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Mahindra Satyam may have to pay taxes from Raju days
July, 13th 2011

Mahindra Satyam may have to bear most of the Rs 617-crore income tax liability relating to years in which its accounts were fudged to show higher revenues and profits, as the Central Board of Direct Taxes has given the IT firm only partial relief.

"There is no provision in the income tax law that allows a company to understate its income and recompute tax liability after the assessment has been completed," said a person privy to the matter. CBDT spokesperson confirmed that the order had been issued but declined to give details.

The income tax department had slapped Rs 617 crore tax on the company last year in respect of incomes for years 2003-04 to 2008-09. When the company failed to meet the demand, the department got its bank accounts frozen. The company had approached the Andhra HC arguing that accounts were fictitious and there was no real income.

The company cited reports of investigating agencies, including that of the Serious Fraud and Investigation Office, to bolster its case.

The court asked the company to pay part of the tax liability and furnish a bank guarantee for the rest and posted the matter for hearing.

The case subsequently came to the Supreme Court. In an April 15 order this year, the Supreme Court asked the company to file a petition before the CBDT to get its tax liability recalculated and also to furnish a bank guarantee of Rs 617 crore within 48 hours to get the freeze on its bank accounts lifted.

In a subsequent order, the SC gave two weeks to company to appeal against any unfavourable CBDT order during which the direct taxes body could not encash the bank guarantee. For assessment years 2007-08 and 2008-09, for which the assessment is not yet complete, the company can hope for some relief.

Satyam computer Services, which was hit my a multi-crore fraud committed by its owner B Ramalinga Raju , was taken over by the Mahindra group in 2009 and rechristened as Mahindra Satyam. The new management disputed the IT's claim as the reconstructed accounts of the company showed that there was no real income. The company did not respond to ET's queries.

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