NO RELIEF I-T slaps 2,114-crore tax demand on Mahindra Satyam

The income-tax department has slapped a tax demand of Rs 2,114 crore on IT firm Mahindra Satyam (erstwhile Satyam Computer Services), after disallowing exemptions claimed by the company. “The company has received draft notices of demand for Rs 1,037.69 crore and Rs 1,075.73 crore for assessment years 2002-03 and 2007-08, respectively,” Mahindra Satyam said in a filing to the BSE. 

    “This is only a draft assessment order. We will respond once we receive the tax notice. We may approach the Tribunal. The tax was levied on fictitious income. It is not justified. Even the government is aware that the income was fictitious during that period,” a senior official said. 
    Tech Mahindra had acquired Satyam Computer after amulti-crore accounting fraud in the company came to light in January 2009. After the acquisition, the company was rebranded 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 draft of the proposed assessment orders proposes disallowance of tax exemptions/deductions claimed by the company. However, it does not exclude fictitious income wrongly offered to tax by the earlier management,” the filing said. 

‘Innovation will drive Infosys over next 5 yrs’

Mumbai: The bedrock of Infosys 3.0, which is the management’s efforts to reinvent the sagging image and fortunes of a company still regarded as the IT bellwether, would be innovation. S Gopalakrishnan (Kris), the executive chairman of Infosys, who counts innovation along with studying books on the brain as his passions, took TOI through the next five years of information technology and Infosys as he takes on the driver’s role at the helm of the IT major. On his first working day in the new role, he described mobility, sensor networks (process of electronic devices to talk to each other) and cloud as the three biggest trends that would define and determine the growth and future of IT. Excerpts from the interview... 
The changes in the global economy have suddenly reduced the positivity around IT. Competitors like TCS and Cognizant are breathing down your neck. What do you think are the biggest challenges that Infosys faces right now? The transition within Infosys and the new structure of management will help chart a stronger course for Infosys. Besides, the new focus on verticals, focus on consulting, non-linear growth model will drive the company. Over the next five years or so, consulting (now 27 %), non-linear businesses (now 8.5%) and IT business operations (over 50 %) would each contribute a third of our total turnover. 
    This transition would help us deal with the challenges better. Having said that, the biggest challenge is the environment-—volatility and uncertainty. And this is here to stay for the next two to three years. It’s expected to impact investment decisions, which may get postponed. There would be questions on how to grow and recruitment. Our investments in new products (offered as services) like digital marketing, social commerce, I-transform, shopping trip 360 degree in the cloud space will help us navigate better. We would continuously need to innovate and ask if we have the right solutions to help clients. 
How much is Infosys depending on innovation to drive the transition and reclaim its position as the market leader? The shape that the company takes over the next five years would be driven by innovation and that would be the biggest differentiator. Purchases in IT will change and our new business model and what we are doing in the cloud space will drive that. The company has to innovate on the industry trends. Every industry would see innovation and we will have to innovate on mobility (hand-held devices), social networks, e-commerce and healthcare (telemedicine). Solutions on the net would be more common and would be based on transaction fees. Companies would seek to save on fixed costs through such solutions on the net, which we would have to provide. 
    The next 10 years would be transformational. To compare in terms of a trend and magnitude, we are at the same place with mobility where the browser (net) was when it was released in 1994. So, a third of our revenues in the next five years would come from new services launched through the process of innovation. We would generate new revenue streams through this innovation. 
Does it bother you that Infosys is not the darling of the markets right now? Growth is a concern in the financial markets. But we would grow and renew through this innovation. We are not looking at the next quarter but the long term to ensure that Infosys is relevant in the future. 
What about margins? We have indicated that it would drop by 3 % but we would be able to sustain it. It would only move in a narrow range. 
Is there cause for concern 
over reports of a slowdown in Europe and the US? The US and Europe, which have a GDP of around $14 trillion each, account for 85 % of our market, so it’s worrying. But if there is another global slowdown, the impact would be less than what we saw in 2008 as businesses are stronger now. We will continue to have profitable growth. However, if Europe fails, the impact would be like the Lehman crisis. 
Does the government inaction and allegations of 
corruption bother you? 
What about Anna Hazare’s crusade? 
    It is a cause of concern. If only it would focus on reforms, pass the direct tax code and clear GST and improve the investment climate by opening up FDI in retail, the environment would become more positive for growth. 
    As for Anna who is fighting for corruption, it’s a big issue. It creates leakages and impacts everyone’s lives. It should be made a national agenda, where business and civil society should also come together. The way forward for the government should be to see the Lokpal bill through, strengthen judiciary and egovernance, which would also streamline its interface with citizens.

S Gopalakrishnan EXECUTIVE CHAIRMAN, INFOSYS