GlaxoSmithKline Pharmaceuticals

1 The Company received a demand for Rs. 71,79 lakhs from the Central
 Government contained in its orders dated 18th June, 1990 and 16th
 November, 1990 in respect of prices relating to Betamethasone bulk
 drugs and formulations therefrom. These orders were challenged by the
 Company by a writ petition in the Honble High Court at Delhi. After
 hearing the submissions of the Company, as well as the Government, in
 the writ petition, the Honble High Court by its judgement and order
 dated 19th October, 2001, was pleased to set aside the impugned demands
 raised by the Central Government. The claim to interest made by the
 Government vide its letter dated 29th October, 1996, demanding interest
 of Rs. 117,66 lakhs for the period 12th May, 1981 to 17th October, 1996
 thereby, does not survive. The Honble High Court has also directed
 that the Company be given an opportunity to present its case with full
 facts to enable the Central Government to raise a fresh demand. The
 Company has sent a letter to the Government giving details of the
 quantities based on which the demand has to be raised as per the
 judgement of the Honble High Court at Delhi and has intimated to the
 Government that according to the Company, after considering the set
 offs which the Company has claimed, the amount payable would be Rs.
 18,68 lakhs. The Company had accrued a liability of Rs. 18,68 lakhs of
 which an amount of Rs. 8,19 lakhs has been paid to the Government in
 the earlier years. Accordingly, the Company has retained the liability
 of Rs. 10,49 lakhs in the Balance Sheet.
 
 The Central Government has filed a special leave petition in the
 Supreme Court against the Delhi High Courts judgement and order dated
 19th October, 2001. The Supreme Court has admitted the said special
 leave petition, which will come up for hearing and disposal in due
 course.
 
 2 Matters in respect of erstwhile Burroughs Wellcome (India) Limited
 (BWIL):
 
 (i) The Government of India, Ministry of Chemicals and Fertilisers, New
 Delhi, passed a final order on 21st July, 1993, directing erstwhile
 BWIL to pay an amount of Rs. 1,91.15 lakhs along with interest due
 thereon from the date of default into the Drugs Prices Equalisation
 Account (DPEA) in respect of a bulk drug procured by erstwhile BWIL
 during the period April 1981 to April 1983.
 
 Erstwhile BWIL filed a writ petition in August 1993 which was admitted
 by the Bombay High Court. After hearing both the parties, the High
 Court granted an interim injunction restraining the Government of India
 from taking any action in furtherance of and/or implementation of the
 order dated 21st July, 1993 or from in any manner seeking to compel
 erstwhile BWIL to deposit any amount into the DPEA, pending the hearing
 and final disposal of the petition on the condition that erstwhile BWIL
 furnishes a bank guarantee for Rs. 2,00 lakhs from a nationalised bank
 and undertakes to pay the amount demanded with interest at the rate of
 20% per annum in case the petition fails.
 
 Erstwhile BWIL had accordingly furnished the required bank guarantee.
 If calculated on the basis of correct data, taking into account set
 offs claimable for earlier years for which data has been provided by
 erstwhile BWIL, no amount will be payable by the Company and
 accordingly no provision in that respect is considered necessary. The
 Companys stand that the demand is not sustainable has been confirmed
 by an eminent counsel. In the meanwhile, the Government of India has
 filed an application in the Supreme Court praying that the writ
 petition (along with several others filed by other pharmaceutical
 companies) be transferred to the Supreme Court from various High
 Courts. The Supreme Court is yet to hear the transfer petition.
 
 (ii) Erstwhile BWIL had made an application to the Government of India
 for approval under Section 198(4) of the Companies Act, 1956, in
 respect of payment of remuneration to the Managing Director and three
 whole time Directors amounting to Rs. 10.93 lakhs for the year ended
 31st August, 1986, which was in accordance with the minimum
 remuneration provided in the agreement entered into with them prior to
 erstwhile BWIL becoming public, which required such Government of
 Indias sanction. The approval is still awaited.
 
 (iii) Remittances in transit represent monies deposited by customers in
 favour of erstwhile BWIL with banks in Zambia - Rs. 0.31 lakhs and in
 Tanzania - Rs. 5.61 lakhs, the remittance of which is pending clearance
 of the authorities in those countries.
 
 3 Matters in respect of erstwhile SmithKline Beecham Pharmaceuticals
 (India) Limited:
 
 (i) Rs. 1,44.44 lakhs received from Beckman Instruments International
 S.A. on account of disputed alleged additional commission has been
 included under Sundry Creditors and Income tax paid thereon aggregating
 to Rs. 64.77 lakhs has been included under Loans and Advances. The
 Company is contesting the matter with the concerned authorities.
 
 (ii) Refund of surtax Rs. 96.81 lakhs, and interest thereon amounting
 to Rs. 48.52 lakhs, received during 1994, have not been adjusted
 against the provision for tax in the books of account and recognised as
 income respectively, since the Income tax department had filed a
 reference application against the income tax tribunals order which was
 pending before the High Court of Karnataka. The Company has received an
 order dated 18th April, 2007 from the High Court of Karnataka which is
 partially in the Companys favour. On the basis of the aforesaid order,
 Income Tax Appellate Tribunal (ITAT), Bangalore will pass an order
 giving directions. On receipt of the ITAT order, the Company will take
 appropriate steps in the matter.
 
                                                               Previous
                                                                   year
                                                 Rupees in    Rupees in
                                                     lakhs        lakhs
 
 4 Contingent Liabilities not provided for:
 
 (i) Cheques discounted with banks                 6,85.69     13,73.98
 
 (ii) In respect of claims made against the 
      Company not acknowledged as debts by 
      the Company
 
      Sales tax matters                           32,29.65     31,97.86
      Excise matters                               7,98.63     11,01.22
      Service tax matters                          2,42.18      2,42.18
      Labour matters                              33,75.66     29,37.65
      Other legal matters                          8,69.90      9,74.00
      which net of current tax amount to -        56,21.42     55,79.77
 
 (iii) Taxation matters in respect of which 
       appeals are pending
 
       Tax on matters in dispute                  87,87.48     77,23.35
       Other consequential matters (net of tax)    3,74.39      3,74.39
 
 Notes:
 
 Future cash outflows in respect of (i) above are dependant on the
 return of cheques by banks.
 
 Future cash outflows in respect of (ii) and (iii) above are
 determinable on receipt of decisions / judgements pending with various
 forums / authorities.
 
 
 5 The tax year for the Company being the year ending 31st March, the
 provision for taxation for the year is the aggregate of the provision
 made for the three months ended 31st March, 2008 and the provision
 based on the figures for the remaining nine months up to 31st December,
 2008, the ultimate tax liability of which will be determined on the
 basis of the figures for the period 1st April, 2008 to 31st March,
 2009.
 
 6 (a) In the previous year, profit on sale / redemption of investments
 (net) current is net of loss on sale/redemption of long term
 investments amounting to Rs. 2,74.39 lakhs.
 
 (b) Profit on sale / redemption of investments (net) (Exceptional Item)
 comprises profit on sale of long term investments amounting to Rs.
 132,66.51 lakhs, current investments of Rs. 14,54.07 lakhs and loss on
 sale of current investments of Rs. 6.74 lakhs.
 
 (c) Miscellaneous expenses in Schedule - 16 Operating and Other
 Expenses includes loss on sale of long term investments Rs. 5.69
 lakhs.
 
 7 The recurring expenditure on research and development charged off to
 revenue amounts to Rs. 4,63.69 lakhs (Previous year - Rs. 4,40.16
 lakhs).
 
 8 Recovery of expenses (net) in Schedule 16 are amounts recovered
 from GlaxoSmithKline Asia Private Limited Rs. 10,61.83 lakhs (Previous
 year - Rs. 8,83.17 lakhs), from subsidiary company Rs. 4,13.61 lakhs
 (Previous year - Rs. 4,12.81 lakhs), from GlaxoSmithKline Pte Limited
 Rs. 11.18 lakhs (Previous year - Rs. 6.10 lakhs), from GlaxoSmithKline
 S.A.E Rs. 14.17 lakhs (Previous year - Rs. 9.57 lakhs), from
 GlaxoSmithKline Pharmaceutical Sdn Bhd Rs. 22.26 lakhs (Previous year -
 Rs. 22.40 lakhs) and paid to GlaxoSmithKline Consumer Healthcare
 Limited Rs. 7,27.07 lakhs (Previous year - Rs. 6,61.54 lakhs) towards
 the value of costs apportioned, in accordance with the agreements on
 allocation of expenses with the companies.
 
 9 Employee Benefits
 
 The disclosures as required as per the revised AS 15 are as under:
 
 1 Brief description of the Plans
 
 The Company has various schemes for long-term benefits such as
 provident fund, superannuation, gratuity and post retirement medical.
 In case of funded schemes, the funds are recognised by the Income tax
 authorities and administered through trustees / appropriate
 authorities. The Companys defined contribution plans are
 superannuation and employees pension scheme (under the provisions of
 the Employees Provident Funds and Miscellaneous Provisions Act, 1952)
 since the Company has no further obligation beyond making the
 contributions. The Companys defined benefit plans include gratuity and
 post retirement medical.  In terms of the Guidance on implementing the
 revised AS 15, issued by the Accounting Standards Board of the
 Institute of Chartered Accountants of India, the provident fund set up
 by the Company is treated as a defined benefit plan since the Company
 has to meet the interest shortfall, if any. However, as at the year end
 no shortfall remains unprovided for. As advised by an independent
 actuary, it is not practical or feasible to actuarially value the
 liability considering that the rate of interest as notified by the
 Government can vary annually. Further the pattern of investments for
 investible funds is as prescribed by the Government. Accordingly other
 related disclosures in respect of provident fund have not been made-.
 The employees of the Company are also entitled to leave encashment and
 compensated absences as per the Companys policy.
 
 10 The Company has only one reportable segment which is
 Pharmaceuticals. Accordingly, no separate disclosures of segment
 information have been made.
 
 11 Disclosures as required by Accounting Standard 19, Leases, issued
 by the Institute of Chartered Accountants of India, are given below:
 
 (i) The Company has taken various residential, office and godown
 premises under operating lease or leave and licence agreements.  These
 are generally not non-cancellable and range between 11 months and 3
 years under leave and licence, or longer for other leases and are
 renewable by mutual consent on mutually agreeable terms. The Company
 has given refundable interest free security deposits under certain
 agreements.
 
 (ii) Lease payments are recognised in the Profit and Loss Account under
 Rent in Schedule 16.
 
 (iii) The future minimum lease payments under non-cancellable operating
 lease - not later than one year - Nil (Previous year - Rs. 1,28.54
 lakhs)
 
 12 Amount recognised as expense for the year under the long-term
 incentive plan is Rs. 1,26.03 lakhs (Previous year - Rs. 62.13 lakhs).
 
 The total carrying amount of the corresponding liability at the year
 end is Rs. 2,69.92 lakhs (Previous year - Rs. 1,46.98 lakhs).
 
 13 In the previous year, the Company sold the Fine Chemicals business
 as a going concern to Thermo Electron LLS India Private Limited for a
 total consideration of Rs. 240,00 lakhs at a profit of Rs. 198,29.63
 lakhs. Accordingly, figures for the current year are to that extent not
 comparable with those of the previous year.
 
 14 Current taxation represents payments in excess of provisions of Rs.
 1709,15.11 lakhs (Previous year - Rs. 1481,15.11 lakhs).
 
 15 Provision for fringe benefits tax represents provision in excess of
 payments of Rs. 28,35.00 lakhs (Previous year - Rs. 21,30.00 lakhs).
 
 16 Investments purchased and sold / redeemed during the year:
 
 Government of India Treasury Bills
 Face value Rs. 1,18,63.50 lakhs
 
 ABN AMRO Money Plus Fund - Institutional Plan - Daily Dividend Option
 10,30,71,647.097 Units of Rs. 10 each
 
 ABN AMRO Cash Fund - Institutional Plus - Daily Dividend Option
 50,09,165.589 Units of Rs. 10 each
 
 DWS Money Plus Fund - Institutional Plan - Daily Dividend Option
 2,10,92,483.143 Units of Rs. 10 each
 
 DSP Merrill Lynch Liquid Plus - Institutional Plan - Daily Dividend
 Option 3,71,058.423 Units of Rs. 1,000 each
 
 DSP Merrill Lynch Liquidity Fund - Institutional Plan - Daily Dividend
 Option 2,00,224.316 Units of Rs. 1,000 each
 
 HDFC Floating Rate Income Fund - Short Term Plan - Wholesale Option -
 Daily Dividend Reinvestment Option 1,65,32,024.617 Units of Rs. 10 each
 
 HDFC Liquid Fund Premium Plan - Daily Dividend Option 1,23,19,721.016
 Units of Rs. 10 each
 
 HSBC Liquid Plus - Institutional Plus - Daily Dividend Option
 36,84,019.931 Units of Rs. 10 each
 
 ICICI Prudential Floating Rate Plan D - Daily Dividend Option
 1,37,956.832 Units of Rs. 10 each
 
 IDFC Liquid Plus Fund - Investment Plan - Plan B - Daily Dividend
 Option 8,12,79,113.889 Units of Rs. 10 each
 
 IDFC Liquid Fund - Daily Dividend Option 2,24,41,327.031 Units of Rs.
 1,000 each
 
 Principal Floating Rate Fund Flexible Maturity Plan Institutional
 Option - Daily Dividend Option 39,25,901.954 Units of Rs. 10 each
 
 SBI - Short Horizon Fund - Liquid Plus - Institutional Plan - Daily
 Dividend Option 1,94,78,417.481 Units of Rs. 10 each
 
 SBI Debt Fund Series - 90 days-17-(06-Nov-07) - Dividend Option
 83,575.000 Units of Rs. 10 each
 
 Templeton Floating Rate Income Fund - Long Term Plan - Institutional
 Dividend Reinvestment Option 3,31,663.640 Units of Rs. 10 each
 
 Templeton India Treasury Management Account Super Institutional Plan
 Daily Dividend Reinvestment Option 1,21,37,654.775 Units of Rs. 1,000
 each
 
 Templeton Floating Rate Income Fund - Short Term Plan - Institutional
 Dividend Reinvestment Option 2,13,728.112 Units of Rs. 10 each
 
 Templeton India Ultra Short Bond Fund - Super Institutional - Daily
 Dividend Reinvestment Option 5,25,35,579.098 Units of Rs. 10 each
 
 17 Previous years figures have been regrouped wherever necessary.