. By the time the issue was decided by the Ld. CIT(A), NFAC in the impugned order, the same had already been decided by the ITAT Ahmedabad Benches in favour of the assessee and against the Revenue in the assessee’s own cases in Asst. Years 2010-11 & 2011-12 (ITA Nos. 48 & 49/Ahd/2024), for Asst. Years 2012-13, 2013-14, 2014-15 and 2015-16 (ITA Nos. 385-387/Ahd/2024 and ITA No. 342/Ahd/2024). Following the decisions of the ITAT in the assessee’s own cases, the Ld. CIT(A) accepted the assessee’s claim with regard to deduction for ESOP expenses.
5. Ld. CIT-DR Shri R.V. Aroon Prasad states that the Revenue has challenged the order on the ground that the orders of the ITAT for the succeeding years have not been accepted and Revenue’s appeals are pending before the High Court. The Ld. CIT-DR however accepts that the issue involved in the present appeal is identical to those in the later years which were decided by the Co-ordinate Bench.
6. Shri Tuhsar Hemani, Ld. Sr. Advocate submitted a compilation of case laws that included, in addition to the cases referred supra, another order of ITAT Ahmedabad Bench in the assessee’s own cases for Asst. Years 2020-21 and 2021-22 (ITA Nos. 563 and 564/Ahd/2024).
7. In view of the precedents in the assessee’s own cases for A.Ys. 2010-11 to 2021-22, we have no hesitation in following the same, confirming the decision of the CIT(A) and dismissing the appeal of the Revenue.
8. In the result, the appeal of the Revenue is dismissed.
This Order is pronounced on 22/10/2026
