Govt to review tax demand on Satyam

The Union government told the Supreme Court today that it would give a fresh hearing to the arguments of Mahindra Satyam on the recent Rs 617-crore income tax demand on its scam-hit predecessor, Satyam Computers.

Satyam had challenged the Andhra Pradesh high court’s order on the company’s appeal there. The HC had ordered it to deposit Rs 350 crore, plus a bank guarantee of Rs 267 crore, with the tax authorities, pending the outcome of the appeal.

The tax claim is based on the falsified accounts of the previous management, led by disgraced founding chairman B Ramalinga Raju. It is based on a foreign tax credit availed of by the former management of the company, which the present leadership believes to be forged. The tax authorities’ demand includes interest and penalties on the amount. Satyam contests both, figure and reasoning.

In an apparently conciliatory gesture, Attorney General G E Vahanvati told a bench headed by Chief Justice S H Kapadia that the I-T demand under dispute would be withdrawn and a well-reasoned order passed. “Let them come to us,” he said.

The SC will take up the case again on Monday. The bench, however, accepted a contention of the AG to disallow the information technology services company to take money from its bank accounts to comply with a settlement arrived at in the US in a class action suit against it.

When the Satyam counsel asked for an order to defreezing some Rs 1,300 crore in bank accounts to comply with the class action order before the US Securities and Exchange Commission, the AG objected. “That money cannot be taken away; let it remain here,” he said.

He said the company could seek an appropriate order from the Central Board of Direct Taxes. Satyam already had cash reserves of Rs 1,800 crore, he said. If, after reconsideration, it is decided the company was entitled to get the money, the government would refund it.