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Mahanagar Telephone Nigam
BSE: 500108|NSE: MTNL|ISIN: INE153A01019|SECTOR: Telecommunications - Service
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« Mar 12
Auditor's Report (Mahanagar Telephone Nigam) Year End : Mar '13
Report on the Financial Statements
 
 We have audited the accompanying financial statements of Mahanagar
 Telephone Nigam Limited (the company), which comprise the Balance
 sheet as at March 31, 2013, and the Statement of Profit and Loss and
 Cash Flow Statement for the year then ended, and a summary of
 significant accounting policies and other explanatory information.
 
 Management''s Responsibility for the Financial Statements
 
 Management is responsible for the preparation of these financial
 statements that give a true and fair view of financial position,
 financial performance and cash flows of the Company in accordance with
 the Accounting Standards referred to in sub-section (3C) of section 211
 of the Companies Act, 1956 (the Act). This responsibility includes
 the design, implementation and maintenance of internal control relevant
 to the preparation and fair presentation of the financial statements
 that are free from material misstatement, whether due to fraud or
 error.
 
 Auditor''s Responsibility
 
 Our responsibility is to express an opinion on these financial
 statements based on our audit.  We conducted our audit in accordance
 with the standards on auditing issued by the Institute of Chartered
 Accountants of India. Those standards require that we comply with
 ethical requirements and plan and perform the audit to obtain
 reasonable assurance about whether the financial statements are free
 from material misstatement.
 
 An audit involves performing procedures to obtain audit evidence about
 the amounts and disclosures in the financial statements. The procedures
 selected depend on the auditor''s judgment, including the assessment of
 the risk of material misstatement of the financial statements, whether
 due to fraud or error. In making those risk assessments, the auditor
 considers internal control relevant to the companies preparation and
 fair presentation of the financial statements in order to design audit
 procedures that are appropriate in the circumstances.  An audit also
 includes evaluating the appropriateness of accounting policies used and
 the reasonableness of the accounting estimates made by management, as
 well as evaluating the overall presentation of financial statements.
 
 We believe that the audit evidence we have obtained is sufficient and
 appropriate to provide a basis for our qualified audit opinion.
 
 Basis for Qualified Opinion
 
 (i) The company has certain balances receivables from and payables to
 BSNL. The net amount recoverable ofRs. 19752.26 million is subject to
 reconciliation and confirmation. In view of non reconciliation/
 confirmation and also in view of various pending disputes regarding
 each other''s claims, we are not in a position to ascertain and comment
 on the correctness of the outstanding balances and resultant impact of
 the same on the financial statements of the company. (Also refer point
 no.11 of note no.34 to the financial statements).
 
 (ii) The company has certain balances receivables from and payables to
 Department of Telecommunication (DOT). The net amount recoverable ofRs.
 34427.11 million is subject to reconciliation and confirmation. In view
 of non reconciliation and non confirmation, we are not in a position to
 ascertain and comment on the correctness of the outstanding balances
 and resultant impact of the same on the financial statements of the
 company. (Also refer point no.15 of note no.34 to the financial
 statements).
 
 (iii) Upto financial year 2011-12 License Fee payable to the DOT on IUC
 charges to BSNL was worked out on accrual basis as against the terms of
 License agreements requiring deduction for expenditure from the gross
 revenue to be allowed on actual payment basis.  From financial year
 2012-13, the license fee payable to the DOT has been worked out
 strictly in terms of the license agreements. The company continues to
 reflect the difference in license fee arising from working out the same
 on accrual basis as aforesaid for the period upto financial year
 2011-12 by way of contingent liability ofRs. 1403.63 million instead of
 actual liability resulting in under statement of current liabilities
 and losses to that extent.  (Also refer point no.16 of note no.34 to
 the financial statements).
 
 (iv) The Company continues to allocate the establishment overheads
 towards capital works on estimated basis. In view of the basis being
 not in line with the accepted accounting practices and Accounting
 Standard -10 Accounting for Fixed Assets issued under the Companies
 (Accounting Standards) Rules, 2006, the same results into overstatement
 of capital work in progress/ fixed assets and understatement of losses.
 The actual impact of the same on the capitalization & losses for year
 is not ascertainable and quantifiable. (Also refer note no.25 and 28 to
 the financial statements).
 
 (v) No adjustment has been considered on account of impairment loss
 during the year, with reference to AS-28 Impairment of Assets issued
 under Companies (Accounting Standards) Rules, 2006. In view of
 continuous losses over the years resulting into full erosion of net
 worth of the company and uncertainty in achievement of future
 projections made by the company, we are unable to ascertain and comment
 on the provision required in respect of impairment in carrying value of
 cash generating units and its consequent impact on the loss for the
 year, accumulated balance of loss and also the carrying value of the
 cash generating units. (Also refer point no. 38 of note no.34 to the
 financial statements).
 
 (vi) Provision for actuarial liability on account of medical expenses
 for retired employees and continuing employees has not been worked out
 and provided for as required under AS-15 Employee Benefits issued
 under Companies (Accounting Standards) Rules, 2006. Instead annual
 insurance premium for the policy taken by the company for this purpose
 is charged to statement of profit and loss. In the absence of actuarial
 valuation as on 31.03.2013, we are not in a position to ascertain and
 quantify the impact thereof on the financial statement.  (Also refer
 point no. 34 of note no.34 to the financial statements).
 
 (vii) Insurance claim for the fire loss in Data Center in July, 2009
 amounting to Rs. 40 Million has been considered good. However,
 insurance company has disputed the claim and has informed the company
 to consider only the part of the claim which is not accepted by the
 Company.
 
 As the dispute is still pending, we are not in a position to comment on
 the appropriateness of the claim recoverable being considered as good
 and the ultimate recovery of the same in full. Pending final outcome of
 the dispute, the impact thereof on the financial statements cannot be
 ascertained and quantified. (Also refer point no. 30(b) of note no.34
 to the financial statements).
 
 (viii)To work out the liability towards wealth tax, vacant land and
 guest houses/inspection quarters are taken at their book values instead
 of valuation the same as per Wealth Tax Act / Rules resulting into
 understatement of losses resulting from lower wealth tax and also
 corresponding understatements of liabilities. In the absence of
 valuation as at the year end, we are not in a position to ascertain and
 quantify the impact thereof on financial statements. (Also refer point
 no. 27 of note no.34 to the financial statements).
 
 (ix) Amount receivables from and payables to the various parties are
 subject to confirmation and reconciliation. Pending such confirmation
 and reconciliations, the impact thereof on the financial statements is
 not ascertainable and quantifiable. (Also refer point no. 24 of note
 no.34 to the financial statements).
 
 (x) Dues from the operators are not taken into account for making
 provision for doubtful debts.  Also no provision for doubtful debts is
 made for disputed cases outstanding for less than 3 years in Basic and
 for less than 6 months in GSM/CDMA. In the absence of any working, the
 impact thereof on the financial statements cannot be ascertained and
 quantified. (Also refer point no. 1 (ii)(b) of note no.1 to the
 financial statements).
 
 (xi) (a) In Delhi Unit, reconciliation of balances of customer''s
 deposits as per subsidiary records with financial books (WFMS) is still
 in progress and the impact, if any, of the differences arising out of
 such reconciliation on financial statements cannot be ascertained and
 quantified at present. (Also refer point no. 15(b) of note no.34 to the
 financial statements).
 
 (b) Unlinked credit ofRs. 420.30 million on account of receipts from
 subscribers against billing by the company which could not be matched
 with corresponding receivables are appearing as liabilities in the
 balance sheet. To that extent, both assets and liabilities are
 overstated. (Also refer point no. 15(f) of note no.34 to the financial
 statements).
 
 (c) The aggregate balance of sundry debtors as per the ageing summary
 in subsidiary records is lower by Rs. 73.83 million as compared to the
 balance in general ledger and is under reconciliation. The same has
 been provided for. Pending reconciliation, the impact of the same on
 the financial statements cannot be ascertained and quantified. (Also
 refer point no. 15(g) of note no.34 to the financial statements).
 
 (xii) In the absence of detailed information i.e. break up of amount
 received with relation to the individual invoices raised through MACH,
 invoice wise reconciliation of the roaming debtors is pending. Pending
 such reconciliation, the impact of the same on the financial statements
 can not be ascertained and quantified. (Also refer point no.42 of note
 no.34 to the financial statements).
 
 (xiii) Fixed assets are generally capitalized on the basis of
 completion certificates issued by the engineering department. Due to
 delays in issuance of the completion certificates, there are cases
 where capitalization of the fixed assets gets deferred to next year.
 The resultant impact of the same on the statement of profit and loss by
 way of depreciation and amount of fixed assets capitalized in the
 balance sheet cannot be ascertained.
 
 (xiv) Out ofRs. 2850 million on account of wet lease of infrastructure
 and other services provided in respect of Commonwealth Games and
 accounted for in 2010-11, a sum ofRs. 430 million remains unrecovered
 and unconfirmed. Also the said amount ofRs. 430 million is yet to be
 approved by the concerned authorities. Pending confirmation, approval
 or any other document from the concerned authorities to substantiate
 the claim of the company, the recoverability of the amount outstanding
 is not certain. The company continues to treat the said amount as good
 for recovery and no provision for doubtful debts has been made for the
 same. To that extent, loss is understated and current assets are
 overstated. (Also refer point no. 44 of note no.34 to the financial
 statements).
 
 (xv) Pending reconciliation of income from recharge coupons/ITC
 cards/prepaid calling cards and stock of such coupons/cards, the impact
 thereof on the financial statements cannot be ascertained and
 quantified.
 
 (xvi)On material exchanged with BSNL on barter basis, VAT liability has
 not been ascertained and provided for. In the absence of detailed
 information, we are not in a position to comment on the likely impact
 of the same on the financial statements of the company.
 
 (xvii) The company had invested Rs.1000 million in 8.75% Cumulative
 Preference Shares of M/ S.  ITI Limited during the year 2001-02. As per
 the terms of allotment, the said preference shares were to be redeemed
 in five equal installments. As per letter no. U-59011-10/2002- FAC
 dated 31.07.2009 issued by DOT, the repayment schedule of the said
 preference shares was deferred to 2012-13 onwards in five equal
 installments.  M/s. ITI Ltd.  has failed to meet its rescheduled
 obligation in respect of first installment of Rs. 200 million payable
 in 2012-13. Since M/s. ITI Ltd.  has not complied with even rescheduled
 commitments, the company has made a provision for the first installment
 of Rs.. 200 million only instead of providing for full investment of
 Rs.1000 million. This has resulted into understatement of losses by
 Rs.800 million and overstatement of non current investments by Rs. 600
 million and also overstatement of current investments by Rs. 200
 million. (Also refer point no. 14 of note no.34 to the financial
 statements).
 
 (xviii) Certain works were carried out in earlier years by Mumbai Unit
 for Defence Network of Govt. of India in respect of alternate
 communication system. In context of the same following explanations has
 been given to us:-
 
 In respect of usage of the same Rs.338.3 million has been received at
 Corporate Office.  Out of this Rs.59.82 million has been decapitalised
 in 2011-12 accounts and ATD sent to Corporate Office. The AT for the
 balance amount ofRs.278.48 million has been received from Corporate
 Office in 2012-13. Out of this amountRs.18.98 million has been
 decapitalised in 2012-13, Rs.32.33 million has been reduced from prior
 period expenses. Balance amount of Rs.227.17 million is relating to
 revenue for usage of the ducts. The work was completed in March-2011,
 the revenue is to be spread over a period of 18 years which is the life
 considered for depreciation of Cables. During the year Rs.25.24 million
 has been booked as income and balance of Rs.201.93 million is taken as
 unearned revenue to be recognised as income in the next 16 years.
 
 In the absence of any agreement / documentary evidence / third party
 confirmation in respect of aforesaid accounting treatment /
 adjustments, we are not in a position to comment on the correctness or
 otherwise of such accounting treatment. (Also refer point no. 21 of
 note no.34 to the financial statements).
 
 (xix)Certain Land and Buildings transferred to MTNL from DOT in earlier
 years have been reflected as leasehold. In the absence of relevant
 records, we are not in a position to comment on the classification of
 the same as leasehold and also the consequential impacts, if any, of
 such classification not backed by relevant records. In the absence of
 relevant records, impact of such classification on the financial
 statements cannot be ascertained and quantified.
 
 (xx) During the year Department of Telecommunication (DOT) has raised a
 demand of Rs. 33131.50 million on account of one time charges for 2G
 spectrum held by the company for GSM and CDMA for the period of licence
 already elapsed and also for the remaining valid period of licence
 including spectrum given on trial basis.
 
 As explained the demand for spectrum usage for CDMA will need revision
 by Rs.1074.40 million on account of rectification of actual usage.
 
 As explained, pending finality of the issue by the company regarding
 surrender of a part of the spectrum , crystallization of issue by the
 DOT in view of the claim being contested by the Company and because of
 the matter being sub judice in the Apex Court on account of dispute by
 other private operators on the similar demands, the amount payable, if
 any, is indeterminate. Accordingly, no liability has been created for
 the demand made by DOT on this account and Rs. 32057.10 million has
 been disclosed as contingent liability.
 
 In view of the above we are not in a position to comment on the
 correctness of the stand taken by the company and the ultimate
 implications of the same on the financial statements of the company.
 (Also refer point no. 41 of note no.34 to the financial statements).
 
 (xxi)Segment Assets and Segment Liabilities in respect of primary
 segment have not been ascertained and disclosed by the company. In the
 absence of required information, we are not in a position to ascertain
 and quantify the impact of the same on segment results. (Also refer
 point no. 35 of note no.34 to the financial statements).
 
 In the absence of information, the effect of which can not be
 quantified, we are unable to comment on the possible impact of the
 items stated in the point nos.(i), (ii), (iv), (v), (vi), (vii),
 (viii), (ix), (x), (xi)(a)&(c), (xii), (xiii),(xv), (xvi), (xviii),
 (xix), (xx) and (xxi) on the financial statements of the company for
 the year ended on 31st March 2013.
 
 We further state that without considering the impact of items stated in
 preceding para, the effect of which could not be determined, had the
 observations made by us in point nos (iii),(xi)(b),(xiv) and (xvii)
 been considered in the financial statements, loss for the year would
 have been Rs. 55844.86 million as against the reported figure ofRs.
 53211.23 million in the Statement of Profit and Loss and Trade
 receivables under the head Current Assets would have been Rs. 3389.68
 million as against the reported figure of Rs. 3809.98 million, Short
 Term Loans and Advances under the head Current Assets would have been
 Rs. 7167.60 million as against the reported figure ofRs. 7597.60
 million, Non Current Investments and Current Investments would have
 been Rs. 1419.79 million and Rs. nil million as against the reported
 figures ofRs. 2019.79 million and Rs.  200 million respectively, Other
 Current Liabilities would have been Rs.  29876.50 million as against
 the reported figure ofRs. 28893.17 million in the Balance Sheet.
 
 Qualified Opinion
 
 In our opinion and to the best of our information and according to the
 explanations given to us, except for the effects of the matters
 described in the Basis for Qualified Opinion paragraph, the financial
 statements give the information required by the Act in the manner so
 required and give a true and fair view in conformity with accounting
 principles generally accepted in India:
 
 a) in the case of Balance Sheet, of the state of affairs of the Company
 as at march 31, 2013;
 
 b) in the case of Statement of Profit and Loss, of the loss for the
 year ended that date; and
 
 c) in case of the Cash Flow Statement, of the cash flows for the year
 ended on that date.  Emphasis of Matters
 
 We draw attention to the following notes on the financial statements
 being matters pertaining to Mahanagar Telephone Nigam Limited requiring
 emphasis by us. Our opinion is not qualified in respect of these
 matters:
 
 (i) Point no.28 of note no.34 to the financial statements regarding
 preparation of financial statements on Going Concern basis in spite of
 the negative net worth of the company as on 31st March, 2013.
 
 (ii) Point no.20(e) of note no.34 to the financial statements regarding
 the issue of pension liability on account of absorbed employees yet to
 be settled with the DOT.
 
 (iii) Point no.22 of note no.34 to the financial statements regarding
 retaining of outstanding liability ofRs. 736.20 million on account of
 decommissioned assets pending arbitration case.
 
 (iv) Point no.23 of note no.34 to the financial statements regarding
 non provision of diminution in the value of investments in joint
 ventures/subsidiary as these diminution are considered temporary in
 nature.
 
 (v) Point no.5(a) of note no.34 to the financial statements regarding
 the adequacy or otherwise of the provision and / or contingency reserve
 held by the company with reference to pending dispute with the Income
 Tax Department at High Court level with reference to deduction claimed
 by the company u/s 80 IA of the Income Tax Act,1961.
 
 (vi) Point no. 5(b) of note no. 34 to the financial statements
 regarding pending appeal effect by income tax authorities ofRs. 1015.43
 million pertaining to financial year 1999-00.
 
 (vii) Point no.5(c) of note no.34 to the financial statements regarding
 non reconciliation of advance tax, provisions for tax and interest on
 income tax refunds with the tax records of the company.
 
 (viii) Point no. 8(b) of note no.34 to the financial statements
 regarding accounting of claims and counter claims of MTNL with M/S M&N
 Publications Ltd., in a dispute over printing, publishing and supply of
 telephone directories for MTNL, in the year when the ultimate
 collection / payment of the same becomes reasonably certain.
 
 (ix) Point no. 40 of note no.34 to the financial statements regarding
 non deduction of tax at source for IUC services rendered by BSNL based
 on the expert opinion taken by the company.
 
 (x) Classification of trade receivables as unsecured without
 considering the security deposit which the company has received from
 the subscribers. (Also refer note no.19 to the financial statements).
 
 (xi) Amount receivable from BSNL has been reflected as loans and
 advances instead of bifurcating the same into trade receivables and
 other receivables. (Also refer note no.16 to the financial statements).
 
 (xii) Disclosure of consumption of imported and indigenous stores and
 spares and percentage to the total consumption as required by Schedule
 VI of the Companies Act, 1956 has not been made by the company in the
 financial statements.
 
 (xiii) Point no. 15(d) of note no.34 to the financial statements
 regarding impact if any, arising out of reconciliation of Balances of
 customer''s deposits in the CSMS billing system with financial books
 (WFMS) in Mumbai Unit.
 
 (xiv) Point no. 15(e) of note no.34 to the financial statements
 regarding impact if any, arising out of reconciliation of Balance
 outstanding under refund due to subscribers account with actual amount
 due for refund in Mumbai Unit.
 
 Report on Other Legal and Regulatory Requirements
 
 1.  As required by the Companies (Auditor''s Report) Order, 2003 (the
 Order) issued by the Central Government of India in terms of
 sub-section (4A) of the Section 227 of the Act, we give in the Annexure
 a statement on the matters specified in paragraphs 4 and 5 of the
 Order.
 
 2.  As required by Section 227(3) of the Act, 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 purpose of our
 audit except for the matters described in point nos. (i), (ii), (iv),
 (v), (vi), (vii), (viii), (ix), (x), (xi)(a)&(c), (xii), (xiii), (xv),
 (xvi), (xviii), (xix), (xx) and (xxi) of paragraph on Basis of
 Qualified Opinion given above;
 
 b.  In our opinion proper books of accounts as required by the law have
 been kept by the company so far as appears from our examination of
 those books;
 
 c.  The Balance Sheet, Statement of Profit and Loss, and Cash Flow
 Statement dealt with by this Report are in agreement with books of
 account;
 
 d.  In our opinion and based on our comments in point nos. (iii), (iv),
 (v), (vi), (xi), (xiii), (xix) & (xxi) of the paragraph on Basis for
 Qualified opinion given above, the Balance Sheet, Statement of Profit
 and Loss, 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, except AS-2 regarding Valuation of Inventories, AS-6
 regarding Depreciation Accounting, AS-9 regarding Revenue Recognition ,
 AS-10 regarding Accounting of Fixed Assets , AS-15 regarding Employee
 Benefits, AS-17 regarding Segment Reporting, AS-28 regarding Impairment
 of Assets, AS-29 on Provisions, Contingent Liabilities and Contingent
 Assets;
 
 e.  In view of the Government notification no. GSR 829 (E) dated 21st
 October 2003, Government companies are exempt from the applicability of
 provisions of clause (g) sub-section (1) of Section 274 of the Act;
 
 ANNEXURE TO INDEPENDENT AUDITORS'' REPORT
 
 (REFERRED TO IN PARAGRAPH 1 UNDER THE HEADING OF  REPORT ON OTHER
 LEGAL AND REGULATORY REQUIREMENTS OF OUR REPORT OF EVEN DATE)
 
 1.  (a) Delhi unit has maintained records of fixed assets. However in
 MS unit- Delhi, identification number is not mentioned. It is noticed
 that records of the Estates Department in respect of Land and Building
 do not match with the records as per financial books. In case of Mumbai
 Unit (both basic and WS unit), fixed assets registers have been
 maintained w.e.f. 01.04.2002. However, the fixed assets records
 maintained by the Mumbai unit are not up dated and reconciled with the
 financial records. Also identification number is not mentioned in
 respect of most of the items. The corporate office has maintained fixed
 assets records showing full particulars including quantitative details
 and situation of fixed assets.
 
 (b) As per the Accounting Policy of the company, Fixed Assets are
 required to be physically verified by the Management on rotation basis,
 once in three years, which in our opinion is reasonable and adequate in
 relation to the size of the Company and the nature of its business. As
 certified by the management, the Apparatus & Plants, vehicles and land
 and buildings were physically verified in accordance with programme of
 verification by the management during the year. No material
 discrepancies were noticed on such verification.
 
 (c) The company has not disposed off any substantial part of its fixed
 assets during the year and as such there is no effect on the going
 concern.
 
 2.  (a) In our opinion, physical verification of inventory has been
 conducted by the management at reasonable intervals during the year .
 
 (b) In our opinion, the procedures of physical verification of the
 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. As per
 the information provided to us, discrepancies noticed on physical
 verification of inventory were not material and have been properly
 dealt with in the books of accounts.
 
 3.  As explained to us, the Company has neither taken nor granted any
 loans, secured or unsecured, to/from companies, firms or other parties
 covered in the register maintained under Section 301 of the Companies
 Act, 1956. Accordingly clause 4(iii) of the Companies (Auditor''s Report
 ) Order, 2003 is not applicable to the Company.
 
 4.  In our opinion and according to the information and explanations
 given to us there are internal control procedures which are generally
 adequate and commensurate with the size and the nature of its business
 for the purchase of inventory and fixed assets and for the sale of
 goods and services. However, the same needs to be further strengthened.
 During the course of our audit, we have not observed any continuing
 failure to correct major weaknesses in internal control systems,
 
 5.  Based on the audit procedures applied by us and the information and
 explanations provided by the management, there was no transaction
 during the year ended 31.03.2013 that need to be entered in the
 register maintained under Section 301 of the Companies Act 1956.
 
 6.  As informed to us, the Company has not accepted any deposits from
 the public during the year within the meaning of section 58 A and 58 AA
 of the Companies Act, 1956 and the rules framed there under.
 
 7.  In our opinion, the Internal Audit System of the company is not
 commensurate with the size of the Company and the nature of its
 business. Moreover, extent of coverage of the areas of operations,
 frequency / quality of reporting/ timeliness of the reporting and the
 follow up of internal audit observations need to be strengthened.
 
 8.  The Central Government has prescribed the maintenance of cost
 records under clause (d) of sub section (1) of section 209 of Companies
 Act, 1956 .The company has not maintained the required Cost Records for
 the year 2012-2013..
 
 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 undisputed Statutory Dues including
 Contributory Provident Fund, Investor Education and Protection Fund,
 Income Tax, Sales Tax, Wealth Tax, service tax, Custom Duty, Excise
 Duty, Cess and any Other material Statutory Dues as applicable with the
 appropriate authorities. As informed to us, the provisions of Employees
 State Insurance Act are not applicable to the company. According to the
 information and explanation given to us no undisputed amounts payable
 in respect of aforesaid dues were outstanding as at 31.03.2013, for a
 period of more than six months from the date they become payable.
 
 (b) According to the information and explanation given to us, there are
 no dues in respect of Custom Duty, Excise Duty and Cess that have not
 been deposited with the appropriate authorities on account of any
 dispute. However, the Company has not deposited Sales Tax /VAT Dues,
 Service Tax and Income Tax Dues on account of disputes as under:
 
 Local Sales Tax and Central Sales Tax / VAT:
 
 The unit has already deposited Rs. 157233054/- out of the total
 disputed liability stated above.  Mumbai Unit
 
 Name of       Nature of Dues    Amount under    Year to    Forum where
 the Statute                     dispute         which      the dispute
                                   (Rs.)         amount     is pending
                                                 relates
 
 BST ACT       Assessed Amount      3552968      1993-94    MSTT
 
 BST ACT       Assessed Amount     53193370      1996-97    DC
 
 BST ACT       Assessed Amount     59424662      1998-99    MSTT
 
 BST ACT       Assessed Amount     35201675      1999-2000  MSTT
 
 BST ACT       Assessed Amount     54829094      2000-01    MSTT
 
 BST ACT       Assessed Amount    101628984      2001-02    Jt. Commr. 
                                                            of Sales
                                                            Tax Appeals
 
 BST ACT       Assessed Amount   2161090302      2003-04    Jt. Commr. 
                                                            of Sales
                                                            Tax Appeals
 
 BST ACT       Assessed Amount   1015717015      2004-05    Jt. Commr. 
                                                            of Sales
                                                            Tax Appeals
 
 Finance Act   Service Tax          5600000      2003-04    CESTAT
 1994
 
 Total                           3490238070
 
 The unit has already deposited Rs. 9680000/- with BST Act and Rs.
 500000 with CESTAT out of the total disputed liability stated above
 
 Statutory dues which have not been deposited in respect of Mumbai MS
 unit as on 31st March, 2013. 
 
 SL.  Nature of Dues              Amount under    Year to    Forum where
 No.                              dispute         which      the dispute
                                     (Rs.)        amount     is pending 
                                                  relates
 
 1    Installation of BTS Site      2909233       2004-05     CESTAT
 
 2    Installation of BTS Site      2617816       2005-06     CESTAT
 
 3    Installation of BTS Site      3210353       2006-07     CESTAT
 
      Total                         8737402
 
 10.  The accumulated losses of the company exceed fifty percent of its
 net worth at the end of the financial year. It has incurred cash losses
 in the financial year and in the immediately preceding financial year.
 
 11.  As per the records of the company and according to the explanation
 provided by the management, we report that there is no default in
 repayment of dues from the loan taken from banks during the year under
 audit.
 
 12.  The Company has not granted loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 Accordingly, clause 4 (xii) of the Order is not applicable.
 
 13.  The Company is not a Chit Fund or a Nidhi Mutual Benefit Fund /
 Society. Accordingly, clause 4(xiii) of the Order is not applicable.
 
 14.  The Company is not dealing in or trading in shares, securities,
 debentures and other investments. Accordingly, clause 4(xiv) of the
 Order is not applicable.
 
 15.  According to the information and explanation given to us, the
 Company has not given any guarantees for loans taken by others from
 banks or financial institutions. Accordingly, clause 4(xv) of the Order
 is not applicable.
 
 16.  In our opinion, the term loans have been applied for the purpose
 for which they were raised.
 
 17.  On the basis of overall examination of the Balance Sheet and Cash
 Flow Statement of the company, we report that the funds raised by the
 company on short term basis have been used for long term investments.
 Out of the short term borrowings, a sum ofRs. 2400 million has been
 used for long term investments in fixed assets including Capital Work
 in Progress.
 
 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.
 
 19.  The Company has issued Non Convertible Debentures (in the form of
 bonds) under Sovereign Guarantee on private placement basis. As per
 information and explanation given to us, no charge or security is
 required to be created for the same.
 
 20.  The Company has not raised any money by public issues during the
 year. Accordingly, clause 4(xx) of the Order is not applicable.
 
 21.  According to the information and explanations given to us, no
 major fraud on or by the company has been noticed or reported during
 the year.
 
 For Arun K. Aggarwal & Associates               For V.K. Dhingra & Co.
 
 Chartered Accountants                           Chartered Accountants
 
 FRN - 003917N                                           FRN - 000250N
 
 sd/-                                                             sd/-
 
 (Arun Agarwal)                                         (Vipul Girotra)
 
 (Partner)                                                    (Partner)
 
 (Mem. No. 082899)                                    (Mem. No. 084312)
 
 Place: New Delhi
 
 Date: MAY 30, 2013
Source : Dion Global Solutions Limited
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