Mahanagar Telephone Nigam

2008-09          2007-08
 
 (Rs. In Million)
 
 1.  Contingent Liabilities
 
 (a)    Income Tax
 
 Demands disputed and under appel      10977.29         17233.13
 
 (b)  Sales Tax, Service Tax, Excise duty,
 
 Municipal Tax Demands Disputed and     1580.84          1423.07
 under Appeal
 
 (c) Disputed Demand under Lease Act*    682.02          1943.99
 
 (d)  i Interest to DDA on delayed       Amount          Amount
 payments/Pending Court Cases/       Indeterminate   Indeterminate
 Tax cases
 
 ii Stamp duty payable on land and       Amount          Amount
 buildings acquired by the Company      Presently     Presently
                                   Unascertainable  Unascertainable
 
 (e)  Claims against the Company not
 acknowledged as-Debts.                  6987.48         3013.49
 
 (f)  Bank guarantee & Letter of
 Credit                                   941.88          913.60
 
 (g)  Directory dispute                  2858.34         2852.50
 
 (h)  Interest demanded by 
      DOT and disputed    
      by company on account of
      delay in payment
      of Leave Salary and Pension 
      Contribution   -                   1738.10         1738.10
 
 (i)  Pending court cases against 
      land acquisition             Indeterminate   Indeterminate
 
 *The Demand for the period from 1998-99 to 2002-03 has been withdrawn
 in full by Joint Commissioner (Appeals) whereas the authorities have
 raised fresh demand for the period from 2003-04 for Rs. 682.02 million
 and an appeal against the same has been made.
 
 2.  Estimated amount of contracts remaining to be executed on capital
 account in respect of Purchase order is Rs.4915.17 Millions (Previous
 year Rs.5492.87 millions). In respect of contracts where the
 expenditure already incurred has exceeded the contract value and the
 contract remains incomplete, the additional expenditure required to
 complete the same cannot be quantified.
 
 3.  Other liabilities include credits on account of receipts including
 service tax from subscribers amounting to Rs.352.04 Millions (Rs.312.45
 Millions), which could not be matched with corresponding debtors or
 identified as liability, as the case may be. Appropriate adjustments/
 payments shall be made inclusive of service tax, when these credits are
 matched or reconciled.
 
 4.  a) The company had claimed benefit under section 80 - IA of the
 Income Tax Act, 1961 for the financial year from 1996-97 to 2005-06.
 The provision of Income Tax for the financial year 1996-97 to 1998-99
 was made without considering the benefit u/s 80IA. For the F.Y. 1997-98
 to 2003-04 and 2005-06, the benefits under section 80IA of the Income
 Tax Act were partially allowed by the IT department. The Company has
 obtained approval from the committee on Disputes to pursue its appeal
 before Honble Income Tax Appellate Tribunal and the appeal is pending
 before ITAT.
 
 b) A Contingency Reserve of Rs.9105.84 millions was created from the
 General Reserve Accounts to meet the contingency that may arise out of
 disallowances of claim of benefit u/s 80IA of Income Tax Act, 1961.
 The contingency reserve so created excludes an amount of Rs.9003.97
 millions for which the provision was created from the years 1996-97 to
 2000-01 and the same is still maintained in the books of accounts
 pending final outcome of Honble ITAT.
 
 5.  (a) Provision for taxation for the current year comprises of Income
 Tax of Rs. 2200.13 Millions, Wealth Tax of Rs.1.87 Millions and
 Rs.64.79 pillions for Fringe Benefit Tax.  Prior period tax amounting
 Rs.2062.94 millions comprises of Rs.862.13 million for prior period
 income & Rs.1200.81 million for provision of tax for earlier years.
 Deferred Tax Assets of Rs. 1312.20 Millions made during the year.
 
 (b) During the year as a result of reconciliation of taxation, an
 amount of Rs. 2536.44 million towards interest on income tax refunds of
 earlier years was booked as prior period income
 
 6.  (a) The supplemental agreement entered into between United India
 Periodicals Pvt. Ltd. /United Data Base (India) Pvt. Ltd/ Sterling
 Computers Ltd and the company for printing of telephone directories was
 struck down by the Honble High Court of Delhi on 30.9.92 and the said
 decision was upheld by the Honble Supreme Court of India on 12.1.93. A
 claim against the Company has been raised by Sterling Computers Ltd.
 for Rs. 258.2 Millions which being under dispute, has not been provided
 for. The company has filed its counter claims of Rs. 228.7 Millions
 before the Honble High Court against Sterling/UDI/UIP and has also
 filed arbitration claims of Rs. 561.8 Millions plus interest @ 21% per
 annum against these parties under the original agreement. Pending
 finalisation of this dispute, the company has raised and recorded as
 Claims Recoverable, a claim for Rs. 154.91 Millions (Rs. 154.91
 Millions) on account of royalty, interest and billing charges and on
 payments made through Letter of Credit; Rs.130.47 Millions (Rs.130.47
 Millions) recovered there against by the company from subscribers for
 the issue of directories, is carried under Current Liabilities.
 Further claims of the Nigam for interest and service charges
 aggregating Rs. 143.67 Millions (Rs. 143.67 Millions) have not been
 accounted for. Financial implication of the claim raised against the
 company, adjustment of the sums received against outstanding claims,
 any non-realisation of claim and further claims recoverable shall be
 effected upon determination based on the outcome of the proceedings in
 the court of law.
 
 MTNL has filed OMP No.151/1996 seeking enlargement oftime under Section
 28 of the Arbitration Act for the Arbitrator to publish the award. The
 case is still pending and will be listed along with OMP No. 135/94 for
 final hearing. The petitioner M/s United India Periodical (Ltd.) filed
 OMP No.135/ 94 in the High Court of Delhi challenging the appointment
 of Arbitrator under Section 33 of the Arbitration Act 1940. The
 Petition is pending from 24.10.1994 in the High Court of Delhi. Now the
 petitioner has filed an application for amendment in the petition filed
 in the year 1994 with the prayer that the arbitration clause 20 of the
 original contract dated 14.3.1987 be determined by the Honble Court of
 the subsequent events. The petitioner has also took plea of
 res-judicata as the MTNL filed the Suit No.4628 of 1994 in Mumbai and
 the same is pending before the Bombay High Court. The case is now
 listed in the category of final matter and is on regular board of the
 Court for the both the aforesaid OMPs.
 
 The suit filed by MTNL against M/s Sterling Computers and others is
 pending in the High Court of Mumbai in which claims to the tune of
 Rs.228.7 millions towards Royalty, Interest on Royalty r amount upto
 31.8.1994, amount paid against LC, Interest on amount of LC, L/D for
 non-performance and other charges etc. for Delhi and Mumbai both units.
 This suit is filed after non-performance of supplementary agreement
 dated 19.7.1991 & 26.9.1991 by M/s Sterling Computers Ltd. The case is
 still pending at Mumbai High Court.
 
 (b) MTNL entered into contracts with M/s M & N Publications Limited for
 printing, publishing and supply of telephone directories for Delhi and
 Mumbai units for a period of 5 years starting from 1993. In view of the
 breaches of the terms and conditions of the contracts committed by the
 contractor in publishing first issue of the directories of both units
 and their failure to execute the remaining part of the contracts, both
 the contracts were terminated by MTNL on 22.07.1996. Income from
 royalty and other applicable recoveries, for first issue published by
 contractor, Rs. 181.2 Millions have been accounted for and received. As
 regards Delhi Unit, MTNL has claimed to the extent of Rs.2110 millions
 (approx.) plus interest thereon at various rates while M/s M&N
 Publications have counter claim of Rs.2860 millions (approx.) plus
 interest thereon. Sole Arbitrator has been appointed by both the
 parties. The effect of claims under the contract for remaining issues
 published by contractor will be accounted for in the year of issuing of
 award by the Sole Arbitrator.
 
 (c) Honble TDSAT, in MTNL Vs C.C.Faxmail & Others, vide its order had
 directed MTNL to refund the double rent charged by it to e-mail service
 providers. MTNL filed a Special Leave Petition against the aforesaid
 order before Honble Supreme Court The Honble Supreme Court, while
 admitting the petition, directed the company to pay a sum of Rs.32.29
 Millions to the C.G.Faxmail & Others.  Vide Judgement dated 14.05.2008.
 The amount has not been deposited. The appeal has been dismissed, MTNL
 has filed for its review.
 
 7.  Certain Lands and Buildings capitalised in the books, are pending
 registration/legal vesting in the name of the company and the landed
 properties acquired from DOT have not been transferred in the name of
 the company and in the case of leasehold lands, the documentation is
 still pending. In case of Mumbai unit legal vesting of land and
 building of the value of Rs.9.86 Millions (Rs. 14.60 Millions) acquired
 after 1st April, 1986 is under process.
 
 8.  The Mumbai Unit had applied for amnesty under the Maharashtra Kar
 Nivaran Yojana, 1999 in respect of the Sales Tax demands of Rs 8.10
 Millions (Rs. 8.10 Millions). The application for amnesty towards
 demands aggregating Rs.2.09 Millions (Rs.2.09 Millions) has been
 accepted. The balance applications relating to demands of Rs.6.02
 Millions (Rs.6.02 Millions) are under process and are not included
 under Contingent Liabilities.
 
 9.  a) Delhi Unit has accounted for the expenditure on account of
 telephone bills of service connections raised by BSNL towards MTNL for
 the period from 01.10.2000 to 30.09.2006 to the tune of Rs.  98.01
 millions on the basis of actual reimbursement made for subsequent
 periods against the disputed claim of Rs.312.72 millions, since no
 details / justifications are received from BSNL in spite of repeated
 persuasion till date. The balance amount of Rs. 214.72 millions is
 shown as contingent liability.
 
 b) Mumbai Unit, during the year has claimed from BSNL charges for
 leasing infrastructure of Rs.346.82m (Rs.339.19m) as per the tariff in
 force. The same has been recognized as revenue in the current year in
 accordance with the accounting policy of the company. An amount of Rs.
 611.60 m (previous year Rs. 731.40 m) has been billed to BSNL towards
 usage of MTNL TAX.
 
 c) In respect of Mumbai Unit during the year, an amount of Rs.2t99.36
 millions have been accounted for as Infrastructure Usage charges
 receivable from BSNL for using the various office building and spaces
 of MTNL and Rs. 89.79 million vice-versa.
 
 d) In respect of Delhi Unit, claim receivables includes Rs.22.5
 millions towards ADC charges receivable from certain operators
 accounted for on adhoc basis in the financial year 2007-08 and is
 subject to change on settlement/acceptance. 
 
 e) In respect of Mumbai Unit during the year, an amount of Rs.364.18
 millions has been accounted as receivable from BSNL on account of
 Property Tax, Electricity, and water and fuel charges.
 
 f) Delhi Unit during the year has accounted for Rs.611.95 millions
 including service tax toward interconnect charges for usage of TAX for
 carriage of traffic on the rates prescribed by TRAI in IUC regulations
 in the absence of any inter connect agreement with MTNL and BSNL. BSNL
 is also charging the same and the claims raised by both parties are
 under dispute.
 
 g) In respect of intra circle calls for Mumbai Unit, carriage charges
 are computed with reference to leased lined and accounted. Entries have
 been passed accordingly for amount payable Rs.823.88 Millions (Rs.
 1676.95 millions) and amount receivable Rs.938.89 Millions (Rs. 1202.33
 millions).
 
 10.  (a) As per direction of the court, one UASL operator had deposited
 Rs.3412.74 million against the claim of the same amount. The company
 had recognized revenue of Rs.2367.90 millions in the year 2004-05 and
 Rs.1044.84 millions in the year 2005-06. The petition filed by UASL
 Operator before Honble High Court, Delhi is dismissed as withdrawn
 with a liberty to the UASL operator to take steps in accordance with
 the Law. The matter is presently pending with the Honble Court.
 
 (b) An amount of Rs.- 160.67 million is receivable from the other
 operators towards infrastructure charges and port charges accounted in
 the year 2007-08 and is under litigation with TDSAT.
 
 11.  The company had subscribed to 8.75% Cumulative Preference Shares
 of M/s. ITI Limited, amounting to Rs.1000 Millions during the year
 2001-02. As per the terms of allotment, the above Preference Shares
 were proposed to be redeemed in 5 equal installments. Accordingly, five
 installments amounting to Rs. 200 millions each, aggregating to Rs.1000
 Millions have become redeemable, which have not been redeemed by ITI
 Limited. As per letter No. U-59011-10/2002-FAC dated 31-7-2009 issued
 by DOT, the repayment schedule of the above cumulative preference
 shares was deferred to 2012-13 onwards in five equal annual
 installments. Moreover, no dividend income has been booked in the
 accounts for the same, as ITI Limited has not declared any dividend.
 
 12.  In respect of Mumbai Unit, the bank reconciliation statements as
 at 31 st March, 2009 include unmatched/ unlinked credits/ debits given
 by the banks in the Mumbai Units bank accounts amounting to Rs.55.25
 million (Rs.56.00 m) and Rs. 63.23 miHion.(Rs.42-75m) respectively,
 which could not be properly accounted for in the absence of adequate
 particulars.
 
 13.  In respect of Mumbai MS Unit, sundry debtors as per billing system
 is Rs.697.9 millions (excluding service tax). Sundry Debtors as per
 WFMS is RS.694.2 millions (excluding service tax). Difference is frozen
 to Rs0.37crores. Out of total sundry debtors of Rs.694.2 millions, an
 amount of Rs.92.8 millions is secured against the deposit available as
 on 31.03.2009.
 
 14.  a) Deposits from applicants and subscribers as on 31st March 1986
 were Rs.1503.59 Millions as intimated provisionally by DOT.
 Corresponding assets shown under claims recoverable are being reduced
 by the amount of recovery of rebate on rental and by the amount of
 recovery of application deposit for which connections have been
 released to subscribers with effect from 1.4.1986. Balance still
 recoverable from DOT on this account is Rs. 558.45 Millions (Rs. 558.38
 Millions).
 
 b) The balance in the Subscribers Deposit Accounts of Rs. 8036.07
 Millions (Rs. 8481.73 Millions) and Interest Accrued and Due thereon of
 Rs. 26.54 Millions (Rs. 29.48 Millions) is subject to reconciliation
 with the relevant subsidiary records.
 
 c) The aggregate balance of sundry debtors as per the subsidiary
 records is short by Rs.57.55 millions (Rs.74.21 millions) as compared
 to the balance in general ledger and under reconciliation. The
 resultant impact of the above on the account is not ascertainable.
 
 15.  a) Amount recoverable on current account from DOT is Rs. 31543.80
 Millions (Rs. 30856.38 Millions) and amount payable is Rs. 658.69
 Millions (Rs. 455.0 Millions). The net recoverable of Rs. 30885.11
 Millions (Rs. 30401.38 Millions) is subject to reconciliation and
 confirmation.
 
 b) The amount recoverable from BSNL is Rs. 16785.67 Millions
 (Rs.6036.89 Millions) and amount payable is Rs.2498.54 Millions
 (Rs.0.57 Millions). The Net recoverable of Rs. 14287.13 Millions
 (Rs.6036.32 Millions) is subject to reconciliation and confirmation.
 
 16.  a) Out of total provision of Gratuity of Rs. 8380.22 Millions up
 to 31.3.2009 (Rs. 6335.22 Millions), an amount of Rs. 1943.73 Millions
 and Rs. 665.40 Millions is recoverable from DOT, in respect of Group C
 & D and Group B employees respectively, for the period prior to their
 absorption. As on 31.03.2009 Rs. 5770.55 Millions is available with the
 Gratuity Trust.
 
 b) The total provision of Leave Encashment is Rs. 4306.23 Millions up
 to 31.3.2009 (Rs. 3196.69 Millions). Out of this, an amount of Rs.
 816.18 Millions and Rs. 274.53Millions is recoverable, from DOT in
 respect of Group B and Group C & D employees respectively for the
 period prior to their absorption in MTNL
 
 c) An amount of Rs. 11357.08 Millions (Rs. 9293.02 Millions) towards
 GPF contribution is recoverable from DOT as on 31.3.2009. The amount
 pertains to Group C& D and Group B employees absorbed in MTNL w.e.f.
 01.11.98 and 01.10.2000, respectively.
 
 d) The total provision of Pension is Rs. 33486.60 Millions (Rs.28716.45
 Millions) upto 31.3.2009. Out of this an amount of Rs. 7546.2 Millions
 and Rs. 2201.02 Millions is recoverable from DOT in respect of Group
 C&D and Group B employees for the period prior to their absorption.
 
 17.  The diminutions in value of investments in Subsidiaries & Joint
 Ventures are considered as temporary hence no provision is made.
 
 18.  Certain claims of BSNL on account of Signaling charges Rs.219.30
 millions, Transit tariff Rs.251.90 millions, MP Billing Rs.60.10
 millions, IUC Rs.101.40 millions and IUC frorrvGujrat Circle Rs.11.14
 millions are being reviewed. Pending settlement of similar other claims
 from BSNL, no provision is considered necessary.
 
 19.  The amount of receivables and payables (including NLP / ILD
 Roaming operators) is subject to confirmation and reconciliation.
 Pending such confirmation/ reconciliation, the,impact on the account is
 not ascertainable at this stage.
 
 20.  Based on the expert opinion received by the company, the provision
 for Fringe Benefit Tax on service connections is not made.   
 
 21.  In respect of Delhi Unit, CDMA exchanges of 100K&50K have been
 decommissioned during the year by the management and necessary
 provision has been made for Rs.535.12 millions as loss of assets in
 accordance with accounting policy. The liability on this project
 amounting to Rs.470.11 millions (includes 8768405 US dollars) lying in
 the books for more than three years and not paid to vendor due to issue
 arising out of contract agreement, is not written back in view of
 pending arbitration case filed by vendor. The outstanding liability of
 Rs.413.3 millions (equivalent to 8768405 US dollars) is frozen due to
 the pending arbitration case.
 
 22.  The impact of 2nd pay revision(IDA) committee issued by
 Departmental of Public enterprises (DPC) issued vide order no.
 2(70)/08-DPE(WC) of dated 26.11.2008 is subject to certain conditions.
 As on the company has not taken any decision in this matter. Pending
 finalization, the interim relief in the form of 50% DA merger with pay
 and arrears were drawn and are being paid accordingly w.e.f.
 1.1.2007.The settlement of the pay revision is subject to settlement of
 issue of Pension payment to absorbed employees by government as per
 agreement reached between management and service associations. Decision
 for the same is pending, the liability on this account is not
 ascertainable and hence not provided.  (
 
 23.  A sum of Rs.131.25 millions accounted for as income in financial
 year 2007-08 being ADCC recoverable from Project Development Company
 (PDC) towards development of Core knowledge park at Noida is still
 outstanding. PDC has sought extension of drop dead date which is under
 examination.
 
 24.  In respect of accounting for billing of subscribers for Mobile
 services and collection made thereon, the GSM Mumbai unit has
 implemented computerized billing system and the financial entries for
 booking of income and debtors accounting have been incorporated in the
 books of accounts based on the output generated through computer
 system.
 
 25.  There is no reported Micro, Small and Medium enterprise as defined
 in the Micro, Small and Medium enterprise development Act, 2006, to
 whom the company owes dues.
 
 26.  Additional information required under Paragraphs 3(x)(a) and 4D(c)
 of Part II of Schedule VI to the Companies Act 1956 is not
 ascertainable, since (i) consumption of stores is included under the
 normal heads of Capital Expenditure and/or Repairs & Maintenance, and
 (ii) the issue of imported and indigenous Herns are not separately
 priced/ identified.
 
 27.  In respect of Delhi Unit, A Claim has been lodged with Insurance
 Company amounting to Rs.76.32 millions due to comprehensively insured
 fixed assets lost in fire accident and consequently gross block of
 Rs.63.36 millions and accumulated depreciation of Rs.23.25 millions has
 been withdrawn pending settlement of the claim. The final adjustment in
 respect of difference between amount claimed and assets withdrawn will
 be made in the year of settlement of claim.
 
 28.  In respect of MS Delhi Unit, IUC Income and Expenditure from
 September 08 to March 09 has been accounted for on estimation basis
 based on average of actual from April 08 to August 08 due to non-
 processing of data for technical problems.
 
 29.  Gratuity is payable to the employees on death or resignation or on
 retirement at the attainment of superannuation age. To provide for
 these eventualities we have use Mortality: 1994-96 LIC Ult table for
 mortality in service and L|C (1996-98) table for mortality in
 retirement.
 
 30.  Mortality in service is assumed on the basis of LIC (1994-96) Ult
 and mortality in retirement is based on LIC(1996-98) table.
 
 31.  Bonus is a short term benefit and during the year company has
 charged Rs.526.44 Millions as expenses and balance outstanding as on
 31.03.09 is Rs.442.90 Millions.
 
 32. During the year, the Company has made an Insurance Policy for
 medical benefits in respect of its retired employees. The Insurance
 Policy is fully funded by the Company, This is in compliance with
 AS-15(Revised).
 
 a) List of Related Parties and Relationships
 
 Paly - Relation
 
 Department of Telecommunication - Holding 56.25% shares of the Company
 
 Millennium Telecom Limited - Wholly owned Subsidiary
 
 Mahanagar Telecom Mauritius Ltd.  - Wholly owned Subsidiary
 
 United Telecom Limited - Joint Venture
 
 MTNL STPI IT Services Ltd.  - Joint Venture
 
 Key Management Personnel
 
 Mr. R. S. P. Sinha - Chairman & Managing Director
 
 Mr. Kuldip Singh - Director (Technical)
 
 Mrs. Anita Soni - Director (Finance)
 
 Mr. S.P. Pachauri - Director (HR)
 
 Mr. K. C. Gupta (Part of the year) - Executive Director (Operation)
 
 Mr. A. K. Arora (Part of the year) - Executive Director, Delhi
 
 Mr. S.M. Talwar (Part of the year) - Executive Director, Delhi
 
 Mr. Manjit Singh (Part of the year) - Executive Director, Delhi
 
 Mr. J. Gopal - Executive Director, Mumbai
 
 33.  Consolidated Financial Statements - AS - 21 & AS - 27
 
 The financial statements of Millennium Telecom Limited & Mahanagar
 Telephone Mauritius Limited (wholly owned subsidiaries of the Company)
 and United Telecom Limited & MTNLSTPI IT Service Limited (Joint
 Ventures) have been consolidated in accordance with the Accounting
 Standard - 21 and Accounting Standard - 27, respectively.
 
 34.  During the year no provision has been made for any loss on account
 of impairment of assets under Accounting Standard 26 as there is no
 indication of any impairment of assets of the Company.
 
 35.  Previous year figures have been regrouped / recast to confirm to
 current years presentation. Amounts in brackets represent the previous
 years figures.