1.  Nature of operations
 
 Munjal Showa Limited (the Company) is a Company established in 1985
 as result of technical and financial collaboration between Hero Group
 and Showa Corporation, Japan. The Company operates as an ancillary and
 manufactures auto components for the two-wheeler and four-wheeler
 industry, primary products being front forks, shock absorbers, struts,
 gas springs and window balancers for sale in domestic market. The
 Company has two manufacturing locations in the state of Haryana and one
 plant at Haridwar.
 
 2.  Segmental information
 
 Based on the guiding principles given in Accounting Standard on
 Segmental Reporting (AS-17), issued by the Institute of Chartered
 Accountants of India, the Companys primary business segment is
 manufacturing of auto components for two- wheeler and four-wheeler
 industry. The business comprises manufacturing and selling of various
 auto components, viz, front fork, shock absorbers, struts, gas springs
 and window balancers, having similar risks and rewards because of
 similar nature of these items. The Company is having negligible export
 and operates mainly in India i.e. only one business and geographical
 segment and thus no further disclosures are required to be made as per
 Accounting Standard (AS-17).
 
 3.  Related party disclosure
 
 (i) Names of related parties
 
 (a) Key management personnel and their relatives
 
 - Mr. Brijmohan Lall Munjal- Chairman
 
 - Mr. Yogesh Chander Munjal – Managing Director
 
 - Mr. Tetsuo Terada - Joint Managing Director (from 18th May, 2010)
 
 - Mr. Kazuhiro Nishioka- Joint Managing Director (upto 23rd March,
 2010)
 
 - Mr. Suresh Munjal- Relative of Mr. Yogesh Chander Munjal
 
 (b) Enterprise with significant influence over the Company
 
 - Showa Corporation, Japan
 
 (c) Enterprises owned or significantly influenced by key management
 personnel and their relatives
 
 - Hero Honda Motors Limited
 
 - Sunbeam Auto Private Limited *
 
 - Hero Cycles Limited
 
 - Hero Corporate Services Limited
 
 - Majestic Auto Limited
 
 - Dayanand Munjal Investments Private Limited
 
 - Thakurdevi Investments Private Limited
 
 - Arrow Infrastructure Limited
 
 - Rockman Industries Limited
 
 - Shivam Autotech Limited
 
 * Public limited company till 18th May, 2010.
 
 Provision for Warranty
 
 A provision is recognized for expected warranty claims on products sold
 during the last two years for some models and three years for others,
 based on past experience of level of repairs and returns. Assumption
 used to calculate the provision for warranties were based on current
 sales level and current information available about returns based on
 the warranty period for all products sold.
 
 Provision (others)
 
 The Company has in the last year received a show-cause notice from
 Haryana State Pollution Control Board (HSPCB) towards contamination
 of ground water caused due to higher concentration of chromium used by
 the Company as compared to the minimum expected level. Pursuant to the
 show cause notice, the management had submitted a time bound
 remediation plan as per which specified milestones are to be achieved
 at the end of each quarter till December 2010. A bank guarantee of Rs.
 50,000,000 has also been submitted to HSPCB. The management has
 initiated adequate steps suggested by the experts and has completed the
 plan within the overall time frame. The matter is pending with
 Appellate Authority, HSPCB. Since the matter is sub-judice, provision
 of Rs.20,000,000 (Previous year Rs. 32,500,000) is being retained
 towards any contingency, as per managements assessment of the costs to
 be incurred.
 
 4 Contingent liabilities (not provided for) in respect
 of:                                                     (Amount in Rs.)
 
               Particulars                March 31, 201   March 31, 2010
 
 a) Demands raised by Income Tax 
 Authorities, being disputed
 by the Company.                           217,314,420     151,149,021
 
 b) Show cause notices issued by 
 Excise Authorities, being
 disputed by the Company.                   177,506,951    39,228,000
 
 c) Demand raised by Employees State 
 Insurance Recovery Officer, being 
 disputed by the Company.                     4,365,036     4,365,036
 
 d) Pending cases with Income Tax Appellate Authorities / High Liability
 not Liability not Court where Income Tax Department has preferred
 appeals.  ascertainable ascertainable
 
 a) Demands raised by the Income Tax Authorities comprise of:
 
 i) In respect of Assessment Years 1993-94 and 1996-97, allowability of
 certain expenses like foreign technician expenses, design and drawing
 fees were pending under appeal with ITAT. ITAT has decided in favour of
 Company. The Income tax department has appealed against the Company
 before the High Court wherein the High Court has ordered in favour of
 the Company which is pending for appeal effect.  The total amount
 involved is Rs. 1,494,076 (Previous year Rs. 1,494,076).
 
 ii) In respect of Assessment Years 1998-99 and 1999-00, allowability of
 certain expenses like foreign technician expenses, design and drawing
 fees were pending under appeal with ITAT. The issue has been set aside
 by the Tribunal to the file of the assessing officer to follow the
 order of earlier years. The Company has obtained legal opinion as per
 which the Company has possibility of success. The total amount involved
 is Rs. 373,287 (Previous year Rs. 373,287).
 
 iii) In respect of Assessment Years 2002-03, 2003-04 and 2004-05 issues
 relating to some percentage of expenses like royalty, technician fee,
 design and drawing, prior period (2004-05) is pending with ITAT. The
 Company has obtained legal opinion as per which the Company has
 possibility of success. The amount involved is Rs. 22,649,734 (Previous
 year Rs. 32,433,639).
 
 iv) In respect of Assessment Year 2005-06, certain adjustments were
 made to the transaction values by the tax authorities based on arms
 length price of international transactions entered with associated
 enterprises.  The issue is pending with CIT (Appeals), based on which
 demand was raised. The Company has obtained legal opinion as per which
 the Company has possibility of success. The amount involved is Rs.
 115,302,063 (Previous year Rs. 116,848,019).
 
 v) In respect of Assessment Year 2006-07, certain adjustments were made
 to the transaction values by the tax authorities based on arms length
 price of international transactions entered with associated enterprises
 and on disallowance of royalty and technical fee is pending with ITAT.
 The Company has obtained legal opinion as per which there is a
 possibility of success. The amount involved is Rs.77,495,260 (Previous
 year Rs.53,191,210 excluding interest, penalty etc).
 
 vi) In respect of Assessment Year 2007-08, certain adjustments were
 made to the transaction values by the tax authorities based on arms
 length price of international transactions entered with associated
 enterprises and on disallowance of royalty and technical fee. The
 Company has preferred filing the objections against the draft
 assessment order and is pending before Dispute Resolution Panel (DRP)
 for disposal. The Company has obtained legal opinion as per which there
 is a possibility of success. The amount of disallowances is Rs
 1,433,774,260, on which income tax amounts to Rs.482,608,417 (excluding
 interest, penalty etc).
 
 b) Show cause/demand notices issued by Excise Authorities comprise of:
 
 (i) The Excise authorities have issued Show Cause Notices (SCNs) on
 the Company proposing to levy Service tax on royalty payments amounting
 to Rs. 157,284,357 (Previous year Rs. 39,228,000) as recipient of
 services under reverse charge mechanism on the royalty paid for such
 import of services during the period from September 10, 2004 to March
 31, 2010. The amount of interest and penalty at this stage is not
 determinable. The Company has filed reply against the above show cause
 notices for rectification of mistake by Rs. 70,280,250 and has
 protested the balance demand of Rs. 87,004,107. The hearing on the same
 is pending for disposal. However, the Company can claim service tax
 credit of material amount.
 
 (ii) The Excise authorities have issued show cause/ demand notices
 (SCNs) on the Company for wrong availment of service tax and cenvat
 aggregating to Rs. 20,222,594. The Company has filed reply against the
 above show cause/ demand notices and has protested the same. The
 Company has obtained legal opinion as per which there is a possibility
 of success.
 
 c) Demands raised by Employee State Insurance Recovery Officer:
 
 Contingent liabilities in respect of demands raised by the Employee
 State Insurance Recovery Officer represent amount demanded from the
 Company due to lack of records for the period 1994 to 1998 on the basis
 of inspections carried out at the Company. The demand has been stayed
 by Honble Judge, Employee Insurance Court, Gurgaon.
 
 5.  In accordance with explanations below Para 10 of Notified
 Accounting Standard 9 - Revenue Recognition, excise duty on sales
 amounting to Rs. 975,728,763 (Previous Year Rs. 730,594,416) has been
 reduced from sales in Profit & Loss Account and excise duty on
 variation of opening and closing stock of finished goods and scrap
 amounting to Rs. 426,523 (Previous Year income of Rs. 860,690) has been
 considered as expense in the financial statements.
 
 6.  Gratuity
 
 The Company has a defined benefit gratuity plan. Every employee who has
 completed five years or more of service gets a gratuity on departure at
 15 days salary (last drawn salary) for each completed year of service
 or part thereof in excess of six months. The scheme is funded with an
 insurance company in the form of a qualifying insurance policy.The
 following tables summarise the components of net benefit expense
 recognized in the profit and loss account and the funded status and
 amounts recognized in the balance sheet for the gratuity plan.
 
 7. Operating Lease Obligations
 
 The Company has taken various residential under operating lease
 agreements. These are generally not non- cancellable” and are
 renewable by mutual consent on mutually agreed terms. There is no
 escalation clause in the lease agreement. There are no restrictions
 imposed by lease arrangements. There are no subleases.
 
 Lease payments for the year are Rs. 2,371,400 (Previous Year Rs.
 1,754,900)
 
 Minimum Lease Payments:
 
 Not later than one year – Rs 1,837,800 (Previous Year Rs. 2,342,250)
 
 Later than one year but not later than five years – Rs 509,250
 (Previous Year Rs. 1,085,340)
 
 Later than five years – Rs. Nil
 
 8. A sum of Rs. 2,620,522 (Previous year Rs. 847,089) on account of
 unamortized foreign exchange premium on outstanding forward exchange
 contracts is being carried forward to be charged to Profit and Loss
 Account of subsequent period.
 
 9. Previous year comparatives
 
 Previous years figures have been regrouped, where considered
 necessary, to conform to this years classification.