Untitled - Domain-b

committee with representatives from state governments
to frame the regulations and also examine various related
issues including the prices of individual pay channels visà-vis
bouquet of channels and promotion of competition
in the television distribution business through the
introduction of DTH and broadband services. Such
regulations or any significant delay in their implementation
could affect the Company’s operation and financial
conditions or its competitive position. Any restriction
relating to advertisements issued by the TRAI could also
adversely affect the aggregate advertisement revenue of
the Company in future.
The Company may be subject to claims based on
the content it provides over its network and third
party networks.
As a broadcaster and distributor of content, the Company
faces potential liability relating to content that it broadcasts
and distributes, including defamation, negligence, copyright,
patent or trademark infringement and other claims based
on the nature and content of the programmes that it
broadcasts or distributes. The Company does not carry
general liability insurance that will cover these types of
liabilities.
The Company is disputing the assessment of
certain service tax by the Indian revenue
authorities and an adverse determination could
adversely affect the Company’s financial position.
Until recently, regulatory restrictions prevented private
satellite channels to be uplinked from India. As a result,
broadcasting operations were conducted by companies
that were based outside India and channels were uplinked
from outside the country. These companies in turn
appointed Indian companies as exclusive collection agents
ZEE TELEILMS LIMITED
for their advertising income. The services rendered by
advertising agencies to the advertisers were brought within
the ambit of service tax levy with effect from November
1996. Consequently, the Government had been collecting
a 5% service tax from the advertising agencies, on the
commission earned by them from their advertising clients.
The office of the Deputy Commissioner of Central Excise
contends that the commission earned by the Company
from its overseas subsidiaries as an exclusive collection
agent for advertising revenues is also liable to service tax,
and has sent a show cause cum demand notice to the
Company with respect to such commission earned. The
Company believes that the service tax applies only to
advertising commission earned by advertising agencies and
that since the Company never provided advertising services,
nor was an advertising agent, service tax is not applicable
to it, and is contesting the revenue authorities assessment
of tax.
The Company estimates that a determination against Zee
would result in the Company having to pay to the revenue
authorities approximately Rs.148 million in back withholding
taxes and an another Rs.148 million as penalty, which could
adversely affect the Company’s financial position. Zee has
not provided for this in its books of accounts.
CRITICAL ACCOUNTING POLICIES
Critical accounting policies are those that require
application of management’s most difficult, subjective or
complex judgments often as a need to make estimates about
the effects of matters that are inherently uncertain and
may change in subsequent periods. Please refer to significant
accounting policies and notes to accounts for details on
critical accounting policies.