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Satyam paid tax on fictitious interest income: SFIO

May, 11th 2009
Satyam paid Rs 186.91 crore as tax over seven years on fictitious interest income on non-existent fixed deposits, said the Serious Fraud Investigation Office (SFIO) in its report on the accounting scam in the IT firm. Satyam Computer Services, under the leadership of its founder B Ramalinga Raju, paid excess tax on fictitious interest income from 2000-01 to 2007-08 on non-existent fixed deposits to prevent any "systematic falsification of accounts" from getting detected, said the SFIO report, the investigation arm of the Corporate Affairs Ministry. Satyam, in the centre of the biggest accounting fraud in the country ever, is alleged to have shown fake fixed deposits of Rs 3,318.37 crore on its books of account, while the company had FDs worth only Rs 9.96 crore. "The amount of excess taxes paid by the company between the financial year 2000-01 and 2007-08 is found to be Rs 186.91 crore, as worked out by investigation," the SFIO said in its report. Noting that the Raju brothers (B Ramalinga Raju and B Rama Raju) were aware that no tax was payable on the false interest income, the report said "they deliberately misused the funds of the company to the detriment of its shareholders in making payment of taxes which were not due". These falsifications helped the promoters in giving a rosy picture of the company and obtaining very high prices for their shares held in the name of their family members and front companies floated by them, the report said. "By knowingly making payment of taxes on non-existent accrued interest, they caused wrongful loss to the company and its stakeholders," the investigating agency added. When questioned by the SFIO on why the company paid excess tax on fake income from non-existent fixed deposits, Raju had said the company should not have paid more tax than warranted by its performance. Raju also told the investigating agency that he was unable to comment any further because of his lack of understanding of the issues involved. On being asked about the persons who played a key role in the fraud, Raju said he took help from Vadlamani Srinivas (ex-CFO of Satyam) and G Ramakrishna (ex-auditor), who were reluctant partners. Raju further said that Srinivas and Ramakrishna were executing things as per his instructions, though he was not aware of the mechanism.