Govt sets aside Rs 617 crore tax demand on Satyam

The government on Friday informed the Supreme Court that it will set aside its order directing scam-hit information technology firm Satyam Computer to pay Rs 617 crore (Rs 6.17 billion) as income tax and will give a fresh hearing to the firm's plea challenging the tax demand.

Attorney General Goolam E Vahanvati, appearing for the Central Board of Direct Taxes, told the apex court that it would recall its March 10, 2011, order, demanding Rs 617 crore in tax and decide afresh on the actual tax liability of Satyam Computer, now known as Mahindra Satyam.

"We would set aside March 10, 2010 order. We would give them a hearing and pass a well-reasoned order," Vahanvati told a three-judge bench headed by Chief Justice S H Kapadia.

The bench, however, refused the Satyam Computer's plea to defreeze its bank account worth Rs 1,300 crore (Rs 13 billion).

Counsel appearing for Satyam Computer submitted that the company urgently needs some money because as per a negotiation it has to pay a huge amount to the US Securities Exchange Commission.

Vahanvati, however, opposed the plea, saying the company already has cash reserves of Rs 1,800 crore (Rs 18 billion). "Let the money remain with us. If after that revised process if they are entitled, we will refund them," said Vahanvati.

Based on this position, Satyam's counsel requested the apex court to put the money in a escrow account.

In response, the bench assured the IT firm saying its interest would be protected. "You would be protected. Right now your main grievance is that you were not heard by the CBDT. It is over," the bench said while directing the matter of defreezing Satyam Computer's account for listing on Monday.

The apex court was hearing a petition filed by Satyam Computers challenging Andhra Pradesh High Court's order directing it to deposit Rs 350 crore (Rs 3.50 billion) along with a bank guarantee of Rs 267 crore (Rs 2.67 billion) to the tax authorities.