1) ACCOUNTING CONVENTION
 
 The Financial Statements are prepared to comply in all material aspects
 with the applicable accounting principles in India, the applicable
 Accounting Standards notified under Section 211 (3C) of the Companies
 Act, 1956 and the relevant provisions of the Companies Act, 1956.
 
 2) REVENUE RECOGNITION
 
 Sales are recognized on transfer of significant risks and rewards to
 the customer that usually takes place on dispatch of goods to the
 customer from the factory/ stockyard/ storage area. In case of export
 sales, revenue is recognized as on the date of bill of lading, being
 the effective date of transfer of significant risks and rewards to the
 customer. Export benefits are accounted for on accrual basis.
 
 3) FIXED ASSETS/INTANGIBLE ASSETS
 
 Fixed assets are recorded at cost of acquisition. Cost includes
 freight, duties, taxes and expenses incidental to acquisition and
 installation of fixed assets. In case of self-constructed fixed assets,
 appropriate overheads including salaries & wages are allocated to the
 cost of the asset. The Cost of Capital Spares is capitalized along with
 the cost of the related Asset.
 
 Intangible assets comprising of Technical know how, product designs,
 prototypes etc. either acquired or internally developed are stated at
 cost. In case of internally generated intangible assets, appropriate
 overheads including salary and wages are allocated to the cost of the
 asset.
 
 Capital work in Progress includes cost of assets at site, direct and
 indirect expenditure incidental to construction, advances made for
 acquisition of capital assets and interest on the funds deployed for
 construction.
 
 4) DEPRECIATION/AMORTISATION
 
 Depreciation on tangible fixed assets is provided on a Straight-Line
 Method on a monthly pro-rata basis at the rates and in the manner
 prescribed in Schedule XIV to the Companies Act, 1956, except on
 following assets which are being depreciated at the rates mentioned
 below:
 
 Motor cars and air conditioners - 25.00%
 
 Computers - 33.33%
 
 All assets costing up to Rs. 5,000/- are being fully depreciated in the
 year of purchase.
 
 Capital spares are amortized in a systematic manner over a period not
 exceeding the useful life of the asset to which they relate.
 
 Intangible assets are amortised on a Straight-Line Method on a monthly
 pro-rata basis over a period of three to ten years based on the
 estimated useful life of the assets.
 
 5) INVENTORIES
 
 Inventories are valued at lower of cost or net realizable value. Cost
 for the purpose of valuation is calculated on a quarterly weighted
 average method. In respect of Finished Goods & Work-in-Progress,
 applicable manufacturing overheads and other costs incurred in bringing
 the items of inventory to their present location and condition are also
 included. Excise duty is included in finished goods valuation.
 
 6) EMPLOYEE BENEFITS
 
 (a) Post-employment benefit plans
 
 i. Defined Contribution Plans - The Company contributes to the
 appropriate authorities its share of the Employees'' Provident & Pension
 Fund and Employee State Insurance, which is charged to Profit and Loss
 Account every year.  The Company has created trust which has taken
 Master policy with the Life Insurance Corporation of India to cover its
 liability towards employees'' Superannuation. Annual contribution of
 Superannuation is charged to Profit and Loss Account every year
 
 ii. Defined Benefit Plans - The estimated liability towards Gratuity
 and Leave Encashment is being provided for based on the actuarial
 valuation carried out at the year-end using Projected Unit Credit
 Method. Actuarial gains and losses are recognized in full in the Profit
 and Loss Account for the period in which they occur.
 
 The Company has created trust which has taken Master policy with the
 Life Insurance Corporation of India to cover its liability towards
 employees'' Gratuity. The Gratuity obligation recognized in the Balance
 Sheet represents the present value of the defined benefit obligation as
 adjusted for unrecognized past service cost and as reduced by the fair
 value of Gratuity Fund.
 
 (b) Short term employment benefits
 
 The undiscounted amount of short term employee benefits expected to be
 paid in exchange for services rendered by employees is recognized
 during the period when the employee renders the services. These
 benefits include compensated absences and performance incentives.
 
 7) RESEARCH & DEVELOPMENT
 
 Revenue expenditure on Research and Development is charged to the
 Profit and Loss Account in the year in which it is incurred. Capital
 expenditure on Research and Development is shown as an addition to
 fixed assets and depreciated at the rate as applicable to respective
 assets.
 
 8) WARRANTY EXPENSES
 
 Provision for warranty is made in the accounts on the basis of past
 experience and technical evaluation in respect of vehicles sold.
 
 9) FOREIGN CURRENCY TRANSACTIONS
 
 Foreign currency transactions are recorded at exchange rates prevailing
 at the date of transaction. Exchange differences, if any, arising on
 settlement of transactions are recognized as income or expense in the
 year in which they arise.
 
 At the Balance Sheet date all monetary assets and monetary liabilities
 denominated in foreign currency are reported at the exchange rates
 prevailing at the Balance Sheet date and the resultant exchange
 difference, if any, is recognized in the Profit & Loss Account.
 
 10) TAXATION
 
 Tax Expense, comprising current tax & deferred tax is included in
 determining the net profit for the year. The current tax has been
 computed in accordance with relevant tax rates and tax laws. Minimum
 Alternate Tax (MAT) paid in excess of normal income tax is recognised
 as asset (MAT Credit entitlement) only to the extent, there is
 reasonable certainty that company shall be liable to pay tax as per the
 normal provisions of the Income Tax Act, 1961 in future.
 
 In accordance with Accounting Standard - 22 ''Accounting for Taxes on
 Income'', notified under Section 211 (3C) of the Companies Act, 1956,
 the deferred tax for timing differences between the book and the tax
 profits for the year is accounted for using the tax rates and laws 
 that have been enacted or substantially enacted as on the Balance 
 Sheet date. However, in the year of transition, the accumulated 
 deferred tax (liabilities) / assets at the beginning of the year 
 has been recognized with a corresponding charge to the General 
 Reserve.
 
 Deferred tax assets arising from temporary timing differences are
 recognized to the extent there is a reasonable / virtual certainty that
 the assets can be realised in the future and are reviewed for the
 appropriateness of their respective carrying values at each Balance
 Sheet date.
 
 11) GOVERNMENT GRANTS
 
 Grants in the form of Capital/Investment subsidy are treated as Capital
 Reserve.
 
 12) BORROWING COSTS
 
 Borrowing costs that are directly attributable to the acquisition,
 construction or production of a qualifying asset are capitalized as
 part of the cost of that asset. Other borrowing costs are recognized as
 an expense in the period in which they are incurred.
 
 13) LEASES
 
 As lessee:
 
 Lease rental in respect of assets taken on Operating Lease are
 charged to Profit & Loss account on straight-line basis over the lease
 term.
 
 14) IMPAIRMENT OF ASSETS
 
 In accordance with Accounting Standard - 28 on ''Impairment of Assets'',
 notified under Section 211 (3C) of the Companies Act, 1956, recoverable
 amount of relevant assets is computed and compared with the carrying
 amount for determining impairment loss, if any at the Balance Sheet
 date in case there is an indication that any asset may be impaired. If
 the carrying amount of the asset exceeds its recoverable amount, an
 impairment loss is recognised in the Profit and Loss Account to the
 extent the carrying amount exceeds recoverable amount.
 
 15) PROVISIONS AND CONTINGENCIES
 
 Provisions are recognized when the Company has a present obligation as
 a result of past events, for which it is probable that an outflow of
 resources embodying economic benefits will be required to settle the
 obligation, and a reliable estimate of the amount can be made.
 Provisions required to settle are reviewed regularly and are adjusted
 where necessary to reflect the current best estimates of the
 obligation. Where the Company expects a provision to be reimbursed, the
 reimbursement is recognized as a separate asset, only when such
 reimbursement is virtually certain. Contingent liabilities are
 disclosed after an evaluation of the facts and legal aspects of the
 matters involved.