ASSISTANT COMMISSIONER OF INCOME TAX, DELHI vs. GLOBAL HEALTH LIMITED, DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, E: NEW DELHI BEFORE SHRI RAJ KUMAR CHAUHAN JUDICIAL MEMBER AND SMT. RENU JAUHRI, ACCOUNTANT MEMBER ITA No.- 7975/Del/2025 [Assessment Year: 2017-2018] Assistant Commissioner of Income Global Health Limited, Tax, E-18, Defence Colony, Room No. 405, CR Building, New Vs New Delhi-110024. Delhi-110024. PAN- AACCG2681C Revenue Assessee ITA No.- 7976/Del/2025 [Assessment Year: 2018-19] Assistant Commissioner of Income Global Health Limited, Tax, E-18, Defence Colony, Room No. 405, CR Building, New Vs New Delhi-110024. Delhi-110024. PAN- AACCG2681C Revenue Assessee ITA No.- 7977/Del/2025 [Assessment Year: 2020-21] Assistant Commissioner of Income Global Health Limited, Tax, E-18, Defence Colony, Room No. 405, CR Building, New Vs New Delhi-110024. Delhi-110024. PAN- AACCG2681C Revenue Assessee

ITA No.- ,7975, 7976 and 7977/Del/2025 Global Health Limited Assessee by Shri Deepak Chopra, Adv. Shri Rohan Kare, Adv. & Shri Priyam Bhatnager, Adv. Revenue by None (Adjournment application by ITO) Date of Hearing 25.05.2026 Date of Pronouncement 27.05.2026 ORDER Per Bench:

These three appeals have been preferred by the Revenue against the order dated 30.09.2025 of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘Ld. CIT(A)] arising out of the assessment order dated 28.12.2019 and 27.09.2022 passed under section 143(3) and 143 r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as the ‘the Act’) by the ADL/JCIT, Special Range- 4, Delhi and Assessment Unit, Income Tax Department (hereinafter referred to as the ‘AO’) pertaining to Assessment Year (A.Y.) 2017-18 and 2020-21. 1.1. The Revenue has raised the following grounds of appeal: ITA No.- 7975/Del/2025 “1. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A)/NFAC has erred deleting the disallowance of 30,22,26,918/- made by the Assessing Officer on account of ESOP expenditure, without appreciating that the ESOP discount represents a capital transaction intrinsically linked to the share capital of the company and, therefore, does not constitute an allowable expenditure within the meaning of section 37(1) of the Income-tax Act, 1961 2. That the Ld. CIT(A) has failed to appreciate that no real expenditure or outflow of funds is incurred by the assessee in respect of ESOP, and the employee benefit expenses claimed is merely a notional or book entry, rendering the ciam ineligible as a revenue deduction under the Act. 2

ITA No.- ,7975, 7976 and 7977/Del/2025 Global Health Limited 3. That the Ld. CIT(A) has erred deciding the appeal in the favour of Assessee despite that the issue has not attained the finality and pending adjudication before the Hon'ble Supreme Court in the case Lemon Tree Hotels (P.) Limited. of 4. That the order passed by the Ld. CIT(A) is erroneous, contrary to law, contrary to the facts on record, and suffers from perversity as it overlooks settled principles governing the allowability of expenditure under section 37(1) and ignores the fact that the entire issue is sub judice before the Hon'ble Supreme Court. 5. The appellant craves leave to add, amend, modify, or withdraw any of the aforesaid grounds of appeal at any time before or during the course of the hearing.”

(ITA No. 7976/Del/2025) “1. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A)/NFAC has erred in deleting the disallowance of 31,96,43,000/- made by the Assessing Officer on account of ESOP expenditure, without appreciating that the ESOP discount represents a capital transaction intrinsically linked to the share capital of the company and, therefore, does not constitute an allowable expenditure within the meaning of section 37(1) of the Income-tax Act, 1961 2. That the Ld. CIT(A) has failed to appreciate that no real expenditure or outflow of funds is incurred by the assessee in respect of ESOP and the employee benefit expenses claimed is merely a notional or book entry, rendering the claim ineligible as a revenue deduction under the Act. 3. That the Ld. CIT(A) has erred deciding the appeal in the favour of Assessee despite that the issue has not attained the finality and pending adjudication before the Hon'ble Supreme Court in the case of Lemon Tree Hotels (P.) Limited. 4. That the order passed by the Ld. CIT(A) is erroneous, contrary to law contrary to the facts on record, and suffers from perversity, as it overlooks settled principles governing the allowability of expenditure under section 37(1) and ignores the fact that the entire issue is sub judice before the Hon'ble Supreme Court 5. The appellant craves leave to add, amend, modify, or withdraw any of the aforesaid grounds of appeal at any time before or during the course of the hearing.” (ITA No.- 7977/Del/2025) “1. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A)/NFAC has erred in deleting the disallowance of 9,56,97,125/- made by the Assessing Officer on account of ESOP expenditure, without appreciating that the ESOP discount represents a capital transaction intrinsically linked to the share capital of the company and, therefore, does not constitute an allowable expenditure within the meaning of section 37(1) of the income-tax Act, 1961

ITA No.- ,7975, 7976 and 7977/Del/2025 Global Health Limited 2. That the Ld. CIT(A) has failed to appreciate that no real expenditure or outflow of funds is incurred by the assessee in respect of ESOP and the employee benefit expenses claimed is merely a notional or book entry, rendering the claim ineligible as a revenue deduction under the Act. 3 That the Ld, CIT(A) has erred deciding the appeal in the favour of Assessee despite that the issue has not attained the finality and pending adjudication before the Hon'ble Supreme Court in the case of Lemon Tree Hotels (P) Limited. 4. That the order passed by the Ld. CIT(A) is erroneous, contrary to law, contrary to the facts on record, and suffers from perversity, as it overlooks settled principles governing the allowability of expenditure under section 37(1) and ignores the fact that the issue is sub judice before the Hon'ble Supreme Court. 5. The appellant craves leave to add, amend, modify, or withdraw any of the aforesaid grounds of appeal at any time before or during the course of the hearing.”

ITA No.- ,7975, 7976 and 7977/Del/2025 Global Health Limited 4. Aggrieved with the said order, the assessee preferred an appeal before the Ld. CIT(A). 4.1 The Ld. CIT(A), after considering the decisions cited by the Ld. AO as well as the assessee on the issue, observed as under:

“7.1 The assessment order, grounds of appeal and the submissions have been carefully perused. The case laws cited by the appellant (supra) have also been studied. The reasons cited by the AO for making the addition by disallowing the expenses on the issue of shares under the ESOP scheme of the appellant are recounted below:  ESOP expenditure is not revenue in nature.  No actual monetary outgo occurred.  SEBI guidelines are irrelevant for tax deductibility.  Shares represent capital; hence any loss is capital loss.  No notified accounting standard exists for ESOPs.  Expenditure does not relate to the relevant previous year.  Only actual amortizable expenses are allowable under Section 37.  Issue not settled by Supreme Court; SLP in the case of NDTV, Lemon Tree Hotels and Biocon is pending”

4.2 The Ld. CIT(A) examined the issue in the light of the decisions of the Hon’ble jurisdictional High Court in the case of PCIT v. New Delhi Television Ltd. [2018] 99 taxmann.com 401 (Delhi) , and Pr. CIT v. Lemon Tree Hotels (P.) Ltd. [2019] taxmann.com 26 (Delhi), and held as under:

ITA No.- ,7975, 7976 and 7977/Del/2025 Global Health Limited “7.3 The following principles are distilled from these decisions of jurisdictional High Courts 7.3.1 Nature of ESOP Expense - Revenue vs. Capital The Hon'ble Karnataka High Court in Biocon Ltd. held that ESOP expenditure is revenue in nature, being a form of employee compensation. The Court observed that "The discount on issue of ESOPs is an employee cost and allowable as a deduction under Section 37(1)... It does not result in acquisition of any capital asset. Similarly, the Delhi High Court in NDTV Ltd. and Lemon Tree Hotels Ltd. affirmed that ESOP-related expenses are not capital losses, but business expenditure, allowable under Section 37(1). 7.3.2 Actual Expenditure and Monetary Outgo The AO has asserted that there is no actual monetary outgo". The High Courts have clarified that notional expenditure, if recognized under the mercantile system and supported by accounting standards, is deductible. The discount on shares represents an expense for the company, forming part of employee remuneration. 7.3.3 Relevance of SEBI Guidelines and AS-15 While SEBI guidelines are not determinative for tax purposes, they establish the regulatory framework for ESOPs. More importantly, AS-15, though not notified under Section 145(2), is widely accepted and judicially endorsed as a valid basis for accounting ESOP expenses. 7.3.4. Timing and Amortization These decisions have held that the expense should pertain to the relevant previous year and is linked to the assessee's business operations. 7.4 In view of the above discussion and binding precedents of the Hon'ble Delhi High Court, the disallowance made by the AO is not sustainable. The ESOP-related expenditure is allowable under Section 37(1) as revenue expenditure incurred wholly and exclusively for the purpose of business.”

4.3 Aggrieved with the order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal.

ITA No.- ,7975, 7976 and 7977/Del/2025 Global Health Limited 5. Before us, the Ld. AR has submitted that the issue is squarely covered in favour of the assessee by the decision of the Hon’ble Delhi High Court in the case of the Lemon Tree Hotels (P.) Ltd. (supra) and as well as in the case of New Delhi Television Ltd. (supra). 5.1 After hearing the rival submissions, we note that the issue of claim of ESOP related expenses as business expenditure u/s 37(1) of the Act has been decided by the Hon’ble jurisdictional High Court. Specifically, in the case of Lemon Tree Hotels Pvt. Ltd (supra). it has been held as under: “The question of law urged with respect to expenditure claimed towards case of Employee Stock Ownership Plan (ESOP) has been subject matter of previous orders of this Court in respect of the present assessee. For A.Y. 2008-09 in ITA 107/2017 (Commissioner of Income Tax Vs. lemon Tree Hotel Ltd.), the Court held that since the ITAT followed the previous judgments in Commissioner of Income Tax vs. PVP Ventures Ltd. [TC(A) No. 1023 of 2005] the expenditure had to be allowed. Likewise, for another assessment year, this court did not frame the question of law in ITA 862/2016. Although the Revenue urges that in terms of Circular No.9 of 2007, the expenditure ought not to be allowed given that actual expenditure towards acquisition of shares, and not mere allotment of shares by the employer can be considered as a permissible deduction, this Court is of the opinion that such an argument is untenable; that was the rationale of disallowance in this case. What the Revenue urges essentially is that the unless the employer/assessee acquires the shares from a third party, it cannot claim any deduction and that expenditure claimed for allotment or issue of ESOP is merely notional. This Court is of the opinion that such an argument ignores the realities of functioning of commercial entities who would then be asked to purchase shares from market place or third party at prevailing rates instead of allotting them. For above reasons, no question of law arises.”

5.2 In view of the decision of the Hon’ble jurisdictional High Court, we hold that the Ld. CIT(A) was justified in granting relief to the assessee by holding that the amount of

ITA No.- ,7975, 7976 and 7977/Del/2025 Global Health Limited Rs. 30,22,26,218/- claimed on account of ESOP expenses is allowable u/s 37(1) of the Act. Accordingly, appeal of the Revenue is hereby dismissed. 6. Since identical issue and facts are involved in ITA No. 7976/Del/2025 for A.Y. 2018- 19 and ITA No. 7977/Del/2025 for A.Y. 2020-21, the decision rendered herein in ITA No. 7975/Del/2025 shall apply mutatis mutandis to these two appeals as well. 7. In the result, all the three appeals of the Revenue are hereby dismissed.

Order pronounced in the open court on 27.05.2026.

Sd/- Sd/- [RAJ KUMAR CHAUHAN] [RENU JAUHRI] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated- 27.05.2026. Pooja. Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR

Asst. Registrar, ITAT, New Delhi,