Satyam challenges Upaid on taxes, files fresh suit

Satyam Computer Services Ltd (rebranded as Mahindra Satyam to reflect its new ownership by Tech Mahindra) has filed a fresh lawsuit in a New York court, challenging the tax payment claims made by mobile payment services company Upaid Systems.

The development comes two months after Satyam agreed to pay $70 million (approximately Rs 325 crore) to the UK-based company in an out-of-the-court settlement.

Mahindra Satyam said in a filing to the BSE on Tuesday that it had filed a lawsuit on February 22, 2010, asking the court for a declaration that the settlement agreement with Upaid is valid and enforceable. It also said Upaid should be made solely responsible for any tax liability arising from the $70-million settlement, including responsibility for complying with tax deduction requirements.

"The ongoing case is closed. However, Upaid has been asking Satyam to pay taxes. We kept out, but can no longer keep lying down. Hence, we knocked on the doors of the New York Court," a source close to the development said.

When contacted, Mahindra Satyam officials declined to comment.

Tax experts opine that, according to Indian laws, tax liabilities could range anywhere between 0 per cent and 40 per cent.

"Hence, in this case (Mahindra Satyam), the tax liability could range anywhere from nil to $30 million (around Rs 140 crore)," said a tax expert, requesting anonymity.

Upaid had filed a lawsuit against Satyam in a Texas court, seeking damages exceeding $1 billion (over Rs 4,600 crore). The proceedings against Satyam started in 2007, alleging forgery of documents necessary for transfer of proper title under an assignment agreement finalised in 1998.

Both Upaid and Satyam entered into an escrow agreement on December 10, 2009, and Satyam had deposited the entire $70-million settlement amount into the account. Upaid agreed to drop all charges against Satyam and also provide a royalty-free licence on its patents on a worldwide and perpetual basis.