Mahindra Satyam asked to deposit Rs 350 cr with I-T

In a setback to Mahindra Satyam, (the former Satyam Computer Services), high court in Hyderabad on Wednesday directed the information technology outsourcing company to deposit Rs 350 crore (Rs 3.5 billion) with the Central Board of Direct Taxes, besides issuing a bank guarantee of Rs 267 crore (Rs 2.67 billion) to the latter.

The former Satyam Computer's founder, Ramalinga Raju, had confessed in early 2009 to having falsified the company's accounts for years.

The income tax department had issued a demand of Rs 617 crore (Rs 6.17 billion) based on a foreign tax credit availed during the Raju years.

Mahindra Satyam chairman Vineet Nayyar had said earlier the CBDT had turned down the company's requests not to impose the tax on the grounds that the calculations were based on the accounts of the previous management and had proved to be fictitious.

Mahindra Satyam had appealed to the HC, which posted the matter on Wednesday to April 20

for further hearing.

A bench of judges VV S Rao and Ramesh Ranganathan said the company could not take into account Raju's confession, for that was still the subject of inquiry and to be established in court.

While delivering the interim order, they allowed the company to access its bank accounts, earlier kept in abeyance by the same court.

S Ganeshan, senior counsel for Mahindra Satyam, argued the CBDT notice was arbitrary and illegal.

Besides, he said, there was no justification in attaching the company's bank accounts, whose total value was Rs 1,300 crore (Rs 13 billion).

He pleaded with the judges to allow release of accounts to pay the month's salary to employees.