Annual Reports - Indraprastha Gas Limited

2.12 Taxation
Income tax expense comprises current tax, deferred tax and fringe benefit tax. Current Tax and Fringe Benefit Tax
is amount of tax for the period determined in accordance with the Income-tax Act, 1961. Deferred Tax charge or
credit reflects the tax effects of timing differences between accounting income and taxable income for the period.
The deferred tax charge or credit and the corresponding deferred tax liability or deferred tax asset are recognized
using the tax rates that have been enacted or substantially enacted by the Balance Sheet date. Deferred tax assets
are recognized only to the extent there is reasonable certainty of realisation in the future. Such assets are reviewed
at each balance sheet date to reassess realisation. Where there are unabsorbed depreciation and carry forward
losses under tax laws, deferred tax assets are recognized only if there is virtual certainty supported by convincing
evidence that such deferred tax assets can be realised in future.
2.13 Earnings per share
Basic earning per share is computed using the weighted average number of equity shares outstanding during the
year. Diluted earning per share is computed using the weighted average number of equity and dilutive equity equivalent
shares outstanding during the year, except where the results would be anti dilutive.
2.14 Contingencies
A provision is recognized in the financial statements where there exists a present obligation as a result of a past
event, the amount of which can be reliably estimated, and it is probable that an outflow of resources would be
necessitated in order to settle the obligation. Contingent liability is a possible obligation that arises from past events
and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain
future events, not wholly within the control of the enterprise, or is a present obligation that arises from past events
but is not recognized because either it is not probable that an outflow of resources embodying economic benefits
will be required to settle the obligation, or a reliable estimate of the amount of the obligation cannot be made.
2.15 Deposits with Government Agencies, Local Authorities and Other Electricity Companies
Deposits given to Government agencies, local authorities and other electricity companies which are perennial in
nature are charged to revenue in the year of payment.
3. Contingent liabilities
3.1 Income Tax cases
In respect of Assessment Year 2001-02 to Assessment Year 2006-07, the department disallowed certain claims made
or set offs availed by the Company. This resulted into adjustments to past carried forward losses aggregating Rs
29,448,913 (previous year Rs. 29,448,913) and demands raised aggregating Rs. 63,289,287 (Previous year Rs.
56,968,002) against which Company has deposited Rs. 32,858,902 (Previous Year Rs. 22,118,716) under protest.
The Company has filed appeals against the above which are pending at various stages.
3.2 UP Trade Tax Cases
The Commercial Tax department of Uttar Pradesh has raised the demand towards UP Trade Tax for the Assessment
year 2007-08 amounting to Rs. 1,776,435 (Previous year Rs. 1,776,435) against which Rs. 863,019 (Previous Year Rs.
863,019) has been deposited and a Bank Guarantee of Rs. 914,000 is issued in favour of the department. The
Company has filed appeals against the above demand with Tribunal, Commercial Taxes, Noida.
3.3 Bank Guarantees
The Company’s total liability towards un-expired Bank Guarantees is Rs.494,809,876 (Previous year Rs. 219,175,559).
3.4 Service charges
During the year the Company has received a demand of Rs. 43,745,684 towards service charges on purchase of
natural gas for the period 1 July, 2008 to 31 March, 2009 The Company is of the view that the amount is not payable
and is disputing the demand made by the supplier and hence no provision has been made in the books of accounts
for this amount.
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