India Tourism Development Corporation Ltd

1.  We have audited the attached balance sheet of India Tourism
 Development Corporation Limited, New Delhi as at 31st March, 2008 and
 also the profit and loss account and the cash flow statement of the
 Company for the year ended on that date annexed thereto, in which are
 incorporated the accounts of the Head Office and 4 units/branches
 audited by us and 39 units/ branches audited by respective branch
 auditors appointed by the Controller and Auditor General of India.
 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 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 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 as
 amended by Companies (Auditors Report) (Amendment) Order, 2004, issued
 by the Central Government of India in terms of Section 227 (4A) of the
 Companies Act, 1956, and on the basis of such examination of the books
 and records of the Company as we considered appropriate and the
 information and explanations given during the course of audit and after
 considering the reports of branch auditors, 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 that:
 
 i) There are Property Tax demands of Rs.  5,489,81 lakhs (Previous Year
 Rs 5,088.93 Lakhs) from NDMC in respect of certain properties and
 demand of Rs 414.77 lacs (Previous Year Rs 344.92 Lakhs) from ESI
 authorities, which are being disputed by the Corporation and not
 provided for (Refer Note No. 1 (a)(i)).
 
 ii) The corporation is due Rs. 2,120.50 Lakhs as at 31.03.2008 (Rs
 1,920.35 Lakhs upto 31.03.07) from certain subsidiary Companies(which
 have significant accumulated losses) on account of services rendered
 and funds advanced to them.  Besides the corporation holds investments
 in the said subsidiaries having a book value as at 31.03.2008 of Rs.
 759.70 lakhs (Previous Year Rs 759.70 Lakhs). The management has
 represented to us that these investments are of long term nature and
 the shortfall/diminution in their value is not permanent and that the
 market value of assets owned by these companies is considerable to
 recover the dues and cost of investments though, at present the net
 worth of most of these companies is in the negative (Refer Note No. 6
 (a)(i),(ii)).
 
 (iii) (a) Compensation payable to a party, whose premises were under
 occupation by the Corporations ATT Division, Delhi upto 28.02.2007has
 not been provided as determination / quantification by the Commissioner
 appointed for the purpose is pending.  [Refer Note no. 2(c) J.  
 
 (b) Lease Rent / registration fee/ ground rent / depreciation due to
 nonfinalization of terms of purchase/lease/title deeds of land and
 buildings have not been provided for. [Refer Note No. 4] 
 
 (iv) Amount of Rs 1326.12 lakhs (Previous Year Rs 1326.12 lakhs ) shown
 as recoverable from demerged units for the period from 1s April 2001
 till the date of physical transfer on account of funds transferred and
 expenses incurred on behalf of the said units, but not received till
 date, has been considered good of recovery by the management. [Refer
 Note No. 8(b)] 
 
 (v) Impairment in the value of assets / partly completed assets
 aggregating to Rs.  206.29 lakhs (Previous Year Rs 206.09 lakhs)
 included under capital work in progress has not been provided. [Refer
 Note No3(b) ] 
 
 vi) Interest payable to/recoverable from and amount due from NBCC
 pertaining to Iraq Project pending reconciliation / receipt of detailed
 statement of accounts from NBCC. Effect on the accounts on due receipt
 / adjustment / accounting thereof cannot be indicated at this stage.
 [Refer Note No. 6(c) & 7(b)] 
 
 vii) Capitlisation effected / charged to expenditure on
 provisional/payment basis, pending receipt of final bills /
 finalisation and certification by architects. Effect on the accounts on
 due adjustment there of, cannot be indicated at this stage.  [Refer
 Note Nos.4 (e)/4(f)]
 
 viii) Balance in Sundry Debtors, Loans and Advances, Deposits and
 Sundry Creditors accounts are subject to independent confirmation and
 reconciliation in some cases.  [Refer Note No. 6 (b)] 
 
 ix) The Corporation had, for the purpose of running of the Duty Free
 Trade in India, established on 18/09/2007 a Joint Venture Company (JV)
 in collaboration with M/s Aldeasa of Spain vide agreement dated
 10/07/2007. In terms of the JV agreement, the corporation and Aldeasa
 were to equally contribute funds to the JV towards capital and
 accordingly the company has, being a promoter subscriber, recorded an
 investment to the extent of Rs. 50,000 (5,000 equity shares of Rs. 10
 each) in the joint venture company, though the share certificates
 remained to be received from the JV company. Besides, the financial
 statements of the JV Company are stated to be under preparation and
 finalisation. Hence corporations share of profit/loss and contribution
 towards expenses, if any, in connection with the running of the JV
 could not be ascertained and accounted for. Effect on the accounts on
 due determination and accounting thereof cannot be indicated at this
 stage. (Refer Note No. 12) 
 
 5.  We further 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 except to the extent referred to in Note No. 6(c) of Schedule 12
 regarding status of dues payable / recoverable from a party and Note
 No. 8(b) of Schedule 12 regarding confirmation of amount recoverable
 from demerged units ;
 
 b) In our opinion proper books of account, as required by law, have
 been kept so far as appears from our examination of those books and
 proper returns adequate for the purpose of our audit have been received
 from the branch auditors in respect of the units / branches audited by
 them.
 
 c) The, reports of the branch auditors on the accounts of units /
 branches audited by them have been received and considered by us in
 preparing this report after making such adjustments as we considered
 necessary ;
 
 d) The balance sheet, profit and loss account and cash flow statement
 dealt with by this report are in agreement with the books of account
 and audited financial statements of the branches.
 
 e) In our opinion, the balance sheet, profit and loss account and cash
 flow statement dealt with by this report comply with Accounting
 Standards referred to in sub-section (3C) of Section 211 of the
 Companies Act, 1956 except to the extent referred to hereunder:-
 
 - Valuation of Inventories at cost in some of the units as against
 lower of cost or net realizable value -Accounting Standard-2 -
 Valuation of Inventories.
 
 - Lease charges in respect of land of Hotel Samrat not having been
 amortised. [Note No. 4 (g)] - Accounting Standard -6 - Depreciation
 Accounting.
 
 - Recognition of income from subsidiary companies on accrual basis
 despite significant, accumulated losses incurred by most of those
 companies - Accounting Standard-9 - (Revenue Recognition).
 
 - Conversion of balance with foreign bank in Iraqi dinar at the rate
 prevailing as on 31s March, 1991 instead of applying year end rates.
 [Refer Note No. 7(a) ] - Accounting Standard-11- Accounting for Effect
 of Changes in Foreign Exchange Rates.
 
 - Non disclosure of details required in respect of operating leases
 entered into by the Company. [Note No. 13 (v) of Schedule-12] -
 Accounting Standard-19-Leases.
 
 - Except to the extent referred to in note 13(viii) of Schedule 12, the
 corporation has not determined impairment in other assets in terms of
 Accounting Standard-28-Impairment of Assets during the year.
 
 From the available information we are unable to quantify the impact on
 the financial statements due to non-compliance of The Accounting
 Standards referred to above.
 
 f) The provisions of clause (g) of sub-section (1) of Section 274 of
 the Companies Act, 1956, are not applicable to the Company in terms of
 notification No.G.S.R.  829(E) dated 21st October, 2003 issued by
 Government of India, Department of Company Affairs;
 
 6.  We further report that:-
 
 a) We are unable to comment on the extent of liability that may devolve
 upon the Corporation and impact the financial statements on resolution,
 of legal proceedings referred to in Para 4(i) and 4 (iii) (a); 
 
 b) The adjustments that may arise pertaining to matters referred to in
 Para 4 (ii),4(iii) (b), 4 (vi), 4(vii),4(viii), 4(ix), which can not be
 quantified at this stage.
 
 c) The impact of our comments in Para 4(iv) and ,4(v), which were
 subject matter of audit qualifications in the earlier years also, is
 given below:
 
                                      Reported figure
                                       (Rs. In lacs)
 
 A Reserve & Surplus                     17223.76
   [Refer Para 4(iv), 4(v)
 B Capital Work-in-progress                302.80
   [Refer Para 4(v)]
 C Current Assets, Loans                 59973.98
   and Advances
   [Refer Para 4(iv)]
 D Current Liabilities and               35752.84
   Provisions (Tax Impact)
 
 Resultant figure       Impact (net of
  (Rs. In lacs)           tax) (Rs. In
                            lacs)
 
    16212.22                 1011.54
       96.5l                  206.29
    58647.86                 1326.12
    35231.97                  520.87
 
 7. Subject to our comments in paragraphs 5(e) and 6 above, in our
 opinion and to the best of our information and according to the
 explanations given to us, the accounts read with accounting policies
 and other notes 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 balance sheet, of the state of affairs of the Company
 as at 31st March, 2008,
 
 ii) in the case of profit & loss account, of the profit for the year
 ended on that date, and
 
 iii) in the case of cash flow statement, of the cash flows for the year
 ended on that date.
 
 ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE ON THE
 ACCOUNTS OF INDIA TOURISM DEVELOPMENT CORPORATION LIMITED FOR THE YEAR
 ENDED 31st MARCH, 2008.
 
 1.  (a) The company has generally maintained proper records showing
 full particulars, including quantitative details and situation of fixed
 assets except at few branches / units where records were incomplete in
 respect of quantitative details and situation etc.
 
 (b) The fixed assets are reported to have been physically verified by
 the management generally at the year end except at few branches where
 such physical verification was reported to have not been carried
 out/partially carried out. In most of the branches/units and the head
 office, the book balance and physical balances have not been reconciled
 and hence, the discrepancies, if any, have not been ascertained for
 necessary adjustments in the books of account.
 
 (c) Except for sale of assets of duty free shops at Calicut, Mumbai and
 Calcutta during the year on their closure and sales of other assets, in
 some of the units / division, which have been classified as not in
 active use and held for sale and which were not significant taking the
 assets of the corporation as a whole, the company had not disposed off
 substantial portion of its assets during the year and hence going
 concern assumption is not affected.
 
 2.  (a) The inventory has been physically verified by the management
 generally once in a year except at few branches / units where
 verification has been conducted at the end of every half year. Some of
 the branch auditors have reported that though the inventory has been
 physically verified the frequency of verification is not reasonable /
 inadequate and needs to be increased in view of the size and nature of
 the inventory.
 
 (b) The procedures of physical verification of inventories followed by
 the management are generally reasonable and adequate in relation to the
 size of the company and the nature of its business except at two units
 AIT Delhi and ATSS where the branch auditors have opined the procedures
 to be not reasonable.  Some of the other branch auditors have reported
 that the procedures of physical verification of inventories need to be
 strengthened and provision for evaporation loss / obsolescence for dead
 stock of stores / spares / provisions, crockery & cutlery items and
 stationery items be made. One of the branch auditors has reported that
 in respect of inventories lying at bonded warehouses and retail outlets
 aggregating to Rs.230.13lacs (including inventories valued as Rs 71.62
 lacs lying at the outlets sealed by the customs authorities since
 November 2003 against which provision of Rs 32.59 lacs has been made
 for obsolete inventory), they were not able to obtain adequate
 assurance regarding the quantities and condition of inventories and the
 basis for determination of estimated realizable value of
 obsolete/damaged/spoilt, non moving inventories.
 
 (c) The company is generally maintaining proper records of inventory
 except at few units wherein the branch auditors have reported that
 proper records of inventory were not maintained. The discrepancies
 noticed on physical verification between the physical stocks and the
 book records were not material except at some branches where such
 discrepancies could not be ascertained in the absence of proper records
 of inventory. However, the consumption of stocks, stores, crockery,
 cutlery etc. has been worked out by taking opening balance, purchases
 and closing balance based on physical inventories. The value of
 shortages etc. has not been shown separately. In this connection refer
 to our comment in para 2(b) above also.
 
 3.  The Company has neither taken nor granted any loans, secured or
 unsecured from/to companies, firms or other parties covered in the
 register maintained under section 301 of the Companies Act, 1956.
 Accordingly provisions of clauses 4(iii)(b),(c),(d),(e),(f),and (g) of
 the said order are not applicable.
 
 4.  In our opinion and according to the information and explanations
 given to us, there are adequate internal control systems commensurate
 with the size of the Company and the nature of its business with regard
 to the purchases of inventory, fixed assets and with regard to the sale
 of goods and rendering of services except at some branches at
 Maharashtra wherein the branch auditors have reported, that their
 evaluation of the prevailing internal control structure and its
 operation disclosed weak internal control systems which were deficient
 not adequate and commensurate with the size of the branches and the
 nature of their business, with regard to purchase of inventory and
 recording, purchase of fixed assets, sale of goods and services,
 deposit of Foreign Currency cash at Duty free shop units income from
 licenses, maintenance of accounting records, reconciliation of control
 accounts, extension of credit, issuance of credit notes, purchase and
 consumption of raw materials, cost of services rendered, stores,
 stocks, issuance of material, valuation of inventories at DFS units (at
 Goa), compliance of provisions relating to tax deduction at source (at
 ATT units Maharashtra) transactions in respect of package tours, and
 which need to be improved / strengthened. There has been continuing
 failure to correct major weaknesses in internal control systems,
 reported by the internal auditors in the previous year on similar
 lines, at these branches.
 
 5.  (a) According to the information and explanations given to us, we
 are of the opinion that there are no contracts or arrangements that
 need to be entered into the register maintained under Section 301 of
 the Companies Act, 1956.  
 
 (b) Not applicable in view of para (a) above.
 
 6.  The Company has not accepted any deposits from public in terms of
 Section 58A and 58AA and other relevant provisions of the Companies
 Act, 1956.
 
 7.  In our opinion, the Company has an internal audit system which is
 generally commensurate with the size and nature of its business.
 However, as reported by some of the branch auditors, the coverage of
 internal audit needs to be strengthened / areas and scope enlarged,
 timely submission and follow up of the report requires to be improved.
 
 8.  As informed to us, the Central Government has not prescribed
 maintenance of cost records under clause (d) of sub-section (1) of
 Section 209 of the Companies Act, 1956.
 
 9.  (a) The Company is generally regular in depositing with the
 appropriate authorities undisputed statutory dues including provident
 fund, investor education and protection fund, employees state
 insurance, income tax, sales tax, wealth tax, service tax, customs
 duty, excise duty, cess and other material statutory dues applicable to
 it except as reported by some of the branch auditors regarding
 irregularity in deposit / non-deposit of undisputed statutory dues.
 
 According to the information and explanations given to us and as
 reported by the branch auditors in their reports, the undisputed
 amounts payable in respect of outstanding statutory dues, that were in
 arrears, as at 31.03.2008 for a period of more than six months from the
 date they became payable are given below :
 
 Name of the Statute, Unit              Nature of dues   
 
 Provident Fund, Ashok, New Delhi       Provident Fund
 ESI, Vigyan Bhawan,                    ESI
 Hyderabad House
 Sales Tax & VAT, ATT Chennai,          Sales Tax, VAT
 IGIAR
 Expenditure Tax, Patliputra Ashok,     Expenditure Tax
 Kalinga
 Service Tax, HQ, ATT Delhi             Service Tax
 
  Amount        Period to which the
 (in lacs)        amount relates
 
   1.12         More than six months
   6.51         More than six months
   3.54         More than six months
   2.32         More than six months
  19.79         June, 2007 Onwards
 
 (b) According to the information & explanations given to us and as
 reported by the branch auditors in their reports, dues of income tax,
 sales tax, wealth tax, service tax, customs duty, excise duty and cess
 that have not been deposited on account of disputes are given below :
 
 Name of the         Nature of dues        Amount
 Statute Unit                            (in lacs)
 
 The Delhi  Sale     Local Sales          6196.17
 tax Act, 1975       Tax
 The Central         Central Sales          12.84
 Sales Tax Act,      Tax
 1956
 Orissa Sales Tax    Sales Tax               0.71
 act
 Maharashtra         Sales Tax            2465.62
 Sales Tax Act
 The Delhi Tax       Luxury Tax            266.88
 on Luxuries Act,
 1996
 The Maharashtra     Luxury Tax             19.90
 Luxury Tax Act
 The Income Tax      Income Tax            409.83
 Act, 1961
 Property Tax        Property Tax         5489.81
 Act
 Customs Act,        Custom Duty         21791.58
 1962 Mumbai
 Customs Act,        Custom Duty             2.14
 1962      
 Provident Fund      (PF)                   27.56
 Service Tax,        Service Tax             7.62
 IGIAR
 Customs             Custom Duty            45.17
 Authority by
 Kolkata
 Customs             Custom Duty             8.22    
 Authority, Delhi  
 
 Period to          Authority before
 which the           which Pending
 amount relates
 
 1990 to 2005       Various Authorities
 1987 to 2002       Various Authorities
 1988 to 2005       Various Authorities 
 1982 to 1996       Mumbai High
                    Court, Maharashtra
                    Sales Tax Tribunal
 1997-98,           Assistant             
 2001-02 &          Commissioner of
 2002-03            Luxury Tax
 1993-1995          Maharashtra Sales
                    Tax Tribunal
 1992-93,           Income Tax
 1994-95,           Appellate Tribunal
 1995-96 &          and CIT (Appeals)
 2005-06
 1987-88            Delhi High Court 
 onwards
 1995 to 2008       Commissioner
                    (Appeals)
 2006-07            Committee on
                    Disputes
 1982-83            High Court
 onwards 
 2007-08            CESTAT, Delhi
 2003               Committee on
                    Disputes
 2005-06            Customs Authority
 
 10.  Even after considering the effects of quantified qualifications,
 in our opinion, the Company does not have any losses / accumulated
 losses. The Company has not incurred cash loss during the financial
 year covered by our audit or in the immediately preceding financial
 year. However, the effect of resolution and quantification of matters
 reported / of unqualified qualifications and others reported in the
 main Audit Report, which may in some cases be significant, have not
 been taken into consideration, as the amounts are not ascertainable.
 
 11.  Based on our audit procedures and as per the information and
 explanations given by the management, the Company has no dues towards
 banks, financial institutions or debenture holders, and, hence,
 provisions of clause 4(xi) of the Order are not applicable to the
 company.
 
 12.  According to the information and explanations given to us and
 based on the documents and records produced to us, the Company has not
 granted loans and advances on the basis of security by way of pledge of
 shares, debentures and other securities.
 
 13.  In our opinion, the Company is not a chit fund or a nidhi mutual
 benefit fund / society.
 
 14.  According to the information and explanations given to us, the
 Company is not dealing in shares, securities and other investments. The
 investments in the shares of subsidiary companies are held by the
 Company in its own name and are not traded.
 
 15.  The Company has not given guarantees during the year for loans
 taken by others from banks or financial institutions. Further, the
 terms and conditions on which the company had given guarantees during
 earlier years for loans taken by others from bank or financial
 institutions are not prima facie prejudicial to the interest of the
 Company.
 
 16.  Based on information and explanations given to us by the
 management, no term loans have been raised by the corporation during
 the year.
 
 17.  According to the information and explanations given to us and on
 an overall examination of the Balance Sheet of the Company, we report
 that no funds raised on short-term basis have been used for long-term
 investment.
 
 18.  The Company has not made any allotment of shares during the year
 under audit, hence this clause is not applicable to the company.
 
 19.  The Company has not issued any debentures, hence this clause is
 not applicable to the Company.
 
 20.  The Company has not raised money by public issues during the year
 under audit , hence this clause is not applicable to the Company.
 
 21.  Based upon the audit procedures performed for the purpose of
 reporting the true and fair view of the financial statements and as per
 the information and explanations given by the management, which have
 been relied upon by us, we report that no fraud on or by the company
 has been noticed or reported during the course of our audit.
 
                                            For Khanna & Annadhanam
                                              Chartered Accountants
 
                                             (K. A Balasubramanian)
 Place: New Delhi                                           Partner
 Date : 28th Nov 08                            Membership No. 17415