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Pr. Commissioner of Income Tax (Central)-2 vs. M/s Delhivery Pvt. Ltd.

Income Tax Appeal · 2026:DHC:7975-DBDecided 17 Sept 2026New Delhi Bench
ITA 479/2024CNR: DLHC010577692024
Justice Dinesh Mehta · Justice Rajneesh Kumar Gupta

Background

The Income Tax Department appealed against a ruling of the Income Tax Appellate Tribunal that had gone in favour of logistics company Delhivery on two points: (i) whether the company could claim a tax deduction of over Rs. 51 crore for the cost of its Employee Stock Option Scheme (ESOP), and (ii) whether an addition of about Rs. 62.7 lakh as "undisclosed income" was justified, based on the Assessing Officer's objection that a share valuation report was certified by a Chartered Accountant instead of a Merchant Banker.

Decision Breakdown

The High Court ruled entirely in the company's favour on both counts. On the ESOP deduction, it simply followed its own well-established precedent (Commissioner of Income Tax v. Lemon Tree Hotels) that ESOP costs are a legitimate deductible business expense, not something to be disallowed. On the valuation question, the Court noted the Tax Department's own rule requiring Merchant Banker certification only came into force from a later financial year (via a May 2018 notification): the valuation in this case related to an earlier year (2017-18), when a Chartered Accountant's certification was still valid. The tax appeal was rejected entirely.

Lesson Learnt

Tax authorities cannot apply a new rule (here, a Merchant Banker certification requirement) retroactively to earlier financial years where the older, more permissive rule was still in force, and settled precedent on ESOP deductions continues to bind future assessments.

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