Satyam fights tax claim on phantom revenues

INDIA'S Satyam Computer Services, the company found involved in a $1bn fraud in January 2009, is fighting a $138m tax claim on fictitious income shown in its accounts between 2002 and 2008.

Now known as Mahindra Satyam, since being sold to Tech Mahindra in a government auction in April 2009, it has petitioned India's Supreme Court to fight a High Court order backing the country's tax authorities.

"We feel this claim is not fair because [former CEO Ramalinga] Raju had fabricated huge revenues", said Satyam's present chairman Vineet Nayyar, noting how false accounting had been used to boost company equity.

He added, in a comment provided to Accountancy Age: "[The] SFIO (Serious Fraud Investigation Organisation) has found that 200 crore Rupees ($45m) extra tax was paid by Raju, while the CBI [Central Bureau of Investigation] has charged Raju for inflicting losses on the company by inflating revenues and paying more taxes."

However, India's Central Board of Direct Taxes has its own logic. "We do not know whether Raju had siphoned off the real money or had shown the non-existent money on records or whether it was a mix of both," said JV Prasad, its income tax counsel at Andhra Pradesh High Court, the state jurisdiction handling most Satyam cases.

In September 2010 Satyam's new management restated its accounts for the disputed period but the tax authorities argue that under India's Income Tax Act, financial documents approved by an annual general meeting cannot be altered after a year.

On 8 April,however, the board said it would heed advice from the Supreme Court that it should consider Satyam's claim sympathetically because the company's revival was supported by the government.

India's attorney general Goolam E Vahanvati, appearing for the board, told the court that it would recall the $138m demand for taxes, interest and late penalties and would give a fresh hearing to the firm's challenge to the tax demand. No timetable was set, however.