Mahindra Satyam challenges I-T claim in Andhra HC

Mahindra Satyam, the erstwhile Satyam Computer Services, has moved the Andhra Pradesh High Court challenging a Rs 616.53-crore claim by the Income Tax (I-T) department. It has sought a stay on further proceedings in relation to the claim.

The Central Board of Direct Taxes (CBDT) rejected Satyam’s plea for reopening of past assessments for the assessment years 2003-04 to 2008-09, determining the company’s actual income based on the findings of investigating agencies, and granting stay on recovery proceedings for the said assessment years.

The Hyderabad-based company, which once ranked as India’s fourth-largest software company, had earlier approached the finance ministry for a stay, but is yet to receive any response.

“A notice under Section 226(3) has been issued by the Additional Commissioner of Income Tax, Hyderabad, for recovery of Rs 616,53,92,660. The company has filed a writ petition before the High Court of Andhra Pradesh, Hyderabad, challenging the said impugned order and seeking stay on further proceedings,” the company said in a statement today.

The I-T department had last year served a notice to Mahindra Satyam, demanding an audit of its accounts for the said assessment years, as the company was found guilty of illegally claiming tax credit on fictitious income during the 2003-04 to 2008-09 period.

“The basis of the Rs 616-crore tax is fictitious income shown by B Ramalinga Raju as he had fabricated huge amount of revenue,” Mahindra Satyam Chairman Vineet Nayyar said.

According to Nayyar, the previous management had claimed Rs 345 crore as foreign tax credit. CBDT officials said since the foreign tax credit was irrelevant, it had ordered Mahindra Satyam to pay Rs 345 crore along with interest, which amounted to Rs 616.53 crore.

Incidentally, Nayyar also hinted that while the government and its two investigating agencies — the Central Bureau of Investigation and Serious Fraud Investigation Office — were prosecuting Raju for showing large fictitious income, the CBDT believed that income will be the basis for imposing tax.

“We have reconstructed the accounts and have even overpaid Rs 200 crore as taxes, but the CBDT has refused to acknowledge the forgery by Raju. Obviously, this position is unacceptable to us and hence, we intend to seek legal remedies against this order,” he said.