I-T to re-audit some Satyam accounts

Wants firm to pay Rs 503.2-crore tax for period between 2002-03 and 2007-08.

Satyam Computer Services, rebranded as Mahindra Satyam, on Tuesday said the Income Tax (I-T) Department had directed it to get its accounts for the years, 2002-03 and 2007-08, re-audited.

The special audit would be done by someone named by the I-T Department and not by the company. The move comes in the wake of the department’s demand that Satyam pay tax aggregating Rs 503.2 crore for the period between 2002-03 to 2007-08.

The company, however, filed a petition before the Central Board of Direct Taxes for a stay over the demand till the correct quantification of income and taxes payable was done for the years in question. In November, Mahindra Satyam chairman Vineet Nayyar said the petition was “under serious consideration”.

Soon after Satyam founder, B Ramalinga Raju, confessed to a massive accounting fraud in January 2009, the I-T officials had started examining several aspects. These included issues such as what had happened to the extra money, whether it had been siphoned off and what was the source of income for Raju for purchasing land at various places.

As Satyam got I-T exemption on its income from software exports, one of the angles the I-T officials looked into was whether the claims of income from software exports had been exaggerated. If so, from where the company had earned the money. If it was from domestic operations, then the company was liable to pay I-T.

In 2007-08, the last full year before the fraud came to light, Satyam’s income from software services exports was stated at Rs 7,889.3 crore, while its income from domestic operations was given as Rs 248.1 crore. The export income included Rs 4,911.1 crore from the US, Rs 1,674.7 crore from Europe, Rs 1,101.2 crore from the Asia-Pacific and Rs 202.3 crore from the rest of the world.

During that year, Satyam’s provision for taxation increased 51.6 per cent to Rs 254.9 crore from Rs 168.15 crore in 2006-07. This increase of Rs 86.7 crore, according to the company’s annual report, was primarily on account of expiry of tax exemption benefit for one Software Technology Park each in Hyderabad, Chennai, Pune and Bhubaneswar at the beginning of 2007-08.