The Mahindra Satyam’s investors in the US, who had won Rs 567 crore in a class-action complaint, will have to pay income-tax in India. The tax liability could be 30 per cent of the award, or Rs 200 crore.
The Authority for Advance Rulings (AAR) in New Delhi has ruled that the settlement amount payable under the US class-action complaint by the Indian company (Mahindra Satyam) and Indian arms of auditors would constitute settlement income. “Such income would be liable to tax deduction at source under the Indian tax laws,” the AAR has said in its ruling.
The US investors had moved the court, claiming compensation from the Indian IT firm that was hit by a massive financial fraud in 2009. They sought monetary damages to compensate the class members for their alleged losses arising out of their investment in the company’s common stock and ADS (American Depository Shares) during the Class period.
After a legal battle in US courts, the company had agreed to pay the sum and deposited in a segregated bank account by March 31, 2011.
The company faces yet another class-action suit in the UK.