Mahindra Satyam moves court against Income Tax claim
March, 23rd 2011
Mahindra Satyam is gearing up for a long legal battle with the income-tax department. The company on Tuesday moved the Andhra Pradesh High Court , seeking a stay on the proceedings related to a Rs 616-crore claim made by the tax department.
The claim is based on a Rs 345-crore foreign tax credit availed by the then management of Satyam Computer Services headed by Ramalinga Raju between 2002-08, which the present management believes is forged. Raju is facing a CBI probe for cooking the account books of Satyam.
The tax department had served notices on Mahindra Satyam a year ago and now it has added interest and penalty provision to the tax credit to arrive at a claim of Rs 616 crore. Satyam Computer was at the centre of India's biggest corporate fraud when its founder Raju confessed to overstating the company's profits for years, in January 2009.
Subsequently, Tech Mahindra took over the company in April 2009 in a government auction and renamed it Mahindra Satyam. The new management restated the company's accounts in September 2010. "Foreign tax credit is irrelevant if you do not have income.
We feel this claim is not fair because Raju had fabricated huge revenues. Government investigating agencies, including the CBI and SFIO, had said Mahindra Satyam had paid tax on this fictional income, which is more than required," said chairman Vineet Nayyar .
According to Nayyar, the new management assumed that Raju forged documents to get foreign tax credit as it could not find any documents related to this. "SFIO has found that Rs 200-crore extra tax was paid by Raju, while the CBI has charged Raju for inflicting losses on the company by inflating revenues and paying more taxes," Nayyar said.
The company expects this money to be automatically refunded once the I-T department accepts the restated accounts. However, the I-T department is not willing to accept the new account statements because as per the I-T Act, financial documents once made and approved by the AGM cannot be altered after a year. Tax officials in Hyderabad refused to comment, citing the matter was sub judice.