Andhra Pradesh High Court today directed IT company Mahindra Satyam to deposit Rs 350 crore with Central Board of Direct Taxes (CBDT) and also issue it bank guarantee of Rs 267 crore in its ongoing tax dispute with the I-T department.

CBDT has demanded Rs 617 crore from the company as tax.

Mahindra Satyam Chairman Vineet Nayyar had earlier said that CBDT turned down its requests not to impose the tax, as calculations were based on previous management's accounts, which had proved to be fictitious.

The I-T department?s tax claim is based on Rs 345 crore foreign tax credit availed by the former management of Satyam Computer Services headed by Ramalinga Raju during 2002-08, which the present management believes is forged.

In a Rs 14,000-crore accounting scam that came to light in 2009, B Ramalinga Raju, the founder and former Chairman of Satyam, had confessed to inflating the company books. The company then had plunged into a financial crisis. It was bought by Mahindra in 2010 and renamed as Mahindra Satyam.

Based on a petition filed by Mahindra Satyam, the High Court on March 25 this year directed the company as well as the I-T Department not to operate the company?s account till March 31.

The matter has been posted to April 20 for further hearing.

Hearing the petition today, the court observed that the company could not take into account Raju?s confession, which was yet to be proved. Indian security agencies are still investigating the extent of financial misdoings committed by the former Satyam Chairman.

A division bench of the High Court, comprising Justices VV S Rao and Ramesh Ranganathan, while delivering the interim order allowed the company to access its bank accounts, earlier kept in abeyance.

S Ganeshan, senior counsel for Mahindra Satyam, argued that the CBDT notice was arbitrary, illegal and on abdication of power and duty.

Besides, he said that there was no justification in attaching the company?s bank accounts whose total value was Rs 1,300 crore. He further pleaded with judges to release accounts to pay salary for the company?s employees for the month.