Tribunal Upholds Tax on Share Premium from CCPS Issuance

In OYO Hotels and Homes Private Limited v. DCIT, Circle 19(1), the key issue was whether share premium of INR 3,885 crore arising on issuance of compulsory convertible preference shares (CCPS) to its holding company could be taxed under section 56(2)(viib). OYO contended that the fair market value (FMV) of its CCPS had been correctly determined by applying the discounted cash flow (DCF) method under Rule 11UA(1)(c), as expressly permitted by the Income-tax Rules.

The assessing officer instead adopted the net asset value (NAV) method under Rule 11UA(2)(a), and the National Faceless Appeal Centre affirmed that approach. In its order dated 4 June 2026, the tribunal dismissed OYO’s grounds, held the premium taxable under section 56(2)(viib) and confirmed the addition based on the NAV valuation.