The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has provided major relief to OYO Hotels and Homes by deleting a tax addition of ₹3,885 crore imposed under the "angel tax" provisions of Section 56(2)(viib) of the Income Tax Act. The dispute arose after tax authorities challenged the share premium received by OYO from its parent company, Oravel Stays, during a corporate restructuring exercise in FY22.

The tax department had rejected OYO's valuation based on the Discounted Cash Flow (DCF) method, arguing that the company's losses and the impact of the COVID-19 pandemic made the valuation unrealistic. Consequently, it treated the share premium as excessive and made additions totaling over ₹3,885 crore.

However, the tribunal ruled in favour of OYO, holding that tax authorities cannot substitute their own assessment for a valuation carried out by a qualified expert under prescribed rules. ITAT observed that DCF is a recognized forward-looking valuation methodology and that business projections cannot be invalidated using hindsight. The tribunal further noted that the angel tax provisions are intended to curb the infusion of unaccounted money and should not be applied to genuine intra-group investments. The ruling reinforces judicial support for commercially justified valuations and limits arbitrary tax challenges to startup and corporate fund-raising transactions.