I-T to recall Rs 617 cr tax on Satyam, company account still frozen

NEW DELHI: In some relief to Satyam Computer (now Mahindra Satyam), the Central Board of Direct Taxation (CBDT) today informed the Supreme Court that it would set aside its order, directing the scam-hit IT firm to deposit Rs 617 crore as Income Tax.

However, the company's plea to defreeze its bank account worth Rs 1,300 crore was rejected by the apex court, which said it would hear this issue on Monday.

Attorney General G E Vahanvati, appearing for CBDT, told the apex court that it would recall its March 10, 2011 order demanding Rs 617 crore in tax that Satyam had refuted on the grounds that calculations were based on fictitious accounts of the previous management, led by disgraced founding Chairman B Ramalinga Raju.

"We would set aside March 10, 2010 order. We would give them a hearing and pass a well-reasoned order," Vahanvati told a three-judge bench headed by Chief Justice S H Kapadia.

The counsel appearing for Satyam had requested the court to defreeze the company account. It said it urgently needed the money as in a recent negotiation it has paid around 10 million USD to Securities and Exchange Commission ( SEC) of USA for overstating the company's revenue, income and cash balances.

"We are not going to solve this problem now. Your main grievance was that you were not heard before passing such an order," the bench said, adding that it would be addressed now.

The counsel submitted, "We also have to pay the salaries of the employees for the next month and have some liabilities also."

However, Vahanvati opposed the company's plea, saying it already had cash reserves of Rs 1,800 crore.

"Let the money remain with us. After that revised process if they are entitled, we will refund them," said Vahanvati.

Based on this position, Satyam's counsel requested the apex court to put the money in an escrow account.

In response, the bench assured the IT firm, saying its interest would be protected. "You would be protected," it said.

Satyam has moved to the apex court after an order by Andhra Pradesh High Court, directing it to deposit Rs 350 crore along with a bank guarantee of Rs 267 crore to the tax authorities.

Earlier, CBDT had turned down the company's requests not to impose the tax as the calculations were based on fictitious accounts of the previous management, led by disgraced founding Chairman B Ramalinga Raju.

The CBDT claim is based on Rs 345 crore foreign tax credit availed by the former management of the company. The tax demand further climbed to about Rs 616 crore after the imposition of interest and penalties.