Satyam says it is being taxed for fictional income

The company’s previous management had allegedly inflated revenue and profit figures

Outsourcer Satyam Computer Services has challenged in a court in India a demand for rupees 6.16 billion (US$134 million) from India’s Income Tax Department, adding a new twist to the problems at the troubled company.

The company’s management plans to argue before a court in Andhra Pradesh state in south India that the company is being taxed on income that was never earned, because the previous management of the company inflated revenue and profit figures for several years.

Satyam filed an application before the court on Tuesday after the Central Board of Direct Taxes rejected its appeal for relief, Satyam said in a statement.

B. Ramalinga Raju, the founder of the company, is being prosecuted by Indian investigative agencies for inflating revenue and other figures at the company.

Satyam was plunged into a financial crisis after Raju disclosed in January 2009 that the company’s accounts had been fiddled with for several years.

“Tax can only be imposed on income,” said Vineet Nayyar, chairman of Satyam, during a conference call Tuesday. Raju had fabricated a large amount of revenue, he added.

After the scandal broke in 2009, the Indian government sacked the company’s board and appointed its own nominees. It also ordered the company’s accounts to be restated for several years, a process that is partially complete.

Another Indian outsourcer, Tech Mahindra, acquired a dominant 43 percent stake in Satyam in 2009, as part of a revival package for the company.

The new management is now asking that income tax be assessed and levied on the basis of accounts that have been reconstructed in accordance with Indian accounting rules, said Hari Thalapalli, chief marketing officer at Satyam.

Satyam said in February that revenue and net profits grew in the third quarter, which ended Dec. 31. The company has stabilized at annual revenue of about US$1 billion and is not facing an exodus of customers any more, analysts said.

If the company has to pay the disputed taxes it will not go under, but a large sum of money, which would have gone into productive investment, may have to be diverted to pay taxes, Thalapalli said.

Satyam is, separately, also negotiating with the U.S. Securities and Exchange Commission in connection with the restatement of accounts in line with U.S. accounting rules. The company delisted its American depositary receipts from the New York Stock Exchange last year as it could not meet an Oct. 15 deadline to file accounts.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

Join the PC World newsletter!

Error: Please check your email address.

Tags business issuesoffshoringregulationCivil lawsuitslegalfinancial resultsgovernmentCriminalservicessatyam computer servicesoutsourcing

Our Back to Business guide highlights the best products for you to boost your productivity at home, on the road, at the office, or in the classroom.

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

John Ribeiro

IDG News Service
Show Comments

Most Popular Reviews

Latest News Articles

Resources

PCW Evaluation Team

Azadeh Williams

HP OfficeJet Pro 8730

A smarter way to print for busy small business owners, combining speedy printing with scanning and copying, making it easier to produce high quality documents and images at a touch of a button.

Andrew Grant

HP OfficeJet Pro 8730

I've had a multifunction printer in the office going on 10 years now. It was a neat bit of kit back in the day -- print, copy, scan, fax -- when printing over WiFi felt a bit like magic. It’s seen better days though and an upgrade’s well overdue. This HP OfficeJet Pro 8730 looks like it ticks all the same boxes: print, copy, scan, and fax. (Really? Does anyone fax anything any more? I guess it's good to know the facility’s there, just in case.) Printing over WiFi is more-or- less standard these days.

Ed Dawson

HP OfficeJet Pro 8730

As a freelance writer who is always on the go, I like my technology to be both efficient and effective so I can do my job well. The HP OfficeJet Pro 8730 Inkjet Printer ticks all the boxes in terms of form factor, performance and user interface.

Michael Hargreaves

Windows 10 for Business / Dell XPS 13

I’d happily recommend this touchscreen laptop and Windows 10 as a great way to get serious work done at a desk or on the road.

Aysha Strobbe

Windows 10 / HP Spectre x360

Ultimately, I think the Windows 10 environment is excellent for me as it caters for so many different uses. The inclusion of the Xbox app is also great for when you need some downtime too!

Mark Escubio

Windows 10 / Lenovo Yoga 910

For me, the Xbox Play Anywhere is a great new feature as it allows you to play your current Xbox games with higher resolutions and better graphics without forking out extra cash for another copy. Although available titles are still scarce, but I’m sure it will grow in time.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?