1.  SYSTEM OF ACCOUNTING:
 
 (i) Basic assumptions:
 
 The accounts have been prepared under historical cost convention on
 accrual basis and as per applicable Mandatory Accounting Standards.
 
 (ii) Going concern:
 
 Accounts have been prepared on the principle applicable to a going
 concern.
 
 (iii) Use of Estimates :
 
 The preparation of financial statements requires management to make
 certain estimates and assumptions that affect the amounts reported in
 the financial statement and notes thereto. Differences between actual
 results and estimates are recognized in the period in which they
 materialize.
 
 2.  a) FIXED ASSETS:
 
 (i) Fixed Assets are stated at original cost and are inclusive of all
 expenses to bring them to a state of use.
 
 (ii) Land is valued at original cost.
 
 (iii) The cost of the leasehold land is amortized over the lease span.
 
 (iv) The tools manufactured departmentally costing individually Rs 5000
 and below and/or having estimated average useful life of 5 years and
 below being of consumable nature are accounted for as revenue
 expenditure under relevant natural heads.
 
 (v) Construction period expenses exclusively attributable to projects
 are capitalized.
 
 (vi) Borrowing cost directly attributable in relation to acquisition,
 construction of assets that takes substantial period of time to get
 ready for its intended use are capitalised as part of the cost of such
 assets upto the date when such assets are ready for intended use. Other
 borrowing costs are charged as expenses in Profit & Loss Account in the
 year in which they are incurred.
 
 b) INTANGIBLE ASSET:
 
 Intangible assets are stated at cost of acquisition less accumulated
 amortisation. Technical Know how is amortised over the useful life of
 the underlying plant. Computer Software is amortised over a period of 6
 years. Amortisation is done on straight line basis.
 
 c) IMPAIRMENT OF FIXED ASSET:
 
 The carrying values of fixed assets of the identified cash generating
 units (CGU) are reviewed for impairment at each Balance Sheet date.
 When events or changes in circumstances indicate that the carrying
 values may not be recoverable and the carrying amount exceeds the
 estimated recoverable amount, the assets of the CGU are written down to
 the recoverable amount and the impairment loss is recognized in the
 profit and loss account.
 
 3. DEPRECIATION:
 
 Premium on leasehold land is amortised over the period of lease.
 
 Depreciation on other fixed assets is charged on straight-line method
 in accordance with rates prescribed in Schedule XIV to the Companies
 Act, 1956 as amended from time to time, except.
 
 (a) Plant, Machinery, Equipment and Jigs & Fixtures costing
 individually Rs 5000 and below are depreciated fully in the year of
 purchase.
 
 (b) In''case of tools where average estimated useful life is greater
 than five years but less than ten years, depreciation is charged @ 20%
 as was being done prior to introduction of Schedule XIV.
 
 Depreciation is not provided on assets which have been declared surplus
 and are not in use. These are distinctively shown under other Current
 Assets at net realisable value.
 
 4.  INVESTMENTS:
 
 Investments are valued at cost. However, in case of permanent
 diminution in the value of investments, suitable provision is made in
 the books of accounts.
 
 5.  INVENTORIES:
 
 (i) Raw materials, components, stores & spares, tools, consumables and
 other stocks are valued at cost (net of CENVAT) determined on FIFO
 Basis. Scrap and disposable goods are valued at estimated realisable
 value.
 
 (ii) Stock-in-trade is valued at lower of cost.or realisable value.
 
 (iii) Work-in-progress is valued at cost. Where the jobs are in
 progress their conversion cost is taken at 50% of the standard cost
 regardless of the stage of completion.  Completed jobs, including jobs
 pending inspection are valued at cost or realisable value whichever is
 less.
 
 (iv) Customs duty on bonded material is allocated to the cost of goods
 and equipment.
 
 (v) Expenditure on stationery, uniform, medicine etc. is charged off to
 revenue at the time of receipt. But the stock remaining at the year end
 are credited to the revenue account at cost and shown as closing stock.
 
 6.  DUTIES ON BONDED STOCK:
 
 Excise duty on finished stocks lying in bond is provided for, on the
 assessable value applicable for each product.
 
 7.  PROVISION FOR REDUNDANCY/OBSOLESCENCE:
 
 A general provision for redundancy is made at 0.5% of the value of
 closing inventory of raw materials and components, stores and spares
 and loose tools and consumables. Wherever neccessary, additional
 provision for redundancy/Obsolescence of inventory is made in
 individual cases keeping in view estimated reaizable value.
 
 8.  CENVAT
 
 Cenvat credit on eligible Revenue / Capital purchase is taken on
 receipt of such materials.
 
 9.  SALES:
 
 Sales are set up as per the Sale of Goods Act. They represent value of
 goods sold at the ex-factory price plus incidentals like freight,
 insurance etc. embedded in the sale price.
 
 10.  ACCOUNTING FOR INCOME AND EXPENDITURE:
 
 Income and expenditure are accounted for in the current year on accrual
 basis under natural heads of account.
 
 11.  FOREIGN EXCHANGE VARIATION:
 
 All transactions denominated in foreign currencies are translated at
 the rate of exchange on the day of the transaction. Monetary assets and
 liabilities denominated in foreign currencies are translated at the
 exchange rate ruling on the balance sheet date. Exchange differences
 arising on foreign currency transactions at the time of translation or
 settlement are included in the profit and loss account.
 
 12.  RETIREMENT BENEFITS:
 
 Contribution to Provident Fund is made to the company''s provident fund
 trust. The fund is compared to aggregate liability and shortfall if any
 is additionally contributed by the company and recognized as expenses.
 
 Gratuity and Leave Encashment liability is ascertained on actuarial
 valuation. However, any excess/deficit in funds managed by LIC as
 compared to the actuarial liability is recognised as asset/liability
 immediately and the consequent gain/loss arising from such valuation is
 charged to revenue in the year in which they arise.
 
 13.  RESEARCH AND DEVELOPMENT:
 
 Expenditure relating to product approvals including type approvals,
 consistency of production approvals from testing agencies and materials
 specifically procured for development of products are charged as
 Research & Development Expenses and other expenditure of Research and
 Development are charged off to the Profit and Loss Account under
 natural heads of accounts. Expenditure which results in creation of
 capital assets is taken to fixed assets and depreciation is provided as
 applicable. Prototype vehicles submitted to testing agencies are booked
 under finished goods.
 
 14. ACCOUNTING OF GOVERNMENT GRANT:
 
 (i) Government Grant of revenue nature is accounted for in the Profit
 and Loss Account under the head other income to the extent the
 expenditure is charged to revenue as and when incurred.
 
 (ii) In case of any specific Government grant the treatment in the
 books of accounts is made on the basis of specific stipulation for the
 same.
 
 15. JOBS DONE FOR INTERNAL USE :
 
 Jobsjtone for internal use are valued on the basis of technical
 estimates of material and conversion cost and are distinctly shown as a
 consolidated deduction from expenditures included in Profit & Loss
 Account.
 
 16.  TAXES ON INCOME:
 
 Provision for current tax is made in accordance with the provisions of
 the Income Tax Act, 1961.
 
 Deferred Tax on account of timing difference between taxable income and
 accounting income is provided considering the tax laws enacted or
 substantively enacted up to the Balance Sheet date.