Mahindra Satyam to challenge the Rs 2,114cr I-T notice

IT firm Mahindra Satyam is likely to approach the Andhra Pradesh High Court challenging the Rs 2,114 crore (Rs 21.14 billion) income tax demand raised by the I-T Department.

"We will definitely move to court that is for sure. The tax was levied on fictitious income. It is not justified. Even the government is aware that the income was fictitious during that period," a senior official said.

Earlier this week, the Income Tax Department had slapped a tax demand of Rs 2,114 crore (Rs 21.14 billion) on IT firm Mahindra Satyam (erstwhile Satyam Computer Services), after disallowing exemptions claimed by the company.

The source said the legal team of Mahindra Satyam is finalising its arguments against the tax notice, adding that the IT firm has received only a showcause notice and is yet to get a final order.

The company had received draft notices raising tax claims of Rs 1,037.69 crore (Rs 10.37 billion) and Rs 1,075.73 crore (Rs 10.75 billion) for assessment years 2002-03 and 2007-08, respectively.

Tech Mahindra had acquired Satyam Computer after a multi-crore accounting fraud in the company came to light in January, 2009.

After the acquisition, the company was re-branded

Mahindra Satyam. Mahindra Satyam has been seeking the return or adjustment of taxes paid on inflated income when disgraced founder Ramalinga Raju was the chairman of the IT company.

The company has argued that the tax payments were made on the basis of records that were allegedly fudged by the company.

The draft of the proposed assessment orders proposes the disallowance of tax exemptions/deductions claimed by the company.

However, the I-T department's claim also includes fictitious income wrongfully declared as taxable by the earlier management, the company had said.

The existence of fictitious sales and fictitious interest has even been confirmed by other government agencies during the investigation, it added.

Mahindra Satyam has in several writ petitions filed before the Andhra Pradesh High Court challenged the re-opening of the company's return for assessment year 2002-03 and sought a directive that fresh assessments should be carried out only after excluding fictitious sales and interest.

These petitions are pending before the High Court.