1. We have audited the attached balance sheet of Sobha Developers
Limited (the Company) as at March 31, 2011 and also the profit and
loss account and the cash flow statement for the year ended on that
date annexed thereto. These financial statements are the
responsibility of the Company’s management. Our responsibility is to
express an opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with auditing standards
generally accepted in India. Those Standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
3. As required by the Companies (Auditor’s Report) Order, 2003 (as
amended) issued by the Central Government of India in terms of
sub-section (4A) of section 227 of the Companies Act, 1956 (‘the Act’),
we enclose in the Annexure a statement on the matters specified in
paragraphs 4 and 5 of the said Order.
4. Without qualifying our opinion, we draw attention to Note 25 under
Schedule 19, regarding the purchase of material and services in the
prior years from private limited companies/ firms, covered under
section 297 of the Act, which require prior approval of the Central
Government. As indicated in the said note, the Company has filed an
application for compounding and obtaining approval from the Company Law
Board under Section 621A of the Act. The Company is confident of
obtaining the approvals, and pending obtaining such approvals, no
adjustments have been made in the financial statements.
5. Further to our comments in the Annexure referred to above, we
report that:
i. We have obtained all the information and explanations, which to the
best of our knowledge and belief were necessary for the purposes of our
audit;
ii. In our opinion, proper books of account as required by law have
been kept by the Company so far as appears from our examination of
those books;
iii. The balance sheet, profit and loss account and cash flow statement
dealt with by this report are in agreement with the books of account;
iv. In our opinion, the balance sheet, profit and loss account and cash
flow statement dealt with by this report comply with the accounting
standards referred to in sub-section (3C) of section 211 of the
Companies Act, 1956;
v. On the basis of the written representations received from the
directors, as on March 31, 2011, and taken on record by the Board of
Directors, we report that none of the directors is disqualified as on
March 31, 2011 from being appointed as a director in terms of clause
(g) of sub-section (1) of section 274 of the Companies Act, 1956; and
vi. In our opinion and to the best of our information and according to
the explanations given to us, the said accounts give the information
required by the Companies Act, 1956, in the manner so required and give
a true and fair view in conformity with the accounting principles
generally accepted in India;
a) In the case of the balance sheet, of the state of affairs of the
Company as at March 31, 2011;
b) in the case of the profit and loss account, of the profit for the
year ended on that date; and
c) In the case of cash flow statement, of the cash flows for the year
ended on that date.
Annexure referred to in paragraph 3 of our report of even date Re:
Sobha Developers Limited
(i) (a) The Company has maintained proper records
showing full particulars, including quantitative details and situation
of fixed assets.
(b) All fixed assets have not been physically verified by the
management during the year but there is a regular programme of
verification which, in our opinion, is reasonable having regard to the
size of the Company and the nature of its assets. No material
discrepancies were noticed on such verification.
(c) There was no disposal of a substantial part of fixed assets during
the year.
(ii) (a) The management has conducted physical verification
of inventory at reasonable intervals during the year.
(b) The procedures of physical verification of inventory followed by
the management are reasonable and adequate in relation to the size of
the Company and the nature of its business.
(c) The Company is maintaining proper records of inventory and no
material discrepancies were noticed on physical verification.
(iii) (a) The Company has granted loan to one party covered
in the register maintained under section 301 of the Act. The maximum
amount involved during the year was Rs. 87.11 million and the year-end
balance was Rs. 87.11 million.
(b) In our opinion and according to the information and explanations
given to us, the rate of interest and other terms and conditions for
such loans are not prima facie prejudicial to the interest of the
Company
(c) The loans granted are re-payable on demand. We are informed that
the Company has not demanded repayment of any such loan or interest
during the year, and thus, there has been no default on the part of the
parties to whom the money has been lent.
(d) There is no overdue amount of loans granted to companies, firms or
other parties listed in the register maintained under section 301 of
the Companies Act, 1956
(e) The Company has taken loan from two parties covered in the register
maintained under section 301 of the Act. The maximum amount involved
during the year was Rs.13.45 million and the year end balance was
Rs.13.45 million.
(f) In our opinion and according to the information and explanations
given to us, the rate of interest and other terms and conditions for
such loan are prima facie not prejudicial to the interest of the
Company.
(g) The loans taken are re-payable on demand. As informed to us, the
lenders have not demanded repayment of any such loan during the year,
and thus, there has been no default on the part of the Company. The
payment of interest has been regular.
(iv) In our opinion and according to the information and explanations
given to us, there is an adequate internal control system commensurate
with the size of the Company and the nature of its business, for the
purchase of inventory and fixed assets and for the sale of goods and
services. During the course of our audit, we have not observed any
major weakness or continuing failure to correct any major weakness in
the internal control system of the Company in respect of these areas.
(v) (a) According to the information and explanations provided by the
management, we are of the opinion that the particulars of contracts or
arrangements referred to in section 301 of the Act that need to be
entered into the register maintained under section 301 have been so
entered.
(b) In respect of transactions made in pursuance of such contracts or
arrangements exceeding value of Rs. 0.50 million entered into during
the financial year, because of the unique and specialized nature of the
items involved and absence of any comparable prices, we are unable to
comment whether the
transactions were made at prevailing market prices at the relevant
time.
(vi) The Company has not accepted any deposits from the public.
(vii) In our opinion, the Company has an internal audit system
commensurate with the size and nature of its business.
(viii) To the best of our knowledge and as explained, the Central
Government has not prescribed maintenance of cost records under clause
(d) of sub-section (1) of section 209 of the Companies Act, 1956 for
the products of the Company.
(ix) (a) The Company is regular in depositing with appropriate
authorities undisputed statutory dues including provident fund,
investor education and protection fund, employees’ state insurance,
income- tax, sales-tax, excise duty, wealth-tax, service tax, customs
duty, cess and other material statutory dues applicable to it.
Further, since the Central Government has till date not prescribed the
amount of cess payable under section 441 A of the Companies Act,1956,
we are not in a position to comment upon the regularity or otherwise of
the Company in depositing the same.
(b) According to the information and explanations given to us, no
undisputed amounts payable in respect of provident fund, investor
education and protection fund, employees’ state insurance, wealth-tax,
service tax, sales-tax, income-tax, customs duty, excise duty, cess and
other material statutory dues were outstanding, at the year end, for a
period of more than six months from the date they became payable.
(c) According to the records of the Company, the dues outstanding of
income-tax, sales-tax, wealth-tax, service tax, customs duty, excise
duty and cess on account of any dispute, are as follows:
Amount*
Name of the statute Nature of dues (Rs. in Million)
Andhra Pradesh Sales Basis of charge of sales
Tax Act tax 5.25
Andhra Pradesh Sales Basis of charge of sales 1.61
Tax Ace Tax
Karnataka Sales Tax Act Basis of charge of sales
tax 70.97
Karnataka Sales Tax Act Basis of charge of sales
tax 64.55
Income Tax Act Differential tax treatment 3.54
Income Tax Act Disallowances 205.69
Income Tax Act Disallowances 0.04
Finance Act,1994
Basis of valuation 95.67
(Service Tax Provisions)
Finance Act,1994
CENVAT credit 202.94
(Service Tax Provisions)
Finance Act,1994
CENVAT credit 13.41
(Service Tax Provisions)
Finance Act,1994
Disallowances 4.23
(Service Tax Provisions)
Period to which Forum where
Name of the statute amount relates dispute is
pending
Andhra Pradesh Sales Tax Act 2002-04 Sales Tax Appellate
Tribunal
Andhra Pradesh Sales Tax Act 2005-08 Sales Tax Appellate
tribunal
Karnataka Sales Tax Act 1998-06 Joint Commissioner
of Commercial Taxes
Karnataka Sales Tax Act 2003-05 High Court
Income Tax Act 1999-01 High Court
Income Tax Act 2005-07 Income Tax Appellate
Tribunal
Income Tax Act 2008-09 Assessing Officer
Finance Act, 1994
(Service Tax Provisions) 2006-08 Central Excise and
Service Tax Appellate
Tribunal
Finance Act, 1994
(Service Tax Provisions) 2005-08 Central Excise and
Service Tax Appellate
Tribunal
Finance Act, 1994
(Service Tax Provisions) 2009-10 Commissioner of
Central Excise
and Service Tax
Finance Act, 1994
(Service Tax Provisions) 2002-07 Commissioner of
Central Excise and
Service Tax
*Net of Rs. 73.45 million, paid under protest
(x) The Company has no accumulated losses at the end
of the financial year and it has not incurred cash losses in the
current and immediately preceding financial year.
(xi) Based on our audit procedures and as per the information and
explanations given by the management, we are of the opinion that the
Company has not defaulted in repayment of dues to a financial
institution, bank or debenture holders.
(xii) According to the information and explanations given to us and
based on the documents and records produced before us, the Company has
not granted loans and advances on the basis of security by way of
pledge of shares, debentures and other securities.
(xiii) In our opinion, the Company is not a chit fund or a nidhi/
mutual benefit fund/ society. Therefore, the provisions of clause
4(xiii) of the Companies (Auditor’s Report) Order, 2003 (as amended)
are not applicable to the Company.
(xiv) In our opinion, the Company is not dealing in or trading in
shares, securities, debentures and other investments. Accordingly, the
provisions of clause 4(xiv) of the Companies (Auditor’s Report) Order,
2003 (as amended) are not applicable to the Company.
(xv) According to the information and explanations given to us, the
Company has given guarantee for loans taken by others from bank or
financial institutions, the terms and conditions whereof in our opinion
are not prima facie prejudicial to the interest of the Company
considering Company’s economic interest in such entities.
(xvi) Based on information and explanations given to us by the
management, term loans (representing loans with a repayment period
beyond 36 months) were applied for the purpose for which the loans were
obtained.
(xvii) According to the information and explanations given to us and on
an overall examination of the balance sheet of the Company, we report
that no funds raised on short-term basis have been used for long- term
investment.
(xviii) The Company has not made any preferential allotment of shares
to parties or companies covered in the register maintained under
section 301 of the Companies Act, 1956.
(xix) According to the information and explanations given to us, the
Company has not issued any debentures during the year. The Company had
created security or charge in respect of debentures issued in prior
years, which were outstanding during the current year.
(xx) The Company has not raised any money by public issues during the
year. Accordingly, the provisions of clause 4(xx) of the Order are not
applicable to the Company.
(xxi) Based upon the audit procedures performed for the purpose of
reporting the true and fair view of the financial statements and as per
the information and explanations given by the management, we report
that no fraud on or by the Company has been noticed or reported during
the year.
For S.R. BATLIBOI & ASSOCIATES
Firm registration number: 101049W
Chartered Accountants
per Adarsh Ranka
Partner
Membership No.: 209567
Bengaluru, India
May 10, 2011
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