In a setback to Satyam Computer Services, the Andhra Pradesh High Court has asked the company to comply with the demand raised by the income-tax department pending final order.

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With this, the company will have to pay Rs350 crore towards income tax and also show a bank guarantee of Rs267 crore.

Satyam was issued a demand for tax payment of Rs617 crore by the I-T department for accounts since 2002. The company challenged the demand at the Central Board of Direct Taxes (CBDT) by seeking a review. However, with the CBDT dismissing the company’s appeal, Satyam had approached the AP high court claiming that the computation of the tax was done on the basis of fictitious revenues shown by the company’s founder B Ramalinga Raju and that there cannot be any tax liability on non-existent income.

Responding to the petition, the high court had earlier asked the company and the I-T department not to touch Satyam’s bank accounts worth Rs1,300 crore till March 31.

The issue came up for further hearing on Wednesday. Satyam’s counsel argued that the Central Bureau of Investigation and the Serious Fraud Investigation Office, which are probing the Satyam scam, had found that Raju had falsified the accounts inflating the company’s revenues. Based on this, the counsel challenged the I-T demand and also asked the court to release the accounts that have been kept beyond operation through the interim order.

However, the tax bench of the high court comprising justices V V Rao and Ramesh Ranganathan said the issue cannot be decided without hearing the arguments of the CBDT and the I-T department.

The bench, which said that the CBI and the SFIO too were yet to conclude their findings on the falsification of accounts by Raju, asked the company to pay Rs350 crore towards the I-T demand through a banker’s cheque and also show unconditional bank guarantees for Rs267 crore.

The bench has asked the petitioner to mark notices to the I-T department and the CBDT for them to respond in the next three weeks. The issue would come up for further hearing on April 20.

Satyam has also been claiming it had paid about Rs200 crore towards income tax in excess and was planning to seek a refund of the amount. The company would now pay Rs350 crore though in the interim.