AP high court asks Satyam to deposit Rs 350 cr with CBDT

In a setback to Mahindra Satyam, (the brand identity of Satyam Computer Services Limited), the Andhra Pradesh High Court on Wednesday directed the IT oursourcing company to deposit Rs 350 crore with the Central Board of Direct Taxes (CBDT), besides issuing a bank guarantee of Rs 267 crore to the tax authorities.

Based on the petition filed by Mahindra Satyam against the I-T department challenging the tax demand of  Rs 617 crore, the court on March 25 had directed the company as well as the I-T department not to operate the company’s accounts till March 31. The matter has been posted to April 20 for further hearing.

Hearing the petition today, the court observed that the company cannot take into account Satyam founder B Ramalinga Raju’s confession, which is yet to be proved.

Mahindra Satyam Chairman Vineet Nayyar, had said earlier that the CBDT had turned down the company’s requests not to impose the tax on the grounds that the calculations were based on the accounts of the previous management and have proved to be fictitious.

After Raju confessing to a multi-crore accounting fraud in 2009, Satyam plunged into a financial crisis. The matter is now being prosecuted by Indian investigative agencies.

While delivering the interim order, a division bench of the AP high court comprising Justices VV S Rao and Ramesh Ranganathan allowed the company to access its bank accounts which were earlier kept in abeyance by the same court.

S Ganeshan, senior counsel for Mahindra Satyam, argued that the CBDT notice was arbitrary, illegal and on abdication of power and duty.

Besides, he said that there was no justification in attaching the company’s bank accounts whose total value is Rs 1,300 crore.

He pleaded with judges in his arguments to release accounts to pay salary for the company’s employees for the month.

The I-T department’s tax claim is based on the Rs 345-crore foreign tax credit availed by the former management of Satyam Computer Services headed by Ramalinga Raju during 2002-08, which the present management believes is forged.