ITC

1.  We have audited the attached balance sheet of ITC Limited as at
 31st March, 2009 and also the profit and loss account and the cash flow
 statement for the year ended on that date, 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 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 issued
 by the Central Government of India in terms of sub-section (4A) of
 Section 227 of the Companies Act, 1956, 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:
 
 i) 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;
 
 ii) 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;
 
 iii) the balance sheet, profit and loss account and cash flow statement
 dealt with by this report are in agreement with the books of account;
 
 iv) 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
 Companies Act, 1956;
 
 v) 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:
 
 a) in the case of the balance sheet, of the state of affairs of the
 company as at 31st March, 2009;
 
 b) in the case of the profit and loss, of the profit for the year ended
 on that date; and
 
 c) in the case of the cash flow statement, of the cash flows for the
 year ended on that date.
 
 5. On the basis of the written representations received from the
 directors, as on 31st March, 2009, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 31st March, 2009 from being appointed as a director in terms of clause
 (g) of sub-section (1) of Section 274 of the Companies Act, 1956.
 
 Annexure to the Auditors Report to the Members of ITC Limited
 
 [Referred to in paragraph (3) thereof]
 
 (i) (a) The company is maintaining proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) In our opinion, the fixed assets have been physically verified by
 the management at reasonable intervals, having regard to the size of
 the company and the nature of its assets. No material discrepancies
 between the book records and the physical inventory are noticed.
 
 (c) During the year, in our opinion, a substantial part of fixed assets
 has not been disposed off by the company.
 
 (ii) (a) The inventory of the company has been physically verified by
 the management during the year excepting material lying with third
 parties (which have substantially been confirmed). In our opinion, the
 frequency of verification is reasonable.
 
 (b) In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventory
 followed by the management were found 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 records of inventory, in our
 opinion, the company has maintained proper records of inventory and the
 discrepancies noticed on physical verification between the physical
 stocks and the book records were not material in relation to the
 operations of the company.
 
 (iii) (a) The company has not granted any loans, secured or unsecured,
 to companies, firms or other parties listed in the Register maintained
 under Section 301 of the Companies Act, 1956. As the company has not
 granted any loans, secured or unsecured, to parties listed in the
 Register maintained under Section 301 of the Companies Act, 1956,
 paragraphs (iii)(b), (c) and (d) of the Order, are not applicable.
 
 (b) The company has not taken any loans, secured or unsecured, from
 companies, firms or other parties listed in the Register maintained
 under Section 301 of the Companies Act, 1956. As the company has not
 taken any loans, secured or unsecured, from parties listed in the
 Register maintained under Section 301 of the Companies Act, 1956,
 paragraphs (iii)(f) and (g) of the Order, are not applicable.
 
 (iv) 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 for the
 purchase of inventory, fixed assets and for the sale of goods and
 services. Further, on the basis of our examinations and according to
 the information and explanations given to us, we have neither come
 across nor have we been informed of any instance of major weaknesses in
 the aforesaid internal control systems.
 
 (v) (a) In our opinion and according to the information and
 explanations given to us, there are no contracts or arrangements that
 need to be entered into the Register maintained under Section 301 of
 the Companies Act, 1956.
 
 (b) In our opinion and according to the information and explanations
 given to us, as there are no contracts or arrangements that need to be
 entered into the Register maintained under Section 301 of the Companies
 Act, 1956, paragraph (v)(b) of the Order is not applicable.
 
 (vi) In our opinion and according to the information and explanations
 given to us, the company has complied with the provisions of Sections
 58A and 58AA and the other relevant provisions of the Companies Act,
 1956 and the Companies (Acceptance of Deposits) Rules, 1975 as
 applicable, with regard to the deposits accepted from the public.
 According to the information and explanations given to us, in this
 regard, no Order under the aforesaid sections has been passed by the
 Company Law Board or National Company Law Tribunal or Reserve Bank of
 India or any Court or any other Tribunal on the company.
 
 (vii) In our opinion, the company has an internal audit system
 commensurate with the size of the company and the nature of its
 business.
 
 (viii) To the best of our knowledge, the Central Government has not
 prescribed the maintenance of cost records under Section 209 (1)(d) of
 the Companies Act, 1956, for any of the products of the company
 excepting paper, soaps & detergents and cosmetics & toiletries, for
 which, in our opinion, prima facie, the prescribed accounts and records
 have been maintained and are being made up. We are not required to and
 accordingly, have not made a detailed examination of the records.
 
 (ix) (a) According to the information and explanations given to us and
 according to the books and records as produced and examined by us, in
 our opinion, the company is regular in depositing 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
 as applicable with the appropriate authorities.
 
 (b) As at 31st March, 2009, according to the records of the company and
 the information and explanations given to us, the following are the
 particulars of dues on account of income-tax, sales-tax, wealth tax,
 service tax, customs duty, excise duty and cess matters that have not
 been deposited on account of any dispute :
 
 Name of              Nature of                   Amount
 the statute          the dues                   (Rs. in
                                                  Crores)
 
 Sales Tax            Sales tax                    9.37
 and VAT              and VAT
 Laws
 
                                                   6.06
 
                                                 181.14 
 
 Customs              Customs                      3.73
 Act, 1962            duty
 Central              Excise duty                 50.66
 Excise
 Act, 1944
                                                  16.76
 
                                                  17.13
 
 Finance Act,         Service tax                169.89
 1994
 
                                                   3.01
 
 Income Tax           Income                       0.25
 Act, 1961            Tax
 
 Period to which            Forum where pending
 the amount
 relates
 Various years
 covering the period
 
 1987-2009                  Appellate Authority -
                            upto Commissioners /
                            Revisional authorities level
 
 1994-2009                  Appellate Authority -
                            Tribunal level
 
 1998-2009                  High Court
 
 1998-2007                  Appellate Authority -
                            Tribunal level
 
 1980-2009                  Appellate Authority -
                            upto Commissioners /
                            Revisional authorities level
 
 1973-2008                  Appellate Authority -
                            Tribunal level
 
 1998-2004                  High Court
 
 2003-2009                  Appellate Authority -
                            upto Commissioners /
                            Revisional authorities level
 
 1999-2008                  Appellate Authority -
                            Tribunal level
 
 2003-2005                  Appellate Authority -
                            Tribunal level
 
 Out of the total disputed dues aggregating Rs. 458.00 Crores as above,
 Rs. 236.97 Crores has been stayed for recovery by the relevant
 authorities.
 
 (x) The company does not have accumulated losses as at 31st March, 2009
 and has not incurred cash losses during the financial year ended on
 that date or in the immediately preceding financial year.
 
 (xi) According to the information and explanations given to us, the
 company has not defaulted in repayment of dues to any financial
 institution, bank or to debenture holders during the year.
 
 (xii) According to the information and explanations given to us, 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 provisions of any special statute as specified under
 paragraph (xiii) of the Order are not applicable to the company.
 
 (xiv) In our opinion and according to the information and explanations
 given to us, the company is not a dealer or trader in securities.
 
 (xv) According to the information and explanations given to us, the
 company has not given any guarantees for loans taken by others from
 banks or financial institutions.
 
 (xvi) According to the information and explanations given to us, the
 term loans have been applied for the purpose for which they were
 obtained.
 
 (xvii) Based on the information and explanations given to us and on an
 overall examination of the balance sheet of the company, in our
 opinion, there are no funds raised on a short term basis which have
 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 during the year.
 
 (xix) As the company has no debentures outstanding at any time during
 the year, paragraph (xix) of the Order is not applicable to the
 company.
 
 (xx) The company has not raised any money by public issue during the
 year.
 
 (xxi) According to the information and explanations given to us, during
 the year, no material fraud on or by the company has been noticed or
 reported.
 
                                            For A. F. Ferguson & Co.
                                              Chartered Accountants
 
                                                M. S. DHARMADHIKARI
 Kolkata                                                    Partner
 May 22, 2009                                  Membership No. 30802