Mahindra Satyam

Gathering steam, the merger process of Mahindra Satyam and Tech Mahindra is on the look out to appoint bankers to finalise the details of the deal. However, news reports suggest that the tussle with the taxman may play spoiltsport.Mahindra Satyam had two tax cases pending with the taxmen claiming over Rs 2700 crore for both.It is learnt that legal advice has been sought to settle tax issue with government before the merger. The company is in talks to negotiate tax settlement but may even push the merger process to January if the tax case is not settled. However, Mahindra Satyam chose to call it a market speculation.[caption id="attachment_73652" align="alignleft" width="380" caption="Vineet Nayyar, Chairman of Mahindra Satyam. Reuters"][/caption]Mahindra Satyam has been in news for quite some time now.A fortnight back the company began a countrywide breakdown against employees who joined the organisation using fake certificates and fraudulent means after it found that some of them had circumvented the company’s background verification process.The incident prompted Mahindra Satyam to check all the employees that claimed to have worked in those organisations.  The menace not only was a hindrance to the industry, but it also created unpleasant concerns among foreign partners over security issues. The background verification of 21,000 employees is predicted to be completed by September end.However, even after being hit by one of the biggest corporate scandals, Hyderabad-based Mahindra Satyam was seen to be back on the growth trajectory. The company posted profit of 225 crore for the June 2011 quarter against a loss of 327 crore in the previous quarter.A week back, the IT consulting and outsourcing company was slapped with an Rs 2114 crore penalty by the Income Tax department after disallowing exemptions claimed by the company. However, denying allegations Vineet Nayyar, Chairman of Mahindra Satyam said in an interview “the tax was levied on fictitious income. It is not justified.”Tech Mahindra had acquired Satyam Computer after a multi-crore accounting fraud when the company came to light in January 2009. After acquisition, the company was re-branded as Mahindra Satyam.Mahindra Satyam has been seeking 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 account of alleged fudged records shown by the company.The company has in several writ petitions filed before the Andhra Pradesh High Court, challenging the re-opening of the assessment of AY 2002-03 and sought directions that fresh assessments should be carried out after removing the fictitious sales and fictitious interest. However, the petitions are pending before the High Court.