Delhi HC gives relief to Oyo in Rs 1,140 crore angel tax demand by income tax department

The Delhi High Court on Saturday stayed a Rs 1,140 crore tax demand made on Oyo by the income tax department, while disposing of a writ petition in favour of the hospitality chain, people in the know said.

The tax department had raised the demand under provisions of the so-called angel tax, which is levied when a company issues shares to an investor at a higher value than the “fair” market value. A person familiar with the matter at the company said the Income Tax Department had treated an investment made by Oyo’s holding company, Oravel Stays, into the subsidiary as income and levied a tax on it.

"The court has disposed of the writ petition (challenging the tax demand) and has granted a stay. The petition was filed by the company a few days ago," the person added.


Another person familiar with the matter said this was a "faceless assessment” by the tax department and, as a result, the company had no option but to go to court. "Fundamentally, the income tax department was treating the investment into Oyo's own subsidiary as income," he also said.

This court decision is a big relief to the company which is aiming to go public.

Oyo is projected to post an adjusted operating profit of Rs 185 crore for the second half of the ongoing fiscal 2023, potentially marking its first full financial year of profitability under this metric, the company told employees last month.

The hospitality chain had reported an adjusted Ebitda of Rs 63 crore in the first half of this financial year, as per previous filings with the Securities and Exchange Board of India.