Honeywell Automation

1.  We have audited the attached Balance Sheet of Honeywell Automation
 India Limited (the Company) as at December 31, 2008, and the related
 Profit and Loss Account and Cash Flow Statement for the year ended on
 that date annexed thereto, which we have signed under reference to this
 report. 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 misstatement. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by 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 as
 amended by the Companies (Auditors Report) (Amendment) Order, 2004
 (together the Order) issued by the Central Government of India in
 terms of sub-section (4A) of Section 227 of the Companies Act, 1956 of
 India (the Act) and on the basis of such checks of the books and
 records of the Company as we considered appropriate and according to
 the information and explanations given to us, we give 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 that:
 
 (a) We have obtained all the information and explanations which, to the
 best of our knowledge and belief, were necessary for the purposes of
 our audit.
 
 (b) In our opinion, proper books of account as required by law have
 been kept by the Company so far as appears from our examination of
 those books;
 
 (c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 (d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash
 Flow Statement dealt with by this report comply with the accounting
 standards referred to in sub-section (3C) of Section 211 of the Act;
 
 (e) On the basis of written representations received from the directors
 of the Company as on December 31, 2008 and taken on record by the Board
 of Directors of the Company, none of the directors of the Company is
 disqualified as on December 31, 2008 from being appointed as a director
 in terms of clause (g) of sub-section (1) of Section 274 of the Act;
 
 (f) In our opinion and to the best of our information and according to
 the explanations given to us, the said financial statements, together
 with the notes thereon annexed thereto, give in the prescribed manner
 the information required by the Act and also 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 December 31, 2008;
 
 (ii) in the case of the Profit and Loss Account, of the profit for the
 year ended on that date; and
 
 (iii) in the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
 [Referred to in paragraph 3 of the Auditors Report of even date to the
 members of Honeywell Automation India Limited on the financial
 statements for the year ended December 31, 2008]
 
 1.  (a) The Company is maintaining proper records showing full
 particulars, including quantitative details and situation, of fixed
 assets.
 
 (b) The fixed assets are physically verified by the Management
 according to a phased programme in five years which, in our opinion, is
 reasonable having regard to the size of the Company and the nature of
 its assets. Pursuant to the programme, a portion of the fixed assets
 has been physically verified by the Management during the year and no
 material discrepancies between the book records and the physical
 inventory have been noticed.
 
 (c) In our opinion and according to the information and explanations
 given to us, a substantial part of fixed assets has not been disposed
 of by the Company during the year.
 
 2.  (a) The inventory (excluding stocks with third parties) has been
 physically verified by the Management during the year.
 
 In respect of inventory lying with third parties, these have been
 confirmed by them. 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) On the basis of our examination of the inventory records, in our
 opinion, the Company is maintaining proper records of inventory. The
 discrepancies noticed on physical verification of inventory as compared
 to book records were not material.
 
 3.  (a) The Company has not granted any loans, secured or unsecured, to
 companies, firms or other parties covered in the register maintained
 under Section 301 of the Act.
 
 (b) The Company has not taken any loans, secured or unsecured, from
 companies, firms or other parties covered in the register maintained
 under Section 301 of the Act.
 
 4.  In our opinion and according to the information and explanations
 given to us, having regard to the explanation that certain items
 purchased are of special nature for which suitable alternative sources
 do not exist for obtaining comparative quotations, there is an adequate
 internal control system, commensurate with the size of the Company and
 the nature of its business, for the purchase of inventory and fixed
 assets and for the sale of goods and services. Further, on the basis of
 our examination of the books and records of the Company carried out in
 accordance with the auditing standards generally accepted in India, we
 have neither come across nor have been informed of any continuing
 failure to correct major weaknesses in the aforesaid internal control
 system.
 
 5.  (a) In our opinion and according to the information and
 explanations given to us, the particulars of contracts or arrangements
 referred to in Section 301 of the Act have been entered in the register
 required to be maintained under that section.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of such contracts or
 arrangements and exceeding the value of Rupees Five Lacs in respect of
 any party during the year have been made at prices which are reasonable
 having regard to the prevailing market prices at the relevant time.
 
 6.  The Company has not accepted any deposits from the public within
 the meaning of Sections 58A, 58AA or any other relevant provisions of
 the Act and the rules framed there under.
 
 7.  In our opinion, the Company has an internal audit system
 commensurate with its size and the nature of its business.
 
 8.  We have broadly reviewed the books of account maintained by the
 Company in respect of products where, pursuant to the Rules made by the
 Central Government of India, the maintenance of cost records has been
 prescribed under clause (d) of sub-section (1) of Section 209 of the
 Act and are of the opinion that, prima facie, the prescribed accounts
 and records have been made and maintained. We have not, however, made a
 detailed examination of the records with a view to determine whether
 they are accurate or complete.
 
 9.  (a) According to the information and explanations given to us and
 the records of the Company examined by us, in our opinion, the Company
 is generally regular in depositing the undisputed statutory dues,
 including provident fund, employees state insurance, investor
 education and protection fund, income-tax, sales-tax, wealth-tax,
 service tax, customs duty, excise duty, cess and other material
 statutory dues, as applicable, with the appropriate authorities.
 
 (b) According to the information and explanations given to us and the
 records of the Company examined by us, there are no dues of sales-tax,
 income-tax, customs duty, wealth tax, service tax, excise duty and cess
 as at December 31, 2008 which have not been deposited on account of a
 dispute, except as follows :
 
 Name of the statute    Nature of dues                   Amount*
                                                        (Rs.000)
 
 The Central Excise     Excise duty, including             1,899
 Act, 1944              applicable penalty
 The Customs Act,       Penalty                              753
 1962
 Maharashtra Sales      Sales Tax / Value Added Tax,      20,737
 Tax Act, 1960          including applicable interest
 Maharashtra Sales      Sales Tax, including applicable   18,724
 Tax Act, 1960          interest
 Maharashtra Sales      Sales Tax / Value Added Tax,      42,238
 Tax Act, 1960          including applicable interest
 Gujarat Sales          Sales Tax / Value Added Tax,         900
 Tax Act,               including applicable interest
 Karnataka Sales        Sales Tax / Value Added Tax,       3,437
 Tax Act                including applicable interest
 Income-tax Act,        Penalty                           91,881
 1961
 Income-tax Act,        Income-tax including             208,542
 1961                   applicable interest
 
 Financial years to which    Forum where
 the amount relates          the dispute is pending
 
 2002-03                     Customs, Excise and Service
                             Tax Appellate Tribunal
 2006-07                     Customs, Excise and Service
                             Tax Appellate Tribunal
 1999-00 to                  Maharashtra Sales Tax
 2001-02                     Appellate Tribunal
 2002-03                     Deputy Commissioner
                             of Sales Tax (Appeals)
 2004-05                     The Company is in the
                             process of filing an appeal
                             with Deputy Commissioner
                            (Appeals)
 2000-01 and                 Assistant Commissioner of
 2001-02                     Sales Tax (Appeals)
 2004-05                     Joint Commissioner of
                             Commercial Taxes (Appeals)
 1998-99, 1999-00            Commissioner of Income Tax
 and 2001-02                (Appeals). Stay against the
                             outstanding demand has
                             been granted to the Company
 2004-05                     Commissioner of
                             Income Tax (Appeals).
 
 * Net of amounts paid under protest or otherwise
 
 10.  The Company has no accumulated losses as at December 31, 2008 and
 it has not incurred any cash losses in the financial year ended on that
 date or in the immediately preceding financial year.
 
 11.  According to the records of the Company examined by us and the
 information and explanations given to us, the Company has not defaulted
 in repayment of dues to any bank, financial institution or debenture
 holders as at the Balance Sheet date.
 
 12.  The Company has not granted any loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 13.  The provisions of any special statute applicable to chit fund/
 nidhi/ mutual benefit fund/ societies are not applicable to the
 Company.
 
 14.  In our opinion, the Company is not a dealer or trader in shares,
 securities, debentures and other investments.
 
 15.  In our opinion, and according to the information and explanations
 given to us, the Company has not given any guarantee for loans taken by
 others from banks or financial institutions during the year.
 
 16.  The Company has not obtained any term loans.
 
 17.  On the basis of an overall examination of the balance sheet of the
 Company, in our opinion, and according to the information and
 explanations given to us, there are no funds raised on a short-term
 basis which have been used for long-term investment.
 
 18.  The Company has not made any preferential allotment of shares to
 parties and companies covered in the register maintained under Section
 301 of the Act during the year.
 
 19.  The Company has not issued any debentures.
 
 20.  The Company has not raised any money by public issues during the
 year.
 
 21.  During the course of our examination of the books and records of
 the Company, carried out in accordance with the auditing standards
 generally accepted in India and according to the information and
 explanations given to us, we have neither come across any instance of
 fraud on or by the Company, noticed or reported during the year, nor
 have we been informed of such case by the Management.
 
                                                Jeetendra Mirchandani
                                                              Partner
                                               Membership No. F 48125
 
                                                 For and on behalf of
 Place : Pune                                   Price Waterhouse & Co.
 Date  : February 6, 2009                       Chartered Accountants