In a development that could impact its valuation ahead of the merger with Tech Mahindra, Mahindra Satyam has received an attachment notice from the Income-Tax Department in the Rs 617-crore tax assessment row with the company.
This tax demand pertains to the period 2002-03 to 2007-08 when the company witnessed a massive financial fraud during the regime of Mr B. Ramalinga Raju, the founder Chairman. The company received the notice two days before it announced financial results for the third quarter.
The company's scrip, which rose after it posted Rs 308-crore net profit, fell by 0.54 per cent on Friday on the BSE to end at Rs 74.85.
“We have received the notice from the I-T Department for attaching land and buildings of the company under Section 281 B of the Income-Tax Act, 1961. We are exploring legal options to challenge this,” the company informed the Bombay Stock Exchange on Friday.
Provision for tax
Though it said it was confident of winning this battle, the company had provided for Rs 511 crore as on March 31, 2011, for likely tax liabilities on account of its murky past. “We have been advised that it is not appropriate to make adjustments to this provision for prior years,” Mr Vineet Nayyar, Chairman of Mahindra Satyam, said. The company, however, had received relief on January 31 in the tax row in which it furnished a bank guarantee for the sum in question under Supreme Court instructions. Hearing the plea, the High Court of Andhra Pradesh had directed the I-T Department not to encash the sum until further orders.
“We received an interim order on January 31 in the writ petitions filed by us questioning the orders of CBDT (Central Board of Direct Taxes) and the draft assessment orders. The court will hear the issue on February 28 and ordered the parties to maintain status-quo as on date,” Mahindra Satyam said.