Delhi High Court Stays Rs 1140 Cr Angel Tax Demand Against OYO

The High Court of Delhi has granted relief to OYO Hotels and Homes Pvt. Ltd. by staying the Income tax demand of Rs 1,139.93 crore for Assessment Year 2021-22.

OYO had declared a loss of Rs 8,59,11,33,141 in its Income Tax Return filed for the AY 2021-22. This return was selected for scrutiny where the Assessing Officer assessed the income at Rs 31,419 crore after adding Rs 38,855 crore received as a premium on Compulsorily Convertible Preference Shares (CCPS) issued to its holding company, Oravel Stays Ltd and passed an order dated 28.12.2022.

Against this order, OYO Hotels filed a petition requesting the High Court to issue directions to the income tax department not to consider the Assessee in default under Section 220(6) of the Income Tax Act, 1961 and stay the Rs 11,39,93,05,320 tax demand until its pending appeal is disposed of.

The AO stated that this premium exceeded the fair market value and was taxable under Section 56(2)(viib) of the Income Tax Act.

The Court observed that this issue had already been settled in favour of the assessee by the Income Tax Appellate Tribunal (ITAT) in its case for AY 2018-19. The court stated that if the addition of the share premium is deleted, the demand tax would be extinguished. It also noted that the Commissioner of Income Tax (CIT) had passed an order, granting a stay on the demand, which was extended for six months, after OYO deposited Rs 1 crore.

Therefore, the court ruled in favour of OYO and issued directions to stay the demand order until the appeal is disposed of by the National Faceless Assessment Centre (NFAC).