The Delhi High Court has stayed a ₹1,140 crore angel tax demand raised by the Income Tax Department against OYO’s parent company, Oravel Stays Pvt. Ltd, for the assessment year 2020–21, providing temporary relief to the SoftBank-backed travel tech firm.
The tax demand was issued under Section 56(2)(viib) of the Income Tax Act commonly known as the “angel tax” provision—which applies when unlisted companies issue shares at a value exceeding their fair market price. The tax department argued that investments made by Oravel into its Indian subsidiary were issued at a premium and were therefore taxable.
OYO challenged this, asserting that the funds injected by the holding company into its subsidiary were capital in nature, not income, and thus should not attract tax under the angel tax provisions.
While disposing of OYO’s writ petition, the Delhi High Court directed the Commissioner of Income Tax (Appeals) to grant a personal hearing and decide the matter within eight weeks. The court further ordered that if the CIT(A) rules against OYO, the tax demand would not be enforced for two weeks, allowing the company time to file an appeal.
This case has wider implications for OYO, which is accelerating plans for a public listing ahead of a critical year-end debt repayment deadline. Creditors, including Mizuho Financial Group Inc., have insisted that founder Ritesh Agarwal repay the $383 million he borrowed—part of a multibillion-dollar loan package—if the startup fails to launch an IPO by October, Bloomberg reported in March.
A substantial tax liability could jeopardise OYO’s IPO prospects, making this legal reprieve a vital development for the company.
