videocon industries limited - Domain-b

) Post Employment Benefits
i) Provident Fund
The Company contributes monthly at a determined rate. These contributions
are remitted to the Employees’ Provident Fund Organisation, India for this
purpose and is charged to Profit and Loss account on accrual basis.
ii) Gratuity
The Company provides for gratuity (a defined benefit retirement plan) to all
the eligible employees. The benefit is in the form of lump sum payments to
vested employees on retirement, on death while in employment, or termination
of employment for an equivalent to 15 days salary payable for each completed
year of service. Vesting occurs on completion of five years of service. Liability
in respect of gratuity is determined using the projected unit credit method
with actuarial valuations as on the balance sheet date and gains/losses are
recognized immediately in the profit and loss account.
iii) Leave Encashment
Liability in respect of leave encashment is determined using the projected unit
credit method with actuarial valuations as on the balance sheet date and gains/
losses are recognized immediately in the profit and loss account.
18. Taxation:
Income tax comprises of Current Tax, Deferred Tax and Fringe Benefit Tax.
Current Tax :
Provision for Current Tax and Fringe Benefit Tax is calculated on the basis of the provisions
of local laws of respective entity.
Deferred Tax :
Deferred tax assets and liabilities are recognised for the future tax consequences of timing
differences, subject to the consideration of prudence. Deferred tax assets and liabilities are
measured using the tax rates enacted or substantively enacted by the balance sheet date. The
carrying amount of deferred tax asset/liability are reviewed at each Balance Sheet date.
19. Share Issue Expenses:
Share issue expenses are written off to Securities Premium Account.
20. Premium on Redemption of Bonds / Debentures:
Premium on Redemption of Bonds / Debentures are written off to Securities Premium
Account.
21. Research and Development:
Revenue expenditure pertaining to Research and Development is charged to revenue under
the respective heads of account in the period in which it is incurred. Capital expenditure,
if any, on Research and Development is shown as an addition to Fixed Assets under the
respective heads.
22. Accounting for Leases:
Where the company is lessee:
a) Operating Leases: Rentals in respect of all operating leases are charged to Profit &
Loss Account.
b) Finance Leases:
(i) Rentals in respect of all finance leases entered before 1st April, 2001 are
(ii)
charged to Profit & Loss Account.
In accordance with Accounting Standard - 19 on “Accounting for Leases” issued
by the Institute of Chartered Accountants of India, assets acquired under
finance lease on or after 1st April, 2001, are capitalised at the lower of their fair
value and present value of the minimum lease payments and are disclosed as
“Leased Assets”.
23. Warranty:
Provision for the estimated liability in respect of warranty on sale of consumer elecrtonics
and Home Appliances product is made in the year in which the revenues are recognised,
based on technical evaluation and past experience.
24. Prior Period Items:
Prior period items are included in the respective heads of accounts and material items are
disclosed by way of notes to accounts.
25. Provision, Contingent Liabilities and Contingent Assets:
Provisions comprise liabilities of uncertain timing or amount. Provisions are recognised
when there is a present obligation as a result of past events and it is probable that there will
be an outflow of resources.
Contingent Liabilities are disclosed by way of Notes to Accounts. Disputed demands in
respect of Central Excise, Customs, Income-tax and Sales Tax are disclosed as contingent
liabilities. Payment in respect of such demands, if any, is shown as an advance, till the final
outcome of the matter.
Contingent assets are not recognised in the financial statements.
26. Other Accounting Policies:
These are consistent with the generally accepted accounting practices.
B] NOTES TO ACCOUNTS:
As at
As at
30th Sept., 2008 30th Sept., 2007
(Rs. in Million) (Rs. in Million)
1. Contingent Liabilities not provided for:
a) Letters of Guarantees 19,043.17 13,051.89
b) Letters of Credit opened 1,375.81 5,552.55
c) Customs Penalty - Stayed by High Court 0.88 11.85
d) Customs Duty demands under dispute 249.49 95.96
[Amount paid under protest Rs. 0.40 million
(Previous year Rs. 3.94 million)]
e) Income Tax demands under dispute 349.38 102.16
[Amount paid under protest Rs. NIL
(Previous year Rs. 102.16 million)]
52
f) Excise Duty and Service Tax demand under dispute 275.57 221.81
[Amount paid under protest Rs. 2.87 million
(Previous year Rs. 2.43 million)]
g) Sales Tax demands under dispute 326.36 213.41
[Amount paid under protest Rs. 23.96 million
(Previous year Rs. 34.20 million)]
h) Others 51.42 51.42
i) During the year, Show Cause Notices (SCN) have been served on the Operator of
the Ravva Oil & Gas Field Joint-Venture for non-payment of service tax and education
cess on various services for USD 11.92 million (INR 474.69 million) for the period
August 16, 2002 to March 31, 2006, out of which USD 0.6 Million (INR 24.76 million)
relates to Ravva Block. The Operator has filed writ petition with Hon’ble High Court
of Chennai. Further, the Operator has received SCN for the period April 1, 2006 to
March 31, 2007 for USD 3.43 million (INR 136.59 million), out of which USD 1.95
million (INR 76.79 million) relates to Ravva Block. Detailed reply to this SCN has been
filed with Commissioner Service Tax and writ petition has been filed with Hon’ble High
Court of Chennai challenging service tax demand on some of the services.
The Ravva Oil & Gas Field Joint-Venture is contesting the demands and believes that
its position is likely to be upheld. The ultimate outcome of the matter cannot presently
be determined and no provision for any liability that may result has been made in the
accounts as the same is subject to agreement by the members of the Joint Venture.
Should it ultimately become payable, the Company’s share as per the participating
interest would be upto USD 0.63 million (INR 25.38 million).
j) Ravva Oil & Gas Field Joint-Venture has received a demand notice for USD 0.54
million (INR 21.53 million) for delay in payment of cess for the period April 2001 to
February 2004. The Ravva Oil & Gas Field Joint-Venture filed an appeal with Hon’ble
High Court of Andhra Pradesh and has received an interim stay order against the
demand. The Ravva Oil & Gas Field Joint-Venture believes that its position is likely to
be upheld. However, should the liability ultimately arise, the Company’s share as per
the participating interest would be upto USD 0.13 million (INR 5.38 million).
k) Disputed Income Tax demand amounting to Rs. 22.29 million in respect of certain
payment made by Ravva Oil & Gas Field Joint-Venture is currently pending before the
Income Tax Appellate Tribunal. The ultimate outcome of the matter cannot presently
be determined and no provision for any liability that may result has been made in the
accounts as the same is subject to agreement by the members of the Joint Venture.
Should it ultimately become payable, the Company’s share as per the participating
interest would be upto Rs. 5.57 million.
2. a) There was a dispute regarding (i) deductibility of Oil and Natural Gas Corporation Ltd.
(ONGC) Carry while computing the Post Tax Rate of Return (PTRR) under the Ravva
Production Sharing Contract (PSC); (ii) deductibility of provision of Site Restoration
Costs for computation of Cost Petroleum and PTRR; (iii) deductibility of inventory
purchased for computation of Cost Petroleum and PTRR; (iv) deductibility of Notional
Dividend Distribution Tax under the Income-tax Act, 1961 for computation of PTRR;
and (v) deductibility of Deposits, Advances and Pre-payments made for the purpose
of Petroleum Operations in the business of Ravva Oil & Gas Field for computation of
Cost Petroleum and PTRR. The Dispute was referred to an International Arbitration in
accordance with the provisions of the Ravva PSC. Vide the interim award dated 31st
March 2005, the Tribunal has upheld the Company’s claims stated in (i) and (v) above
whereas the claim of the Company stated in (ii), (iii) and (iv) above were rejected
by the Tribunal. While accepting the Interim Award, the Company computed and
submitted the calculation on May 31st, 2005 to Government of India (GOI) indicating
the amount payable by the Company after applying the said Arbitration Award at US$
27.02 million equivalent to Rs. 1,081.88 million, which was not accepted by GOI and it
claimed that the Company needs to pay US$ 43.72 million equivalent to Rs. 1,750.55
million and interest thereon applying the same Arbitration Award. The Company filed
a supplementary application on July 7th, 2005 followed by an amendment application
on August 8th, 2005 with the Arbitration Tribunal with a prayer to determine the
correct amount payable to GOI as well as to determine the interest, if any, payable
on the same to GOI. Pending the final decision of the Hon’ble Arbitral Tribunal, the
Company has accounted for and paid the sum of US$ 43.72 million equivalent to Rs.
1,750.55 million to GOI on ad hoc basis.
The GOI has further filed an affidavit on May 10th, 2005 before the Kuala Lumpur
High Court in Malaysia challenging the Arbitration Award and praying for setting
aside the Partial Award dated March 31st, 2005 only in respect of ONGC Carry Issue
whereas the Company has challenged the jurisdiction of the Kuala Lumpur High
Court and therefore the maintainability of such an appeal at that Court.
b) There is a dispute between the Company and GOI with regard to the computation
of interest on delayed payment of profit petroleum to the extent of US$ 67,636
equivalent to Rs. 2.71 million. The Company has filed an Interim Application on July
7th, 2005 before the Hon’ble Arbitral Tribunal for final determination of such amount,
pending which no provision has been made by the Company.
c) There is a dispute regarding the rate of conversion from US$ into Indian rupees
applicable to the Nominees of the GOI for the purpose of payment of amount of
the invoices for sale of the Crude Oil by the Company under the Ravva PSC. The
dispute was referred to an International Arbitration in accordance with the provisions
of the Ravva PSC. Vide the interim award dated March 31st, 2005, the Tribunal
has partly upheld the Company’s claim. While accepting the Award, the Company
has worked out and submitted a computation on June 30th, 2005 to GOI indicating
the amount receivable at Rs.121.43 million being the amount short paid by GOI
nominees up to June 19th, 2005 and interest thereon also calculated up to June
19th, 2005. The Company further vide its’ letter dated August 22nd, 2005 updated its’
claim indicating the total amount receivable from GOI Nominees at Rs.124.42 million
being the amount short paid by GOI nominees up to July 31st, 2005 and interest
thereon also calculated up to July 31st, 2005. During the year, the Company further
updated its’ claim in this respect vide its’ letter dated April 28th, 2008 wherein total
amount receivable from GOI Nominees is computed at Rs. 349.85 million, being the
amount short paid by GOI Nominees upto March 31st, 2008 and interest thereon also
calculated up to March 31st, 2008. The Company had earlier filed a supplementary