How to treat this window??

I am working on a bathroom project. There is a window in the tub shower area that was formerly covered up with just a plastic shower wall/enclosure.

I want to replace all the board with waterproof board etc.

The window actually looks out onto another room in the house, not outside. There was a new room built in back of this bathroom, and this window was covered up at some point with the plastic enclosure.

Since the window looks out only into the house, i dont see any point in retaining it. But should i just put backer board right over it? Maybe create a hole so moisture doesent get trapped?

I want to tile the enclosure after i replace the board etc.

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