A.  FINANCIAL STATEMENTS
 
 The financial statements are prepared under historical cost convention
 on accrual basis as a going concern and in accordance with the
 Generally Accepted Accounting Principles (GAAP), the Companies Act,
 1956 and in compliance with Companies (Accounting Standard) Rules,
 2006, except those with significant uncertainty. Accounting policies
 not stated explicitly otherwise are consistent with Generally Accepted
 Accounting Principles.
 
 B.  USE OF ESTIMATES
 
 The preparation of financial statements in conformity with Indian GAAP
 requires management to make estimates and assumptions that affect the
 balances of assets and liabilities and disclosures relating to
 contingent liabilities as at the Balance Sheet date and amounts of
 income and expenses during the year. Examples of such estimates include
 income taxes and future obligation under employee retirement benefit
 plans. Management periodically assesses whether there is an indication
 that an asset may be impaired and makes provision in the accounts for
 any impairment losses estimated. Actual results could differ from those
 estimates. The effects of adjustment arising from revisions made to the
 estimates are included in the Profit and Loss statement of the year in
 which such revisions are made.
 
 C.  REVENUE RECOGNITION
 
 a) Revenue from sale of goods is recognised on transfer of all
 significant risks and rewards of ownership to the buyer.
 
 b) Revenue from services are recognised on rendering of services to
 customers except otherwise stated.
 
 c) Rental income from assets given on operating lease is recognised
 using straight line method. Contingent rent is recognised as income to
 reflect systematic allocation of earning over the lease period. This
 policy is not applicable for variable rental income based on turnover
 of the tenant.
 
 d) Interest income is recognised on accrual basis on a time proportion
 basis.
 
 D.  FIXED ASSETS
 
 Fixed Assets, including those given on operating lease, are stated at
 cost of acquisition inclusive of freight incurred, duties and taxes
 (net of CENVAT/ Sales Tax) and incidental expenses less accumulated
 depreciation. Cost incurred on construction of fixed assets consists of
 all directly attributable expenditure.  Fixed assets is net off of
 value of compensation received against non performance of full capacity
 of machine.
 
 E.  DEPRECIATION
 
 Depreciation is provided on fixed assets including those given on
 operating lease on written down value method at the rates and in the
 manner specified in Schedule-XIV of the Companies Act, 1956.
 
 Depreciation on reduced amount of fixed assets is net off depreciation
 on that compensation amount excess charged in earlier years.
 
 F.  INVESTMENTS
 
 All investments are bifurcated into Long Term Investments and Current
 Investments. Investments that are readily realisable and intended to be
 held for not more than a year are classified as Current Investments.
 All other investments are classified as Long Term. Current Investments
 are carried at lower of cost or fair market value, determined on an
 individual investment basis. Long Term Investments are carried at cost.
 Provision for Diminution in the value of Long Term Investments is made,
 only if such a diminution is other than temporary.
 
 G.  INVENTORIES
 
 Tobacco Division
 
 a) Raw Materials: At lower of weighted average cost or net realisable
 value.
 
 b) Work in Progress: At lower of cost or net realisable value.
 
 c) Finished Goods: At lower of cost or net realisable value.
 
 d) Stores, Packing & Other Materials: At lower of weighted average cost
 or net realisable value.
 
 H.  EXCISE DUTY
 
 Excise duty has been accounted for at the time of manufacture of goods,
 accordingly excise duty on finished goods lying as stock in factory has
 been considered for valuation.
 
 I.  FOREIGN CURRENCY TRANSACTION
 
 Transactions in foreign currencies are recorded at the exchange rate
 prevailing at the time of occurrence of payments/receipts.
 
 Exchange differences arising on foreign exchange transactions settled
 during the year are recognized in the profit and loss account of the
 year
 
 J.  SALES
 
 Sales represents invoice value of finished goods sold inclusive of
 excise duty and value added tax but excludes sales returns, claims,
 rate difference etc.  Rental income is exclusive of service tax.
 
 K.  CLAIMS/REFUNDS
 
 Excise, Insurance and other claims/refunds are accounted for on
 acceptance/actual receipt/ payment basis.
 
 L.  EMPLOYEE BENEFITS
 
 i) Short term employee benefits
 
 All employee benefits payable wholly within twelve months of rendering
 the service are classified as short- term employee benefits. Benefits
 such as salaries, wages and short term compensated absences, etc. and
 the expected cost of ex-gratia is recognised in the period in which the
 employee renders the related service.  (ii) Post-employment benefits
 
 a) Defined Contribution Plan: Employee benefits in the form of
 Employees State Insurance Corporation and Provident Fund are considered
 as defined contribution plan and the contributions are charged to the
 Profit and Loss Account of the year when the contributions to the
 respective funds are due.
 
 b) Defined Benefit Plan: Employee benefits in the form of Gratuity and
 Leave Encashment are considered as defined benefit plan and are
 provided for on the basis of an independent actuarial valuation, using
 the projected unit credit method, as at the Balance Sheet date as per
 requirements of Accounting Standard- 15 (Revised 2005) on Employee
 Benefits.
 
 Actuarial gains/losses, if any, are immediately recognised in the
 Profit and Loss Account.
 
 M.  TAXATION
 
 a) Current Tax: Current tax is determined as the amount of tax payable
 in respect of taxable income for the year in accordance with the
 provisions of the Income Tax Act, 1961. Minimum Alternative Tax credit
 available under section 115JB of the Income Tax Act, 1961 will be
 accounted in the year in which the benefits are claimed.
 
 b) Deferred Tax: Deferred tax is recognised subject to consideration of
 prudence on the basis of timing differences being the differences
 between taxable income and accounting income that originate in one
 period and capable of reversal in one or more subsequent periods using
 the tax rates and laws that have been enacted or substantially enacted
 as on the balance sheet date. Deferred tax asset is recognised and
 carried forward only to the extent that there is reasonable certainty
 that the asset will be realised in future.
 
 N.  IMPAIRMENT OF ASSETS
 
 An asset is treated as impaired when the carrying cost of the same
 exceeds its recoverable amount.  Impairment is charged to the Profit
 and Loss account in the year in which an asset is identified as
 impaired.  The impairment loss recognised in prior accounting period is
 reversed if there has been a change in the estimate of the recoverable
 amount.
 
 O.  BORROWING COSTS
 
 Borrowing costs that are attributable to the acquisition or
 construction of qualifying assets are capitalised as part of the cost
 of such assets. A qualifying asset is one that necessarily takes
 substantial period of time to get ready for intended use or sale. Other
 borrowing costs are recognised as an expense in the year in which they
 are incurred.
 
 P.  PROVISIONS/CONTINGENCIES
 
 A provision is recognised for a present obligation as a result of past
 events if it is probable that an outflow of resources will be required
 to settle the obligation and in respect of which a reliable estimate
 can be made.  Provisions are determined based on best estimate of the
 amount required to settle the obligation as at the Balance Sheet date.
 Liabilities which are material and whose future outcome cannot be
 ascertained with reasonable certainty are treated as contingent
 liability and are disclosed by way of note.