Mahindra Satyam moves to US court against Upaid over tax dispute 
February 24, 2010
Source:  ET Bureau

HYDERABAD: Barely two months after Mahindra Satyam agreed to pay $70 million to the UK-based mobile payment services firm Upaid in an out-of-court settlement, a fresh row has erupted between the two firms over a tax dispute. Seeking legal help this time, Mahindra Satyam, in a preemptive move, has moved a US court over the tax liabilities of the settlement amount.

The company on Tuesday said it has filed a lawsuit against Upaid in a New York court for a declaration that the settlement agreement is valid and enforceable. Moreover, it has also sought a firm say on the tax liabilities rising from the settlement payment, including responsibility for complying with tax deduction requirements, from Upaid. Furthermore, it has also sought compensatory damages against Upaid in an amount to be determined during trial, it said.

According to sources placed in the company, the additional tax liabilities, if any, would run up to 0-40%, amounting to around $20 million whereas Satyam, in its announcement to the bourses, has said it has discharged its obligations under the settlement agreement and shall owe nothing further to Upaid.

Also, the company wants Upaid to declare that the disbursement of funds from the escrow account must be made in accordance with Indian law, including any requirement to deduct taxes from the settlement amounts prior to disbursement.

In the out-of-court settlement in December last year, Upaid had agreed to drop all charges against Mahindra Satyam and also provide a royalty-free licence on its patents on a worldwide and perpetual basis. The amount is, however, a tenth of what Upaid had earlier sought for damages from the erstwhile Satyam.

Mahindra Satyam also said it has already deposited the entire $70-million settlement amount into the escrow account provided for under the agreement.

Prior to the settlement, Upaid had filed the lawsuit in a Texas court seeking damages exceeding $1-billion, alleging forgery of documents necessary for transfer of proper title to its under an assignment agreement entered into in 1998, whereas, after the settlement, the Hyderabad-based company is entitled to receive from Upaid including the release of claims, licence of intellectual property and dismissal of pending litigation.

“Even if we assume that Satyam has to shell out the additional tax liability, the company has much larger issues to handle and will not affect the operations and stock price,” said Apurva Shah, head of research, Prabhudas Lilladher. On Tuesday, the company’s scrip closed at Rs 96.85, up by 0.10% on the Bombay Stock Exchange.

Satyam takes former client Upaid to court over tax matter
February 24, 2010
SOURCE : PTI

NEW DELHI: Mahindra Satyam (formerly Satyam Computer) on Tuesday said it has filed a lawsuit in a New York court against its former UK client Upaid, seeking to make it solely responsible for any tax liability arising from an out-of-court settlement reached by them.

In December last year, Satyam had offered to settle all disputes with Upaid Systems over licence of intellectual property, among others, by paying $70 million to the UK- based provider of mobile and online payment-transaction services.

Mahindra Satyam sources said there is a stand-off between Satyam and Upaid over the tax liabilities.

In a regulatory filing on BSE, Mahindra Satyam said: "In the lawsuit filed on February 22, 2010, Satyam is asking the New York Court for a declaration that the settlement agreement is valid and enforceable... Upaid is solely responsible for any tax liability arising from that $70 million settlement payment, including responsibility for complying with tax deduction requirements."

It further said to the extent there is any tax deduction required, it shall be deducted from the $70 million, plus interest, currently in the escrow account that would otherwise be payable to Upaid.

In its court declaration, Satyam further said under the terms of the Agreements, the disbursement of funds from the Escrow Account must be made in accordance with Indian law, including any requirement to deduct taxes from the Settlement Amounts prior to disbursement.

Satyam is entitled to receive from Upaid all the benefits of the Settlement Agreement, including the release of claims, license of intellectual property and dismissal of pending litigation, the Indian software maker contended in the petition.

Outsourcing to India: Europe plays strictly by the rules
February 24, 2010
SOURCE: ET Bureau

NEW DELHI: European outsourcing customers prefer contract staff and local delivery, as per a latest Forrester study. Western Europe, which accounts for nearly $6.8-billion worth of India’s software exports, follows strict local labour rules and plans to avoid any move that could be viewed as anti-social, according to research firm Forrester.

After interviewing more than 30 vendor and user companies including Accenture, Capgemini, HP, IBM, Infosys, Tata Consultancy Services (TCS) and Wipro, Forrester reported that while global players such as ABN Amro leverage Indian providers for their global IT development and support requirements, Continental European companies send very little or even no work to India.

While Germany showed relatively solid growth in the past two years, locations such as France, the third-largest European IT services market after the UK and Germany, has sent less than 2% of its overall IT services budgets to India. This is even as Indians service providers offer the lowest rates and offshore scale.

Factors including organisational structures heavy on senior staff, historic preference for staff augmentation and traditional unwillingness to let work go off-site make offshoring from Continental Europe a peculiar market that has eluded almost all service providers — Indians, regional Europeans, and even multinationals.

Companies in Western Europe aren’t in a hurry to cut costs by outsourcing overseas. Instead, their top priority is to be well integrated with the local social fabric, which includes avoiding cutting jobs in their countries, and adhering to local labour rules and other norms.

Indian companies, too, have been relatively inflexible in their approach in Europe. For instance, Infosys’ Poland facility (primarily for finance and accounting services) show how top Indian firms tend to limit their focus to select markets and offer narrow capability in one or two service lines. Moreover, they prefer to manage the staff themselves, and offer delivery from offshore locations.

Besides, most Indian firms see a challenge in ramping up onshore and nearshore resources as it directly impacts their bottom line. To capture more work in Europe, Indian outsourcers are making several moves and investments to become more relevant to markets such as Germany, the Netherlands, the Nordics, and Switzerland.

They are further recruiting local country-level or practice-level leadership, ramping up and opening new nearshore centres, starting language and cultural training centres offshore to train delivery staff and tweaking business models to accommodate lower offshore ratios, the report said.

Global delivery service firms such as Siemens IT Solutions and Services have been using Indian resources for low-cost labour for more than a decade. But, most Continental clients are still taking a cautious approach toward offshoring and show only a moderate growth of offshore initiatives.

Traditionally many believed that European firms typically prefer to send their jobs to nearshore locations such as Eastern Europe for the cultural proximity and similar time zones. However, the report revealed that more than 60% of European firms intend to send their work to India.