1.  We have audited the attached Balance Sheet of ATLAS COPCO (INDIA)
 LIMITED (the Company) as at 31st December, 2010, the Profit and Loss
 Account and the Cash Flow Statement of the Company for the year ended
 on that date, both annexed thereto. These financial statements are the
 responsibility of the Companys Management. Our responsibility is to
 express an opinion on these financial statements based on our audit.
 
 2.  We conducted our audit in accordance with the auditing standards
 generally accepted in India. Those Standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatements. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and the disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and the significant estimates
 made by the Management, as well as evaluating the overall financial
 statement presentation. We believe that our audit provides a reasonable
 basis for our opinion.
 
 3.  As required by the Companies (Auditors Report) Order, 2003 (CARO)
 issued by the Central Government in terms of Section 227(4A) of the
 Companies Act, 1956, we enclose in the Annexure a statement on the
 matters specified in paragraphs 4 and 5 of the said Order.
 
 4.  Further to our comments in the Annexure referred to in paragraph 3
 above, we report as follows:
 
 (a) we have obtained all the information and explanations which to the
 best of our knowledge and belief were necessary for the
 purposesofouraudit;
 
 (b) in our opinion, proper books of account as required by law have
 been kept by the Company so far as it appears from our examination of
 those books; >
 
 (c) the Balance Sheet, the Profit and Loss Account and the Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 (d) in our opinion, the Balance Sheet, the Profit and Loss Account and
 the Cash Flow Statement dealt with by this report are in compliance
 with the Accounting Standards referred to in Section 211 (3C) of the
 Companies Act, 1956;
 
 (e) in our opinion and to the best of our information and according to
 the explanations given to us, the said accounts give the information
 required by the Companies Act, 1956 in the manner so required and give
 a true and fair view in conformity with the accounting principles
 generally accepted in India:
 
 (i) In the case of the Balance Sheet,of the state of affairs of the
 Company as at 31st December,2010;
 
 (ii) in the case of the Profit and LossAccount, of the profit of the
 Company for the year ended on that date and
 
 (iii) in the case of the Cash Flow Statement, of the cash flows of the
 Company for the year ended on that date.
 
 5.  On the basis of the written representations received from the
 Directors as on 31 st December, 2010 taken on record by the Board of
 Directors, none of the Directors is disqualified as on 31st December,
 2010 from being appointed as a director in terms of Section 274(1 )(g)
 of the Companies Act, 1956.
 
 ANNEXURE REFERRED TO IN PARAGRAPH 3 OF THE AUDITORS REPORT OF EVEN
 DATE TO THE MEMBERS OF ATLAS COPCO (INDIA) LIMITED ON THE ACCOUNTS FOR
 THE YEAR ENDED 31ST DECEMBER, 2010.
 
 (i) (a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 (b) The fixed assets have not been physically verified by the
 management during the year but the company has a system of verifying
 the fixed assets once in every three years. In our opinion, the
 frequency of physical verification of fixed assets is reasonable having
 regard to the size of the Company and the nature of the assets.
 
 (c) The fixed assets disposed off during the year are not substantial
 and hence it has not affected the going concern assumption.
 
 (ii) (a) Inventories have been physically verified during the year by
 the management except for stocks with third parties in respect of which
 confirmations have been received in some cases. In our opinion, the
 frequency of verification is reasonable.
 
 (b) In our opinion, the procedures of physical verification of
 inventory followed by the management are reasonable and adequate in
 relation to the size of the Company and the nature of its business.
 
 (c) The Company has maintained proper records of inventory. The
 discrepancies noticed on verification between physical stocks and book
 stocks were not material having regard to the size of operations of the
 Company and have been properly dealt with in the books of accounts.
 
 (iii) (a) The Company has not granted or taken any loans, secured or
 unsecured to /from companies, firms or other parties covered in the
 registermaintained undersection 301 oftheCompaniesAct, 1956.
 Sub-clauses (b), (c), (d), (f) and (g) are not applicable.
 
 (iv) In our opinion and according to the information and explanations
 given to us and having regard to the explanation that most of the items
 purchased are of a special nature and comparable alternative quotations
 are not available, there is an adequate internal control system
 commensurate with the size of the Company and the nature of its
 business, with regard to purchase of inventory and fixed assets and for
 the sale of goods and services. Whilst there is no continuing failure
 to correct major weaknesses in internal control system, the internal
 controls overfinancial reporting have been strengthened by the
 management.
 
 (v) (a) Based upon the audit procedures performed and according to the
 information and explanations given to us, contracts or arrangements
 thatneed to beentered into the register maintained in pursuance of
 section 301 ofthe Companies Act, 1956 have been so entered.
 
 (b) The transactions made in pursuance of such contracts or
 arrangements and exceeding the value of rupees five lakhs with any
 party during the year have been made at prices which are reasonable
 having regard to the prevailing market prices at the relevant time.
 
 (vi) The Company has not accepted any deposits from the public to which
 the provisions of section 58A, 58AA or any other relevant provisions
 ofthe Companies Act, 1956 and the rules framed there under apply.
 
 (vii) The Company has an internal audit system commensurate with its
 size and nature of its business.
 
 (viii) We have broadly reviewed the books of account maintained by the
 Company relating to the manufacture of power driven pumps pursuant to
 the notification of the Central Government for the maintenance of cost
 records under section 209(1 )(d) of the Companies Act, 1956 and, on the
 basis ofthe information received, are ofthe opinion that prima facie
 the prescribed accounts and records have been maintained / are being
 made up. We have not, however, made a detailed examination of the
 records with a view to determining whether they are accurate or
 complete. To the best of our knowledge and according to the information
 given to us, the Central Government has not prescribed the maintenance
 of cost records under Section 209 (1) (d) of the Companies Act 1956 for
 any other products ofthe Company.
 
 (ix) (a) According to the records of the Company, apart from the
 certain instances of delays in payment of Income tax deducted at
 source, Service tax and Excise duty, the Company has been generally
 regular in depositing undisputed statutory dues including Provident
 Fund, Employees State Insurance, Investor Education and Protection
 Fund, Income tax, Sales tax, Wealth tax, Service tax, Custom Duty,
 Excise Duty, cess and other statutory dues with the appropriate
 authorities. Based on our audit procedures and according to the
 information and explanations given to us, there are no arrears of
 statutory dues which has remained outstanding as at 31 st December,
 2010 for a period of more than six months from the date they became
 payable except for Service tax amounting to Rs. 10,364,532, which has
 since been paid subsequent to the Balance Sheet date.
 
 (b) According to the information and explanations given to us and
 records ofthe company, the details ofthe dues of sales tax/income tax/
 custom duty/ wealth tax/ service tax/ excise duty/ cess, which have not
 been deposited on account of any dispute, are given below:
 
 Nature of 
 the dues          Amounts Involved   Forum where dispute Is pending
                  (dues to the extent
                     not deposited)
                      (Rs. 000)
 
 Sales Tax            12,280          Maharashtra Sales Tax Tribunal
 
                      22,981          Commissioner, Appeals
 
 Sales Tax Penalty     1,042          Commissioner (Appeals), Chennai
 
 Service Tax           3,125          Deputy Commissioner Central Excise
 
                       1,457          In process of filing appeal
                                      with Tribunal
 
                       6,756          Assistant Commissioner of 
                                      Central Excise
 
 Excise Duty           2,553          Deputy Commissioner Central Excise
 (Including penalty 
 but excluding interest)
 
                       4,780          Customs Excise and Service Tax
 
                                      Appellate Tribunal (CESTAT), Mumbai
 
                       1,500          Commissioner Central Excise
 
                         300          Assistant Commissioner, Central 
                                      Excise
 
 Income Tax
 A.Y. 1997-98            521          Commissioner of Income Tax(Appeals)
 
 A.Y. 2000-01         15,099          Income Tax Tribunal
 
 A.Y. 2002-03         29,461          Commissioner of Income Tax(Appeals)
 
 A.Y. 2003-04          9,597          Commissioner of Income Tax(Appeals)
 
 A.Y. 2006-07        120,777          Income Tax Tribunal
 
 (x) The Company does not have any accumulated losses as at 31st
 December, 2010. The Company has not incurred any cash losses during
 thefinancial year covered by our audit and the immediately preceding
 financial year.
 
 (xi) Based on our audit procedures and according to the information and
 explanations given by the management, the Company has not defaulted in
 repayment of dues to banks. There are no dues to financial institutions
 or debenture holders.
 
 (xii) The Company has not granted any loans and advances on the basis
 of security by way of pledge of shares, debentures and other
 securities.
 
 (xiii) The Company is not a chit fund, nidhi/ mutual benefit fund and
 therefore the requirements pertaining to such class of companies are
 not applicable.
 
 (xiv) The Company is not dealing or trading in shares, securities,
 debentures and other investments.
 
 (xv) The Company has not given any guarantee for loans taken by others
 from banks or financial institutions.
 
 (xvi) The term loans taken by the Company during the year have been
 applied forthe purpose for which they were raised.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the Balance Sheet of the Company we are of
 the opinion that the funds raised on short-term basis have not been
 used for long-term investment.
 
 (xviii) The Company has not made any preferential allotment of shares
 to parties and companies covered in the Register maintained under
 section 301 of the Companies Act, 1956.
 
 (xix) The Company has not issued any debentures during the year and
 therefore the question of creating security or charge in respect
 thereof does notarise.
 
 (xx) The Company has not made any public issue during the year and
 therefore the question of disclosing the end use of money does not
 arise.
 
 (xxi) Based upon the audit procedures performed and according to the
 information and explanations given and representations made by the
 management, we report that no fraud on or by the Company had been
 noticed or reported during the year.
 
                                   For Deloitte Haskins & Sells
 
                                          Chartered Accountants
                                     (Registration No. 117365W)
 
 Date: 25th April, 2011                             G. Shankar
 
 Place: Pune                                           Partner
 
                                       (Membership No.: 27023)