Big relief for Ritesh Agarwal’s OYO! Delhi HC’s latest ruling on Rs 1,140 crore angel tax demand

In a significant decision for Ritesh Agarwal ’s OYO Hotels & Homes, the Delhi High Court has stayed the recovery of a Rs 1,140 crore tax demand. The demand, raised under the angel tax provisions (Section 56(2)(viib) of the Income Tax Act) for the assessment year 2021-22 (April-March), stemmed from OYO's issuance of compulsorily convertible preference shares to its holding company, Oravel Stays.

According to the Income Tax Department, the investment by Oravel into its Indian subsidiary was an income, thus taxable, reported Economic Times. However, OYO argued that these funds by Oravel into its subsidiary were capital in nature, not income, and therefore should not be subject to angel tax. A Division Bench of Justices Vibhu Bakhru and Tejas Karia issued the stay on the recovery of the tax demand after OYO challenged the department's "inaction" in extending a previous stay on the recovery of the demand amounting to Rs 1139,93,05,320 pursuant to a high-pitched assessment.