ESOP Cost allowable as Business Expenditure u/s 37: ITAT allows Yatra’s ₹93L Claim Despite same Issue Pending before SC [Read Order]
The Delhi High Court in Lemon Tree Hotels Ltd. had already held that ESOP cost is allowable as revenue expenditure and the tribunal has applied the same ruling here.
![ESOP Cost allowable as Business Expenditure u/s 37: ITAT allows Yatra’s ₹93L Claim Despite same Issue Pending before SC [Read Order]](https://images.taxscan.in/h-upload/2026/01/19/2120774-esop-itat-taxscan.jfif "ESOP Cost allowable as Business Expenditure u/s 37: ITAT allows Yatra’s ₹93L Claim Despite same Issue Pending before SC [Read Order]")
The Income Tax Appellate Tribunal ( ITAT ), Delhi Bench allowed that ESOP (Employee Stock Option Plan) expenditure to Yatra as business deduction under Section37(1) of the Income Tax Act, 1961 despite pending SLP before the Supreme Court. "We are of the considered opinion that just because the SLP is pending before the Hon'ble Supreme Court would not negate the decision of...
The Income Tax Appellate Tribunal ( ITAT ), Delhi Bench allowed that ESOP (Employee Stock Option Plan) expenditure to Yatra as business deduction under Section37(1) of the Income Tax Act, 1961 despite pending SLP before the Supreme Court.
"We are of the considered opinion that just because the SLP is pending before the Hon'ble Supreme Court would not negate the decision of the Hon'ble Delhi High Court. In so far as the decision in the case of Lemon Tree [supra] has not been stayed by the hon’ble Supreme Court, the decision of the Hon'ble Delhi High Court applies with full force”, said the tribunal.
TSI Yatra Private Limited, the assessee filed an appeal against the order of the NFAC, Delhi dated 03.01.2025. The lower authorities upheld the disallowance made by the Assessing Officer.
During assessment proceedings, the AO noticed that Yatra had debited ₹93,00,000 as cost of share awards granted under ESOP to employees, shown as part of the company’s share and incentive plan.
The AO treated the ESOP expense as not allowable and added the amount back to income. The CIT(A) also confirmed the same.
Before the Tribunal, the assessee argued that the issue was no longer res integra, as the Delhi High Court in Lemon Tree Hotels Ltd. had already held that ESOP cost is allowable as revenue expenditure.
The assessee also stated the decision of the Karnataka High Court decision in Biocon Ltd., which took a similar view.
On the other hand, the Revenue defended the disallowance.
The bench of Anubhav Sharma (Judicial member) and Naveen Chandra (Accountant member) noted the decision of Delhi High Court ruling in Lemon Tree Hotels case. Even though the SLP is pending before the apex court, the order of the high court has not stayed.
Thus, the decision of the high court applies. Accordingly, it held that ESOP expenses are allowable under Section 37(1).
Therefore, the tribunal allowed Yatra’s appeal on this issue, deleting the disallowance of ₹93 lakh.
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