TATA MOTORS LTD - DVR Ltd.

1. We have audited the attached Balance Sheet of TATA MOTORS LIMITED as at March 31,2007, and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date both 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 the 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 issued, by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. 4. Further to our comments in the Annexure referred to in paragraph 3 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 written representations received from the directors, as on March 31, 2007, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2007 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 31,2007; (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 the Cash Flow Statement, of the cash flows for the year ended on that date. For DELOITTE HASKINS & SELLS Chartered Accountants M.S. Dharmadhikari Partner Membership No.: 30802 Mumbai: May 18, 2007 ANNEXURE TO THE AUDITORS' REPORT (Referred to in paragraph 3 of our report of even date) (i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. (b) As explained to us, physical verification of a major portion of fixed assets as at March 31,2007 was conducted by the Management during the year. In our opinion, the frequency of physical verification is reasonable. Having regard to the size of the operations of the Company and on the basis of explanations received, in our opinion, the net differences found on physical verification were not significant. (c) The fixed assets disposed off during the year, in our opinion, do not constitute substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company. (ii) (a) As explained to us, the stocks of finished goods (other than a significant part of the spare parts held for sale) and work in progress in the Company's custody have been physically verified by the Management as at the end of the financial year or after the year end, and in respect of stocks of stores and spares, the aforesaid spare parts held for sale, and raw materials in the Company's custody, there is a perpetual inventory system and a substantial portion of the stocks have been verified during the year. In our opinion, the frequency of verification is reasonable. In the case of materials and spare parts held for sale lying with third parties, certificates confirming stocks have been received in respect of a substantial portion of the stocks held during the year or at the year-end. (b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of stocks followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business. (c) In our opinion and according to the information and explanations given to us, the Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material having regard to the size of the operations of the Company. (iii) (a) The Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. As the Company has not granted any loans, clauses (iii)(b), (iii)(c) and (iii)(d) of Paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company. (b) The Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. As the Company has not taken any loans, clauses (iii)(f) and (iii)(g) of Paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company. (iv) In our opinion and according to the information and explanations given to us, having regard to the explanations that some of the items purchased are of special nature and suitable alternative sources do not exist for obtaining comparable quotations, there exist an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventories and fixed assets and with regard to the sale of goods and services. During the course of our audit, we have not observed any major weakness in the internal control system of the Company. (v) To the best of our knowledge and belief and according to the information and explanations given to us, we are of the opinion that the contracts or arrangements that need to be entered into the register required to be maintained under Section 301 of the Companies Act, 1956 have been so entered. Since the value of the said transaction does not exceed Rupees five lakhs, the information required under clause (v)(b) of Paragraph 4 of the Companies (Auditor's Report) Order, 2003 is not applicable to the Company. (vi) In our opinion and according to the information and explanations given to us, the Company has not accepted deposits from the public during the period covered by our audit report. In respect of unclaimed deposits matured in earlier years that are outstanding during the year, the Company has complied with the provisions of Sections 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975. To the best of our knowledge and according to the information and explanations given to us, no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal. (vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business. (viii) We have broadly reviewed the books of account relating to the manufacture of motor vehicles pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 209 (1 )(d) of the Companies Act, 1956 and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determining whether they are accurate or complete. To the best of our knowledge and according to the information and explanations given to us, the Central Government has not prescribed maintenance of cost records under Section 209 (1)(d) of the Companies Act, 1956 for any other products of the Company. (ix) (a) According to the information and explanations given to us, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income tax, sales tax, wealth tax, service tax, customs duty, excise duty, cess and other material statutory dues applicable to it. We are informed by the Company that the Employees' State Insurance Act, 1948 is applicable only to certain locations of the Company. With regard to the contribution under the Employees' Deposit Linked Insurance Scheme, 1976 (the Scheme), we are informed that the Company has its own Life Cover Scheme, and consequently, an application has been made seeking an extension of exemption from contribution to the Scheme, which is awaited. (b) According to the information and explanations given to us, no undisputed amounts payable in respect of income tax, sales tax, wealth tax, service tax, customs duty, excise duty and cess were in arrears, as at March 31,2007 for a period of more than six months from the date they became payable. (c) According to the information and explanations given to us, details of dues of income tax, sales tax, wealth tax, service tax, custom duty, excise duty and cess which have not been deposited on account of any dispute are given below: Particulars Financial years to which the matter pertains Income tax 1994-95, 1995-96, 1996-97, 1997-98 1997-98 and 2002-03 Sales tax 1971-72, 1972-73,1973-74, 1986-90, 1992-93, 1995-97 1979-80, 1988-91, 1992-93, 1994-96, 1999-2001, 2001-03 1988-90, 1991-93, 1995-96, 1997-98, 1999-2001, 2003-04, 2004-05 1984-85, 1985-86, 1989-90, 1990-91, 1991-92, 1992-93,1993-94, 1996-97, 1997-98, 1998-99, 1999-00, 2000-01, 2001-02, 2002-06 1964-65, 1965-67, 1974-75, 1975-76, 1982-83, 1986-87, 1987-88, 1988-89, 1992-93, 1993-94, 1994-95, 1995-96, 1996-97, 1998-02, 2004-05 1996-97, 1998-99, 2001-02 1984-87, 1988-89, 1990-91, 1995-96, 1997-98, 2003-04, 2005-06 1986-87, 1990-91, 1991-92, 1993-94, 1996-98, 1999-2000, 2002-03, 2003-04 Excise duty 2000-01 1993-94, 1996-97, 2002-05, 2005-06, 2006-07 1984-85, 1995-96, 2001 -02, 2003-04, 2004-05, 2005-06, 2006-07 2005-07 2006-07 Forum where Amount dispute is pending (Rs. in Crores) Appellate Tribunal 13.36 Commissioner 249.69 High Court 14.41 Appellate Tribunal 24.34 Additional Commissioner 21.84 Joint Commissioner 116.27 Deputy Commissioner 72.41 Commissioner 0.20 Assistant Commissioner 0.33 Trade Tax Officer 1.94 Supreme Court 2.14 Appellate Tribunal 19.66 Commissioner (Appeals) 5.07 Additional Commissioner 0.95 Deputy Commissioner 0.33 Subsequent to the Balance Sheet date the Company has received an order raising demand of Rs. 25.70 crores in respect of sales tax for the year 2002-03. The time up to which the Company could appeal against the order has not yet elapsed. We are informed that the Company is in the process of filing appeal against the said order before the appropriate authority. (x) The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year. (xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution, bank or debenture holder. (xii) Based on our examination of the records and the information and explanations given to us, the Company has not granted any 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 are not applicable to the Company. (xiv) In our opinion and according to the information and explanations given to us, 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 are not applicable to the Company. (xv) In our opinion and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.Therefore, the provisions of clause 4 (xv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company. (xvi) In our opinion and according to the information and explanations given to us, the term loans have been applied for the purpose for which they were raised other than amounts temporarily invested pending utilisation of the funds for the intended use. (xvii) In our opinion and 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) According to the information and explanations given to us, the Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956. (xix) In our opinion and according to the information and explanations given to us, the Company has not issued any secured debentures during the period covered by our report. Accordingly, the provisions of clause 4 (xix) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company. (xx) As informed to us, during the period covered by our audit report, the Company has not raised any money by public issues. (xxi) To the best of our knowledge and belief and according to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the course of our audit. For DELOITTE HASKINS & SELLS Chartered Accountants M.S. Dharmadhikari Partner Membership No.: 30802 Mumbai