Tax imbroglio: HC bars access to Mahindra Satyam’s frozen accounts

26 Mar 2011

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The Andhra Pradesh High Court on Friday issued a restraining order barring both Mahindra Satyam and the income tax department from accessing the company's bank accounts in Hyderabad, which have been attached by the I-T department, till 31March. The court has posted further hearings on the case to 10 March.

As many as 26 accounts of the company in various banks, containing a total of Rs1,300 crore, were attached by the I-T department on Tuesday after the Central Board of Direct Taxes (CBDT) on Monday turned down the company's plea seeking a stay on a tax demand of Rs616.54 crore. Mahindra Satyam immediately moved the high court seeking a stay on the proceedings related to the tax claim.

The I-T department's claim centres on a Rs345-crore foreign line of tax credit obtained during 2002-08, by the former management of Satyam Computer Services, headed by its jailed founder Ramalinga Raju . The scam-hit company was taken over by Tech Mahindra, part of the Mahindra & Mahindra group, in 2009. The present management believes the credit documents are forged.

The I-T department had served notices to the company a year back, and now it has added interest and penalty provision to the tax credit to arrive at a claim of Rs616 crore. Mahindra Satyam has been refusing to cough up the amount, arguing that the claim pertains to the 2002-03 to 2007-08 period when Raju was cooking the company's books, and were based on "fictitious and non-existent income".

The restraining order was issued by a bench comprising Justice V V S Rao and Justice Ramesh Ranganathan, while hearing a petition filed by Mahindra Satyam challenging the I-T department's tax demand and the attachment of its bank accounts.

Mahindra Satyam's counsel told the court that the attachment of bank accounts by the I-T department was unfair as the tax demand was only for Rs616.54 crore. "What is more disturbing is that the taxmen had attached our bank accounts by issuing as many as 26 garnishee orders," senior Mahindra Satyam counsel S Ganesh said.

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