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Notes to Accounts of GlaxoSmithKline Pharmaceuticals Ltd.

Mar 31, 2015

GENERAL INFORMATION

GlaxoSmithKline Pharmaceuticals Limited (''the Company'') is a public limited company and is listed on the BSE Ltd. (Bombay Stock Exchange) and the National Stock Exchange of India Ltd. (NSE). The Company is engaged interalia, in the business of manufacturing, distributing and trading in pharmaceuticals.

2 SHARE CAPITAL

(b) Rights, preferences and restrictions attached to equity shares:

The Company has one class of equity shares having a par value of Rs. 10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

(c) Shares held by subsidiaries of ultimate holding company in aggregate

(d) Details of equity shares held by shareholders holding more than 5% shares of the aggregate shares in the Company:

3 RESERVES AND SURPLUS

(a) I ncludes Central Government subsidy Rs. 15.00 lakhs and capital profit on reissue of shares forfeited of erstwhile Burroughs Wellcome (India) Limited Rs. 0.51 lakhs.

(b) On account of buy back of equity shares.

4 LONG TERM BORROWINGS

Terms of repayment

Interest free Sales Tax Loan from SICOM Limited as at 31st March, 2015 of Rs. 3,11.55 lakhs (Previous year - Rs. 4,14.24 lakhs) includes NIL (Previous year - Rs. 4.80 lakhs repayable in one installment) availed under the 1988 Sales Tax deferment Scheme, closing on 31st January, 2014 and Rs. 3,11.55 lakhs (Previous year - Rs. 4,09.44 lakhs) under the 1993 Sales Tax deferment Scheme repayable in twenty one instalments (previous year twenty seven instalments) closing on 30th April, 2021. The current maturity amount of Rs. 48.95 lakhs (Previous year - Rs. 53.74 lakhs) of the loan has been disclosed under Note 8 - Other Current Liabilities.

Rupees in lakhs

As at 31st As at 31st March, 2015 December, 2013

22 CONTINGENT LIABILITIES AND COMMITMENTS

A. Contingent Liabilities not provided for:

(i) Cheques discounted with banks 3,74.00 1,56.84

(ii) In respect of claims made against the Company not acknowledged as debts by the Company

- Sales tax matters 34,39.35 34,16.65

- Excise matters 5,93.30 5,93.30

- Service tax matters 1,29.20 1,29.20 - Labour matters 69,31.23 62,81.49

- Other legal matters 22,01.55 22,01.55

which net of current tax amount to 87,75.79 83,31.91

(iii) Income-tax matters in respect of which appeals are pending

- Tax on matters in dispute 177,46.83 199,70.77

Notes:

Future cash outflows in respect of (i) above are dependant on the return of cheques by banks.

Future cash outflows in respect of (ii) and (iii) above are determinable on receipt of decisions / judgements pending with various forums / authorities.

6 The demand of Rs. 71,79 lakhs made by the Central Government on the Company in respect of Betamethasone bulk drugs and formulations made therefrom during the period May 1981 to August 1987 has been under litigation for a period spanning nearly 30 years. Pursuant to the special leave petition of the Central Government in the Supreme Court of India against the Delhi High Court''s Judgment and Order dated 19th October 2001 which was held in favour of the Company, the Supreme Court has, vide its Judgement and Order dated 31st March 2011, upheld the demand. The Company had accrued a liability of Rs. 18,68 lakhs in earlier years and a further provision of Rs. 53,11 lakhs was accrued in 2011.

Based on a legal advice, the Company has filed an Application in the Supreme Court seeking, inter alia, clarifications on some aspects of the Judgement and directions for recomputation of the demand. Simultaneously, the Company without prejudice to and subject to the outcome of the Application filed in the Supreme Court, has tendered as a further deposit, an amount of Rs. 63,60 lakhs, which together with the amount of Rs. 8,19 lakhs previously deposited with the Government, aggregates to the demand of Rs. 71,79 lakhs made by the Government in November 1990. The Company filed a Review Petition in the Supreme Court which was rejected in March 2012.

In October 1996, the Government had claimed interest of Rs. 117,66 lakhs for the period 12th May 1981 to 17th October 1996, for which no provision was made in earlier years. The Government has vide letter dated 4th May 2011 called upon the Company to discharge the entire liability, including upto date interest calculated at 15% p.a., and has vide letter dated 10th October 2011, raised a demand on the Company for the interest amount amounting to Rs. 247,44 lakhs. Without prejudice to the position that interest is not payable, the Company has recognized a provision of Rs. 247,44 lakhs in respect of the Government''s claim for interest in 2011. The Company has filed a Writ Petition at Delhi High Court against the above demand which has been admitted. The Company also filed stay applications which have been dismissed and has filed a Special Leave Petition (SLP) before the Supreme Court for stay of the interest demand until final determination of the Writ Petition filed in the Delhi High Court. The Supreme Court on hearing the above SLP passed an order on 3rd April 2012. The said order stayed the Demand Notice dated 10th October 2011 during the pendency of the Writ Petition at the Delhi High Court subject to the Company depositing Rs. 136,82 lakhs in three equal installments within six month''s time from the date of order. All three instalments have been deposited with the Government as of date. The Supreme Court, vide its order dated 5th October 2012, directed the Delhi High Court to dispose of the Writ Petition as expeditiously as possible.The Delhi High Court has listed the Writ Petition for hearing on 27th August, 2015.

24 Matters in respect of erstwhile Burroughs Wellcome (India) Limited (BWIL):

(i) The Government of India, Ministry of Chemicals and Fertilisers, New Delhi, passed a final order on 21st July, 1993, directing erstwhile BWIL to pay an amount of Rs. 1,91.15 lakhs along with interest due thereon from the date of default into the Drugs Prices Equalisation Account (DPEA) in respect of a bulk drug procured by erstwhile BWIL during the period April 1981 to April 1983.

Erstwhile BWIL filed a writ petition in August 1993 which was admitted by the Bombay High Court. After hearing both the parties, the High Court granted an interim injunction restraining the Government of India from taking any action in furtherance of and/ or implementation of the order dated 21st July, 1993 or from in any manner seeking to compel erstwhile BWIL to deposit any amount into the DPEA, pending the hearing and final disposal of the petition on the condition that erstwhile BWIL furnishes a bank guarantee for Rs. 2,00 lakhs from a nationalised bank and undertakes to pay the amount demanded with interest at the rate of 20% per annum in case the petition fails.

Erstwhile BWIL had accordingly furnished the required bank guarantee. If calculated on the basis of correct data, taking into account set offs claimable for earlier years for which data has been provided by erstwhile BWIL, no amount will be payable by the Company and accordingly no provision in that respect is considered necessary. The Company''s stand that the demand is not sustainable has been confirmed by an eminent counsel. The Government of India''s application in the Supreme Court praying that the writ petition be transferred to the the Supreme Court from the Bombay High Court was not allowed and the Company''s writ petition will now be heard by the Bombay High Court.

(ii) Erstwhile BWIL had made an application to the Government of India for approval under Section 198(4) of the Companies Act, 1956, in respect of payment of the Managing Director and three whole time Directors amounting to Rs. 10.93 lakhs for the year ended 31st August, 1986, which was in accordance with the minimum remuneration provided in the agreement entered into with them prior to erstwhile BWIL becoming public, which required such Government of India''s sanction. The approval is still awaited.

(iii) Remittances in transit represent monies deposited by customers in favour of erstwhile BWIL with banks in Zambia - Rs. 0.31 lakhs and in Tanzania - Rs. 5.61 lakhs, the remittance of which is pending clearance of the authorities in those countries.

7 Matters in respect of erstwhile SmithKline Beecham Pharmaceuticals (India) Limited:

(i) Rs. 1,44.44 lakhs received from Beckman Instruments International S.A. on account of disputed alleged additional commission has been included under Long term provisions and Income tax paid thereon aggregating to Rs. 64.77 lakhs has been included under long term loans and advances. The Company is contesting the matter with the concerned authorities.

(ii) Refund of surtax Rs. 96.81 lakhs, and interest thereon amounting to Rs. 48.52 lakhs, received during 1994, have not been adjusted against the provision for tax in the books of account and recognised as income respectively, since the Income tax department had filed a reference application against the income tax tribunal''s order which was pending before the High Court of Karnataka. The Company has received an order dated 18th April, 2007 from the High Court of Karnataka which is partially in the Company''s favour. On the basis of the aforesaid order, Income Tax Appellate Tribunal (ITAT), Bangalore will pass an order giving directions. On receipt of the ITAT order, the Company will take appropriate steps in the matter.

8 The Company has appointed Mr. Andrew Aristidou as Executive Director for the period December 1, 2014 to June 30, 2017 at the Board Meeting held on November 6, 2014. Shareholders of the Company have approved his appointment and remuneration vide postal ballot dated March 26, 2015. The Company has filed the application with the Central Government for approval of his appointment and payment of remuneration on April 30, 2015. Approval of the Central Government is awaited.

9 The recurring expenditure on research and development charged off to revenue amounts to Rs. 2,19.35 lakhs (Previous year - Rs. 2,62.86 lakhs).

10 Miscellaneous expenses in Note 35 include loss on foreign currency transactions (net) Rs. 1,64.38 lakhs (Previous year - Rs. 9,33.91 lakhs)

11 " Reimbursement of expenses (net)" in Note 35 are amounts recovered from GlaxoSmithKline Asia Private Limited Rs. 1,64.65 lakhs (Previous year - Rs. 3,46.92 lakhs), from subsidiary company Rs. 3,03.15 lakhs (Previous year - Rs. 2,94.13 lakhs), from Stiefel India Private Limited Rs. 24.97 lakhs (Previous year - Rs. 18.43 lakhs), from GlaxoSmithKline Pte Limited Rs. 30.96 lakhs (Previous year - Rs. 58.96 lakhs), from GlaxoSmithKline Services unlimited Rs. 2,19.75 lakhs (Previous year - 92.03 lakhs), GlaxoSmithKline Research and Development Rs. 1,05.74 lakhs (Previous year - NIL), GlaxoSmithKline Brasil Ltda Rs. 46.98 Lakhs (Previous year - Rs. 9.18 Lakhs) and paid to GlaxoSmithKline Consumer Healthcare Limited Rs. 27,69.44 lakhs (Previous year - Rs. 21,79.14 lakhs) towards the value of costs apportioned, in accordance with the agreements on allocation of expenses with the companies.

12 Employee Benefits:

The company obtained actuarial reports as required by the Accounting Standard 15, Employee Benefits (revised 2005) [''the revised AS 15''], notified under sub-section (3C) of Section 211 of the Companies Act, 1956 based on which disclosures have been made in the financial statements for the fifteen months ended 31st March, 2015.

The disclosures as required by the revised AS 15 are as given below:

1 Brief description of the Plans

The Company has various schemes for long-term benefits such as provident fund, superannuation, gratuity and post retirement medical. In case of funded schemes, the funds are recognised by the Income tax authorities and administered through trustees / appropriate authorities. The Company''s defined contribution plans are superannuation and employees'' pension scheme (under the provisions of the Employees'' Provident Funds and Miscellaneous Provisions Act, 1952) since the Company has no further obligation beyond making the contributions. The liability of the Company on the exempt Provident Fund managed by the trustees is restricted to the interest shortfall if any. The employees of the Company are also entitled to leave encashment and compensated absences as per the Company''s policy. The Company''s defined benefit plans include gratuity, post retirement medical and other benefits.

3 The liability for leave encashment and compensated absences as at period end is Rs. 43,01.90 lakhs (Previous year - Rs. 33,37.71 lakhs) #.

4 Disclosures for defined benefit plans as on 31st March, 2015:

13 The Company has only one reportable segment which is Pharmaceuticals. Accordingly, no separate disclosures of segment information have been made.

14 Related Party disclosures

Related party disclosures, as required by Accounting Standard 18, "Related Party Disclosures", notified under sub-section (3C) of Section 211 of the Companies Act, 1956 are given below:

1 Relationships (during the period):

(i) Shareholders (the GlaxoSmithKline (GSK) Group shareholding) in the Company Glaxo Group Limited, u.K.

GlaxoSmithKline Pte Limited, Singapore Eskaylab Limited, u.K.

Burroughs Wellcome International Limited, u.K.

Castleton Investment Limited, Mauritius

Holding company / ultimate holding company of the above shareholders *

GlaxoSmithKline plc, u.K.

GlaxoSmithKline Finance plc, u.K.

Setfirst Ltd, u.K.

SmithKline Beecham Limited, u.K.

Wellcome Limited, u.K.

The Wellcome Foundation Limited, u.K.

Wellcome Consumer Healthcare Limited, u.K.

* no transactions during the period

(ii) Subsidiary of the Company

Biddle Sawyer Limited, a wholly owned subsidiary of the Company

(iii) Other related parties in the GlaxoSmithKline (GSK) Group where common control exists and with whom the Company had transactions during the period:

GlaxoSmithKline Asia Private Limited, India GlaxoSmithKline Brasil Ltda, Brazil GlaxoSmithKline Consumer Healthcare Limited, India GlaxoSmithKline Biologicals S.A., Belgium GlaxoSmithKline Services unlimited, u.K.

Glaxo Operations uK Limited, u.K Laboratoire GlaxoSmithKline S.A.S., France GlaxoSmithKline Export Limited, u.K.

GlaxoSmithKline Research & Development Ltd GlaxoSmithKline Pte Limited, Singapore GlaxoSmithkline Philippines Inc., Philippines GlaxoSmithKline Australia Pty Limited, Australia GlaxoSmithKline Trading Services Limited, Ireland GlaxoSmithKline Limited, Hong Kong GlaxoSmithKline South Africa (Pty) Ltd, South Africa GlaxoSmithKline LLC, u.S.A Stiefel India Private Limited, India Glaxo Wellcome Ceylon Ltd., Sri Lanka uS Pharmaceuticals, u.S.A. uS GMS Financial Services, u.S.A.

(iv) Directors and members of GSK India Management Team and their relatives:

Mr. A. Aristidou (w.e.f 1st December, 2014) Mr. PV. Nayak

Ms. A. Bansal (w.e.f 19th February, 2013) Mr. R. Bartaria

Mr. A.N. Roy Mr. R.C. Sequeira

Mr. C.T. Renganathan (up to 31st December, 2014) Mr. R.R. Bajaaj

Mr. D.S. Parekh Mr. R. Krishnaswamy

Mr. D. Sundaram Mr. S. Harford *

Dr. H.B. Joshipura Dr. S. Joglekar (up to 21st February, 2014)

Mr. H. Buch Mr. S. Khanna

Mr. K. Hazari Mr. S. Dheri

Mr. M.B. Kapadia (up to 30th November, 2014) Mr. S. Venkatesh (w.e.f 25th June, 2014)

Mr. N. Kaviratne Ms. V. Desai (w.e.f 11th February, 2014)

Mr. P. Bhide Mr. V. Thyagarajan

* no transactions during the period

15 Disclosures as required by Accounting Standard 19, "Leases", notified under sub-section (3C) of Section 211 of the Companies Act, 1956, are given below:

(i) The Company has taken various residential, office and godown premises under operating lease or leave and licence agreements. These are not non-cancellable and range between 11 months and 3 years under leave and licence, or longer for other leases and are renewable by mutual consent on mutually agreeable terms. The Company has given refundable interest free security deposits under certain agreements.

(ii) Lease payments are recognised in the Statement of Profit and Loss under ''Rent'' in Note 35.

16 (a) Provision for tax is net of advance tax and tax deducted at source amounting to Rs. 251,92.00 lakhs (Previous year - Rs. Nil).

(b) Advance income-tax (net) represents payments in excess of provisions of Rs. 2980,21.26 lakhs (Previous year - Rs. 2980,21.26 lakhs) and includes a net tax refund with interest of Rs. 110,35.00 lakhs which has been held as provision pending the final outcome of a litigation.

17 Other Loans and advances are net of allowances for doubtful loans and advances aggregating Rs. 29,96.83 lakhs (Previous year - Rs. 29,96.83 lakhs).

18 During the period, a complaint filed against the company and others by Bio Med (P) Ltd is pending determination before the Competition Commission of India (CCI).

19 In April 2014, GlaxoSmithKline Plc (GSK), London, UK, entered into an inter-conditional agreement with Novartis AG (Novartis), Basel, Switzerland where GSK (i) will acquire the Novartis''s Vaccines Business and manufacturing capabilities and facilities from Novartis, and (ii) GSK sell the rights to its Marketed Oncology Portfolio, related R&D activities and AKT Inhibitors currently in development to Novartis. Globally, this transaction with Novartis was completed on March 2nd 2015.

In connection to the above transactions, the GlaxoSmithKline Pharmaceuticals Limited ("Company") Board in its meeting held on 12th February 2015, approved the transactions on an Asset Sale basis with Novartis Healthcare Private Limited, a private unlisted Company incorporated under the Companies Act 1956. Pursuant to the global deal, the Company will have its distribution rights terminated for the oncology portfolio in return for accessing the distribution rights of the acquired vaccines portfolio. The transaction would be profit neutral for the Company.

GSK Plc and Novartis AG have obtained the approval from Competition Commission of India. The Company has filed application with Foreign Investment Promotion Board (FIPB). The closing of the asset sales between the companies is subject to the receipt of all applicable legal and regulatory approvals, consent, permissions and sanctions as may be necessary from concerned authorities.

20 The accounting year of the company has been changed from January - December to April - March with effect from the current year. Consequently, the current year''s financial statements are for the 15 months from 1st January, 2014 to 31st March, 2015. The previous year figures relate to the 12 months ended 31st December, 2013.

In view of the above, the current year''s figures are not comparable with those of the previous year. Previous year''s figures have been regrouped wherever necessary.


Dec 31, 2013

The liability for leave encashment and compensated absences is provided on the basis of valuation, as at Balance Sheet date, carried out by an independent actuary.

(ii) The expenditure on voluntary retirement schemes is charged to the Statement of Profit and Loss in the year in which it is incurred.

(iii) Actuarial gains and losses comprise experience adjustments and the effects of changes in actuarial assumptions and are recognised in the Statement of Profit and Loss in the year in which they arise.

(p) Earnings Per Share

Basic earnings per share is calculated by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.

The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares, that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.

(b) Rights, preferences and restrictions attached to equity shares :

The Company has one class of equity shares having a par value of Rs. 10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

22 CONTINGENT LIABILITIES AND COMMITMENTS

A. Contingent Liabilities not provided for:

(i) Cheques discounted with banks .. .. .. 1,56.84 4,84.58

(ii) I n respect of claims made against the Company not acknowledged as debts by the Company

- Sales tax matters .. .. .. .. .. .. 34,16.65 30,74.86

- Excise matters .. .. .. .. .. .. .. 5,93.30 5,92.64

- Service tax matters .. .. .. .. .. .. 1,29.20 1,29.20

- Labour matters .. .. .. .. .. .. .. 62,81.49 56,83.79

- Other legal matters .. .. .. .. .. .. 22,01.55 22,01.55

which net of current tax amount to - .. .. 83,31.91 78,91.80

(iii) Income-tax matters in respect of which appeals are pending

- Tax on matters in dispute .. .. .. .. 199,70.77 106,72.90 Notes:

Future cash outflows in respect of (i) above are dependant on the return of cheques by banks.

Future cash outflows in respect of (ii) and (iii) above are determinable on receipt of decisions / judgements pending with various forums / authorities.

B. Commitments

(i) Estimated amount of contracts (net of advances) remaining to be executed on

capital account and not provided for .. .. 53,72.63 48,59.74

(ii) Uncalled liability on partly paid shares:

- in Hill Properties Limited .. .. .. .. .. 0.12 0.12

Note:

Future cash outflow is dependent on the call to be made by Hill Properties Limited.

1 The demand of Rs. 71,79 lakhs made by the Central Government on the Company in respect of Betamethasone bulk drugs and formulations made therefrom during the period May 1981 to August 1987 has been under litigation for a period spanning nearly 30 years. Pursuant to the special leave petition of the Central Government in the Supreme Court of India against the Delhi High Court''s Judgment and Order dated 19th October 2001 which was held in favour of the Company, the Supreme Court has, vide its Judgement and Order dated 30th March 2011, upheld the demand. The Company had accrued a liability of Rs. 18,68 lakhs in earlier years and a further provision of Rs. 53,11 lakhs was accrued in 2011.

Based on a legal advice, the Company has filed an Application in the Supreme Court seeking, inter alia, clarifications on some aspects of the Judgement and directions for recomputation of the demand. Simultaneously, the Company without prejudice to and subject to the outcome of the Application filed in the Supreme Court, has tendered as a further deposit, an amount of Rs. 63,60 lakhs, which together with the amount of Rs. 8,19 lakhs previously deposited with the Government, aggregates to the demand of Rs. 71,79 lakhs made by the Government in November 1990. The Company filed a Review Petition with the Supreme Court which was rejected in March 2012.

In October 1996, the Government had claimed interest of Rs. 117,66 lakhs for the period 12th May 1981 to 17th October 1996, for which no provision was made in earlier years. The Government has vide letter dated 4th May 2011 called upon the Company to discharge the entire liability, including upto date interest calculated at 15% p.a., and has vide letter dated 10th October 2011, raised a demand on the Company for the interest amount amounting to Rs. 247,44 lakhs. Without prejudice to the position that interest is not payable, the Company has recognized a provision of Rs. 247,44 lakhs in respect of the Government''s claim for interest in 2011. The Company has filed a Writ Petition at Delhi High Court against the above demand which has been admitted. The Company also filed stay applications which have been dismissed and has filed a Special Leave Petition (SLP) before the Supreme Court for stay of the interest demand until final determination of the Writ Petition filed in the Delhi High Court. The Supreme Court on hearing the above SLP passed an order on 3rd April 2012. The said order stayed the Demand Notice dated 10th October 2011 during the pendency of the Writ Petition at the Delhi High Court subject to the Company depositing Rs. 136,82 lakhs in three equal installments within six month''s time from the date of order. All three instalments have been deposited with the Government as of date. The Supreme Court, vide its order dated 5th October 2012, directed the Delhi High Court to dispose of the Writ Petition as expeditiously as possible. The Delhi High Court has listed the Writ Petition for hearing on 4th July, 2014.

2 Matters in respect of erstwhile Burroughs Wellcome (India) Limited (BWIL):

(i) The Government of India, Ministry of Chemicals and Fertilisers, New Delhi, passed a final order on 21st July, 1993, directing erstwhile BWIL to pay an amount of Rs. 1,91.15 lakhs along with interest due thereon from the date of default into the Drugs Prices Equalisation Account (DPEA) in respect of a bulk drug procured by erstwhile BWIL during the period April 1981 to April 1983. Erstwhile BWIL filed a writ petition in August 1993 which was admitted by the Bombay High Court. After hearing both the parties, the High Court granted an interim injunction restraining the Government of India from taking any action in furtherance of and / or implementation of the order dated 21st July, 1993 or from in any manner seeking to compel erstwhile BWIL to deposit any amount into the DPEA, pending the hearing and final disposal of the petition on the condition that erstwhile BWIL furnishes a bank guarantee for Rs. 2,00 lakhs from a nationalised bank and undertakes to pay the amount demanded with interest at the rate of 20% per annum in case the petition fails.

Erstwhile BWIL had accordingly furnished the required bank guarantee. If calculated on the basis of correct data, taking into account set offs claimable for earlier years for which data has been provided by erstwhile BWIL, no amount will be payable by the Company and accordingly no provision in that respect is considered necessary. The Company''s stand that the demand is not sustainable has been confirmed by an eminent counsel. The Government of India''s application in the Supreme Court praying that the writ petition be transferred to the Supreme Court from the Bombay High Court was not allowed and the Company''s writ petition will now be heard by the Bombay High Court.

(ii) Erstwhile BWIL had made an application to the Government of India for approval under Section 198(4) of the Companies Act, 1956, in respect of payment of the Managing Director and three whole time Directors amounting to Rs. 10.93 lakhs for the year ended 31st August, 1986, which was in accordance with the minimum remuneration provided in the agreement entered into with them prior to erstwhile BWIL becoming public, which required such Government of India''s sanction. The approval is still awaited.

(iii) Remittances in transit represent monies deposited by customers in favour of erstwhile BWIL with banks in Zambia - Rs. 0.31 lakhs and in Tanzania - Rs. 5.61 lakhs, the remittance of which is pending clearance of the authorities in those countries.

3 Matters in respect of erstwhile SmithKline Beecham Pharmaceuticals (India) Limited:

(i) Rs. 1,44.44 lakhs received from Beckman Instruments International S.A. on account of disputed alleged additional commission has been included under Long term provisions and Income tax paid thereon aggregating to Rs. 64.77 lakhs has been included under long term loans and advances. The Company is contesting the matter with the concerned authorities.

(ii) Refund of surtax Rs. 96.81 lakhs, and interest thereon amounting to Rs. 48.52 lakhs, received during 1994, have not been adjusted against the provision for tax in the books of account and recognised as income respectively, since the Income tax department had filed a reference application against the income tax tribunal''s order which was pending before the High Court of Karnataka. The Company has received an order dated 18th April, 2007 from the High Court of Karnataka which is partially in the Company''s favour. On the basis of the aforesaid order, Income Tax Appellate Tribunal (ITAT), Bangalore will pass an order giving directions. On receipt of the ITAT order, the Company will take appropriate steps in the matter.

4 Employee benefits expenses in Note 34 include amounts subject to approval of members in ensuing Annual General Meeting - NIL (Previous year - Rs. 80.18 lakhs).

5 The recurring expenditure on research and development charged off to revenue amounts to Rs. 2,62.86 lakhs (Previous year - Rs. 2,40.34 lakhs).

6 Miscellaneous expenses in Note 35 include loss on foreign currency transactions (net) Rs. 9,33.91 lakhs (Previous year - Rs. 3,14.72 lakhs).

7 " Reimbursement of expenses (net)" in Note 35 are amounts recovered from GlaxoSmithKline Asia Private Limited Rs. 3,46.92 lakhs (Previous year - Rs. 3,25.98 lakhs), from subsidiary company Rs. 2,94.13 lakhs (Previous year - Rs. 3,20.63 lakhs), from Stiefel India Private Limited Rs. 18.43 lakhs (Previous year - Rs. 15.53 lakhs) , from GlaxoSmithKline Pte Limited Rs. 58.96 lakhs (Previous year - Rs. 62.04 lakhs), from GlaxoSmithKline Service Unlimited Rs. 92.03 lakhs (Previous year - 80.68 lakhs), GlaxoSmithKline Brasil Ltda Rs. 9.18 Lakhs (Previous year - NIL) and paid to GlaxoSmithKline Consumer Healthcare Limited Rs. 21,79.14 lakhs (Previous year - Rs. 11,00.66 lakhs) towards the value of costs apportioned, in accordance with the agreements on allocation of expenses with the companies.

8 Employee Benefits:

The Company obtained actuarial reports as required by the Accounting Standard 15, Employee Benefits (revised 2005) [‘the revised AS 15''], notified under sub-section (3C) of Section 211 of the Companies Act, 1956 based on which disclosures have been made in the financial statements for the year ended 31st December, 2013.

The disclosures as required by the revised AS 15 are as given below:

1 Brief description of the Plans

The Company has various schemes for long-term benefits such as provident fund, superannuation, gratuity and post retirement medical. In case of funded schemes, the funds are recognised by the Income tax authorities and administered through trustees / appropriate authorities. The Company''s defined contribution plans are superannuation and employees'' pension scheme (under the provisions of the Employees'' Provident Funds and Miscellaneous Provisions Act, 1952) since the Company has no further obligation beyond making the contributions. The liability of the Company on the exempt Provident Fund managed by the trustees is restricted to the interest shortfall if any. The employees of the Company are also entitled to leave encashment and compensated absences as per the Company''s policy. The Company''s defined benefit plans include gratuity, post retirement medical and other benefits.

# excludes impact of actualisation of gratuity Rs. 22.01 lakhs, leave encashment and compensated absences Rs. 6.62 lakhs (Previous year - gratuity Rs. 39.65 lakhs, leave encashment and compensated absences Rs. 15.53 lakhs).

* The Guidance Note on Implementing AS 15, ‘Employee Benefits'' issued by the Accounting Standard Board (ASB) of the Institute of Chartered Accountants of India states that Provident Funds set up by employers that guarantee a specified rate of return and which require interest shortfall to be met by the employer would be defined benefit plans in accordance with the requirements of paragraph 26(b) of AS 15. The current year is the first year in which the actuary has given the detailed disclosures in the actuarial valuation report, in view of the issuance of the Guidance Note by the Institute of Actuaries of India. Accordingly the compliance with the disclosure requirements of paragraph 120(n) of AS 15: Employee Benefits has been done prospectively from this year onwards.

9 The Company has only one reportable segment which is Pharmaceuticals. Accordingly, no separate disclosures of segment information have been made.

10 Related Party disclosures

Related party disclosures, as required by Accounting Standard 18, "Related Party Disclosures", notified under sub-section (3C) of Section 211 of the Companies Act, 1956 are given below:

1 Relationships (during the year):

(i) Shareholders (the GlaxoSmithKline (GSK) Group shareholding) in the Company:

Glaxo Group Limited, U.K.

Eskaylab Limited, U.K.

Burroughs Wellcome International Limited, U.K.

Castleton Investment Limited, Mauritius

Holding company / ultimate holding company of the above shareholders *

GlaxoSmithKline plc, U.K.

GlaxoSmithKline Finance plc, U.K.

SmithKline Beecham Limited, U.K.

Wellcome Limited, U.K.

The Wellcome Foundation Limited, U.K.

Wellcome Consumer Healthcare Limited, U.K.

* no transactions during the year

(ii) Subsidiary of the Company:

Biddle Sawyer Limited, a wholly owned subsidiary of the Company

(iii) Other related parties in the GlaxoSmithKline (GSK) Group where common control exists and with whom the Company had transactions during the year:

SmithKline Beecham Private Limited, Sri Lanka GlaxoSmithKline Asia Private Limited, India GlaxoSmithKline Brasil Ltda, Brazil GlaxoSmithKline Consumer Healthcare Limited, India GlaxoSmithKline Biologicals S.A., Belgium GlaxoSmithKline Services Unlimited, U.K.

Glaxo Operations UK Limited, U.K Laboratoire GlaxoSmithKline S.A.S., France GlaxoSmithKline Export Limited, U.K.

GlaxoSmithKline Pte Limited, Singapore GlaxoSmithKline Australia Pty Limited, Australia GlaxoSmithKline Trading Services Limited, Ireland GlaxoSmithKline Limited, Hong Kong GlaxoSmithKline LLC, U.S.A Stiefel India Private Limited, India US Pharmaceuticals, U.S.A.

US GMS Financial Services, U.S.A.

GlaxoSmithKline Ilaclari Sanayi ve Ticaret AS, Turkey GlaxoSmithKline Manufacturing SPA, Italy

49 Disclosures as required by Accounting Standard 19, "Leases", notified under sub-section (3C) of Section 211 of the Companies Act, 1956, are given below:

(i) The Company has taken various residential, office and godown premises under operating lease or leave and licence agreements. These are not non-cancellable and range between 11 months and 3 years under leave and licence, or longer for other leases and are renewable by mutual consent on mutually agreeable terms. The Company has given refundable interest free security deposits under certain agreements.

(ii) Lease payments are recognised in the Statement of Profit and Loss under ‘Rent'' in Note 35.

11 Advance income-tax (net) represents payments in excess of provisions of Rs. 2980,21.26 lakhs (Previous year - Rs. 2747,20.91 lakhs) and includes a net tax refund with interest of Rs. 110,35.00 lakhs which has been held as provision pending the final outcome of a litigation.

12 The tax year for the Company being the year ending 31st March, the provision for taxation for the year is the aggregate of the provision made for the three months ended 31st March, 2013 and the provision based on the figures for the remaining nine months up to 31st December, 2013, the ultimate tax liability of which will be determined on the basis of the figures for the period 1st April, 2013 to 31st March, 2014.

13 Other Loans and advances are net of allowances for doubtful loans and advances aggregating Rs. 29,96.83 lakhs (Previous year - Rs. 30,06.19 lakhs).

14 Previous year''s figures have been regrouped wherever necessary.


Dec 31, 2012

GENERAL INFORMATION

GlaxoSmithKline Pharmaceuticals Limited (''the Company'') is a public limited company and is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The Company is engaged interalia, in the business of manufacturing, distributing and trading in pharmaceuticals.

(a) Rights, preferences and restrictions attached to equity shares :

The Company has one class of equity shares having a par value of Rs. 10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

Terms of repayment

Interest free Sales Tax Loan from SICOM Limited as at 31st December, 2012 of Rs. 4,59.33 lakhs (Previous year - Rs. 4,90.52 lakhs) includes Rs. 20.94 lakhs (Previous year - Rs. 42.78 lakhs) availed under the 1988 Sales Tax deferment Scheme repayable in three installments, closing on 31st January, 2014 and Rs. 4,38.39 lakhs (Previous year - Rs. 4,47.74 lakhs) under the 1993 Sales Tax deferment Scheme repayable in twenty nine instalments closing on 30th April, 2021. The current maturity amount of Rs. 45.09 lakhs (Previous year - Rs. 31.19 lakhs) of the loan has been disclosed under Note 8 - Other Current Liabilities.

1 The demand of Rs. 71,79 lakhs made by the Central Government on the Company in respect of Betamethasone bulk drugs and formulations made therefrom during the period May 1981 to August 1987 has been under litigation for a period spanning nearly 30 years. Pursuant to the special leave petition of the Central Government in the Supreme Court of India against the Delhi High Court''s Judgment and Order dated 19th October, 2001 which was held in favour of the Company, the Supreme Court has, vide its Judgement and Order dated 30th March, 2011, upheld the demand. The Company had accrued a liability of Rs. 18,68 lakhs in earlier years and a further provision of Rs. 53,11 lakhs was accrued in 2011.

Based on a legal advice, the Company has filed an Application in the Supreme Court seeking, inter alia, clarifications on some aspects of the Judgement and directions for recomputation of the demand. Simultaneously, the Company without prejudice to and subject to the outcome of the Application filed in the Supreme Court, has tendered as a further deposit, an amount of Rs. 63,60 lakhs, which together with the amount of Rs. 8,19 lakhs previously deposited with the Government, aggregates to the demand of Rs. 71,79 lakhs made by the Government in November 1990. The Company filed a Review Petition with the Supreme Court which was rejected in March 2012.

In October 1996, the Government had claimed interest of Rs. 117,66 lakhs for the period 12th May, 1981 to 17th October, 1996, for which no provision was made in earlier years. The Government has vide letter dated 4th May, 2011 called upon the Company to discharge the entire liability, including upto date interest calculated at 15% p.a., and has vide letter dated 10th October, 2011, raised a demand on the Company for the interest amount amounting to Rs. 247,44 lakhs. Without prejudice to the position that interest is not payable, the Company has recognized a provision of Rs. 247,44 lakhs in respect of the Government''s claim for interest in 2011. The Company has filed a Writ Petition at Delhi High Court against the above demand which has been admitted. The Company also filed stay applications which have been dismissed and has filed a Special Leave Petition (SLP) before the Supreme Court for stay of the interest demand until final determination of the Writ Petition filed in the Delhi High Court. The Supreme Court on hearing the above SLP passed an order on 3rd April, 2012. The said order stayed the Demand Notice dated 10th October, 2011 during the pendency of the Writ Petition at the Delhi High Court subject to the Company depositing Rs. 136,82 lakhs in three equal installments within six month''s time from the date of order. All three instalments have been deposited with the Government as of date. The Supreme Court, vide its order dated 5th October, 2012, directed the Delhi High Court to dispose of the Writ Petition as expeditiously as possible. The Delhi High Court has listed the Writ Petition for hearing on 21st February, 2013.

2 Matters in respect of erstwhile Burroughs Wellcome (India) Limited (BWIL):

(i) The Government of India, Ministry of Chemicals and Fertilisers, New Delhi, passed a final order on 21st July, 1993, directing erstwhile BWIL to pay an amount of Rs. 1,91.15 lakhs along with interest due thereon from the date of default into the Drugs Prices Equalisation Account (DPEA) in respect of a bulk drug procured by erstwhile BWIL during the period April 1981 to April 1983. Erstwhile BWIL filed a writ petition in August 1993 which was admitted by the Bombay High Court. After hearing both the parties, the High Court granted an interim injunction restraining the Government of India from taking any action in furtherance of and/ or implementation of the order dated 21st July, 1993 or from in any manner seeking to compel erstwhile BWIL to deposit any amount into the DPEA, pending the hearing and final disposal of the petition on the condition that erstwhile BWIL furnishes a bank guarantee for Rs. 2,00 lakhs from a nationalised bank and undertakes to pay the amount demanded with interest at the rate of 20% per annum in case the petition fails.

Erstwhile BWIL had accordingly furnished the required bank guarantee. If calculated on the basis of correct data, taking into account set offs claimable for earlier years for which data has been provided by erstwhile BWIL, no amount will be payable by the Company and accordingly no provision in that respect is considered necessary. The Company''s stand that the demand is not sustainable has been confirmed by an eminent counsel. The Government of India''s application in the Supreme Court praying that the writ petition be transferred to the Supreme Court from the Bombay High Court was not allowed and the Company''s writ petition will now be heard by the Bombay High Court.

(ii) Erstwhile BWIL had made an application to the Government of India for approval under Section 198(4) of the Companies Act, 1956, in respect of payment of the Managing Director and three whole time Directors amounting to Rs. 10.93 lakhs for the year ended 31st August, 1986, which was in accordance with the minimum remuneration provided in the agreement entered into with them prior to erstwhile BWIL becoming public, which required such Government of India''s sanction. The approval is still awaited.

(iii) Remittances in transit represent monies deposited by customers in favour of erstwhile BWIL with banks in Zambia - Rs. 0.31 lakhs and in Tanzania - Rs. 5.61 lakhs, the remittance of which is pending clearance of the authorities in those countries.

3 Matters in respect of erstwhile SmithKline Beecham Pharmaceuticals (India) Limited:

(i) Rs. 1,44.44 lakhs received from Beckman Instruments International S.A. on account of disputed alleged additional commission has been included under Long term provisions and Income tax paid thereon aggregating to Rs. 64.77 lakhs has been included under long term loans and advances. The Company is contesting the matter with the concerned authorities.

(ii) Refund of surtax Rs. 96.81 lakhs, and interest thereon amounting to Rs. 48.52 lakhs, received during 1994, have not been adjusted against the provision for tax in the books of account and recognised as income respectively, since the Income tax department had filed a reference application against the income tax tribunal''s order which was pending before the High Court of Karnataka. The Company has received an order dated 18th April, 2007 from the High Court of Karnataka which is partially in the Company''s favour. On the basis of the aforesaid order, Income Tax Appellate Tribunal (ITAT), Bangalore will pass an order giving directions. On receipt of the ITAT order, the Company will take appropriate steps in the matter.

4 Employee benefits expenses in Note 35 include amounts subject to approval of members in ensuing Annual General Meeting - Rs. 80.18 lakhs (Previous year - Nil).

5 The recurring expenditure on research and development charged off to revenue amounts to Rs. 2,40.34 lakhs (Previous year - Rs. 3,82.79 lakhs).

6 Miscellaneous expenses in Note 36 include loss on foreign currency transactions (net) Rs. 3,14.72 lakhs (Previous year - Rs. 6,05.80 lakhs).

7 " Reimbursement of expenses (net)" in Note 36 are amounts recovered from GlaxoSmithKline Asia Private Limited Rs. 3,25.98 lakhs (Previous year - Rs. 3,00.37 lakhs), from subsidiary company Rs. 3,20.63 lakhs (Previous year - Rs. 5,31.59 lakhs), from Stiefel India Private Limited Rs. 15.53 lakhs (Previous year - Rs. 14.50 lakhs), from GlaxoSmithKline Pte Limited Rs. 62.04 lakhs (Previous year - Rs. 59.86 lakhs), from GlaxoSmithKline Service Unlimited Rs. 80.68 lakhs (Previous year - 23.95 lakhs) and paid to GlaxoSmithKline Consumer Healthcare Limited Rs. 11,00.66 lakhs (Previous year - Rs. 10,04.34 lakhs) towards the value of costs apportioned, in accordance with the agreements on allocation of expenses with the companies.

8 Employee Benefits:

The Company obtained actuarial reports as required by the Accounting Standard 15, Employee Benefits (revised 2005) [‘the revised AS 15''], notified under sub-section (3C) of Section 211 of the Companies Act, 1956 based on which disclosures have been made in the financial statements for the year ended 31st December, 2012.

The disclosures as required by the revised AS 15 are as given below:

1 Brief description of the Plans

The Company has various schemes for long-term benefits such as provident fund, superannuation, gratuity and post retirement medical. In case of funded schemes, the funds are recognised by the Income tax authorities and administered through trustees / appropriate authorities. The Company''s defined contribution plans are superannuation and employees'' pension scheme (under the provisions of the Employees'' Provident Funds and Miscellaneous Provisions Act, 1952) since the Company has no further obligation beyond making the contributions. The liability of the Company on the exempt Provident Fund managed by the trustees is restricted to the interest shortfall if any. The employees of the Company are also entitled to leave encashment and compensated absences as per the Company''s policy.

3 The Guidance Note on Implementing AS 15, ‘Employee Benefits'' issued by the Accounting Standard Board (ASB) of the Institute of Chartered Accountants of India states that Provident Funds set up by employers that guarantee a specified rate of return and which require interest shortfall to be met by the employer would be defined benefit plans in accordance with the requirements of paragraph 26(b) of AS 15. Pursuant to the Guidance Note, the liability in respect of the shortfall of interest earnings of Fund is Nil determined on the basis of an actuarial valuation. The interest shortfall liability being "Other Long Term Employee Benefits", detailed disclosures are not required.

4 The liability for leave encashment and compensated absences as at year end is Rs. 27,37.69 lakhs (Previous year - Rs. 24,63.29 lakhs) #.

10 The Company has only one reportable segment which is Pharmaceuticals. Accordingly, no separate disclosures of segment information have been made.

11 Related Party disclosures

Related party disclosures, as required by Accounting Standard 18, "Related Party Disclosures", notified under sub-section (3C) of Section 211 of the Companies Act, 1956 are given below:

1 Relationships (during the year):

(i) Shareholders (the GlaxoSmithKline (GSK) Group shareholding) in the Company Glaxo Group Limited, U.K.

Eskaylab Limited, U.K.

Burroughs Wellcome International Limited, U.K.

Castleton Investment Limited, Mauritius

Holding company / ultimate holding company of the above shareholders *

GlaxoSmithKline plc, U.K.

GlaxoSmithKline Finance plc, U.K.

SmithKline Beecham Limited, U.K.

Wellcome Limited, U.K.

The Wellcome Foundation Limited, U.K.

Wellcome Consumer Healthcare Limited, U.K.

* no transactions during the year

(ii) Subsidiary of the Company

Biddle Sawyer Limited, a wholly owned subsidiary of the Company

(iii) Other related parties in the GlaxoSmithKline (GSK) Group where common control exists and with whom the Company had transactions during the year:

SmithKline Beecham Private Limited, Sri Lanka

GlaxoSmithKline Pakistan Limited, Pakistan

GlaxoSmithKline Asia Private Limited, India

GlaxoSmithKline Consumer Healthcare Limited, India

GlaxoSmithKline Biologicals S.A., Belgium

GlaxoSmithKline Services Unlimited, U.K.

GlaxoSmithKline Export Limited, U.K.

SmithKline Beecham Pharmaceuticals R & D, U.S.

Glaxo Operations UK Limited, U.K

GlaxoSmithKline Pte Limited, Singapore

GlaxoSmithKline Australia Pty Limited, Australia

GlaxoSmithKline Trading Services Limited, Ireland

GlaxoSmithKline Limited, Hong Kong

GlaxoSmithKline LLC, U.S.A

GlaxoSmithKline Limited, Kenya

Stiefel India Private Limited, India

Glaxo Wellcome Ceylon Ltd., Sri Lanka

US Pharmaceuticals, U.S.A.

GlaxoSmithKline Ilaclari Sanayi ve Ticaret AS, Turkey

GlaxoSmithKline Manufacturing SPA, Italy

12 Disclosures as required by Accounting Standard 19, "Leases", notified under sub-section (3C) of Section 211 of the Companies Act, 1956, are given below:

(i) The Company has taken various residential, office and godown premises under operating lease or leave and licence agreements. These are not non-cancellable and range between 11 months and 3 years under leave and licence, or longer for other leases and are renewable by mutual consent on mutually agreeable terms. The Company has given refundable interest free security deposits under certain agreements.

(ii) Lease payments are recognised in the Statement of Profit and Loss under ‘Rent'' in Note 36.

13 Advance income-tax (net) represents payments in excess of provisions of Rs. 2747,20.91 lakhs (Previous year - Rs. 2452,83.36 lakhs) and includes a net tax refund with interest of Rs. 110,35.00 lakhs which has been held as provision pending the final outcome of a litigation.

14 The tax year for the Company being the year ending 31st March, the provision for taxation for the year is the aggregate of the provision made for the three months ended 31st March, 2012 and the provision based on the figures for the remaining nine months upto 31st December, 2012, the ultimate tax liability of which will be determined on the basis of the figures for the period 1st April, 2012 to 31st March, 2013.

15 Previous year figures

The financial statements for the year ended December 31, 2011 had been prepared as per the then applicable, pre-revised Schedule VI to the Companies Act, 1956. Consequent to the notification of Revised Schedule VI under the Companies Act, 1956, the financial statements for the year ended December 31, 2012 are prepared as per Revised Schedule VI. Accordingly, the previous year figures have also been reclassified to conform to this year''s classification. The adoption of Revised Schedule VI for previous year figures does not impact recognition and measurement principles followed for preparation of financial statements.

The accompanying notes are an integral part of the financial statements.


Dec 31, 2009

1 The Company received a demand for Rs. 71,79 lakhs from the Central Government contained in its orders dated 18th June, 1990 and 16th November, 1990 in respect of prices relating to Betamethasone bulk drugs and formulations therefrom. These orders were challenged by the Company by a writ petition in the Honble High Court at Delhi. After hearing the submissions of the Company, as well as the Government, in the writ petition, the Honble High Court by its judgement and order dated 19th October, 2001, was pleased to set aside the impugned demands raised by the Central Government. The claim to interest made by the Government vide its letter dated 29th October, 1996, demanding interest of Rs. 117,66 lakhs for the period 12th May, 1981 to 17th October, 1996 thereby, does not survive. The Honble High Court has also directed that the Company be given an opportunity to present its case with full facts to enable the Central Government to raise a fresh demand. The Company has sent a letter to the Government giving details of the quantities based on which the demand has to be raised as per the judgement of the Honble High Court at Delhi and has intimated to the Government that according to the Company, after considering the set offs which the Company has claimed, the amount payable would be Rs. 18,68 lakhs. The Company had accrued a liability of Rs. 18,68 lakhs of which an amount of Rs. 8,19 lakhs has been paid to the Government in the earlier years. Accordingly, the Company has retained the liability of Rs. 10,49 lakhs in the Balance Sheet.

The Central Government has filed a special leave petition in the Supreme Court against the Delhi High Courts judgement and order dated 19th October, 2001. The Supreme Court has admitted the said special leave petition, which has come up for hearing and disposal.

2 Matters in respect of erstwhile Burroughs Wellcome (India) Limited (BWIL):

(i) The Government of India, Ministry of Chemicals and Fertilisers, New Delhi, passed a final order on 21st July, 1993, directing erstwhile BWIL to pay an amount of Rs. 1,91.15 lakhs along with interest due thereon from the date of default into the Drugs Prices Equalisation Account (DPEA) in respect of a bulk drug procured by erstwhile BWIL during the period April 1981 to April 1983.

Erstwhile BWIL filed a writ petition in August 1993 which was admitted by the Bombay High Court. After hearing both the parties, the High Court granted an interim injunction restraining the Government of India from taking any action in furtherance of and/or implementation of the order dated 21st July, 1993 or from in any manner seeking to compel erstwhile BWIL to deposit any amount into the DPEA, pending the hearing and final disposal of the petition on the condition that erstwhile BWIL furnishes a bank guarantee for Rs. 2,00 lakhs from a nationalised bank and undertakes to pay the amount demanded with interest at the rate of 20% per annum in case the petition fails.

Erstwhile BWIL had accordingly furnished the required bank guarantee. If calculated on the basis of correct data, taking into account set offs claimable for earlier years for which data has been provided by erstwhile BWIL, no amount will be payable by the Company and accordingly no provision in that respect is considered necessary. The Companys stand that the demand is not sustainable has been confirmed by an eminent counsel. In the meanwhile, the Government of India has filed an application in the Supreme Court praying that the writ petition (along with several others filed by other pharmaceutical companies) be transferred to the Supreme Court from various High Courts. The Supreme Court is yet to hear the transfer petition.

(ii) Erstwhile BWIL had made an application to the Government of India for approval under Section 198(4) of the Companies Act, 1956, in respect of payment of remuneration to the Managing Director and three whole time Directors amounting to Rs. 10.93 lakhs for the year ended 31st August, 1986, which was in accordance with the minimum remuneration provided in the agreement entered into with them prior to erstwhile BWIL becoming public, which required such Government of Indias sanction. The approval is still awaited.

(iii) Remittances in transit represent monies deposited by customers in favour of erstwhile BWIL with banks in Zambia - Rs. 0.31 lakhs and in Tanzania - Rs. 5.61 lakhs, the remittance of which is pending clearance of the authorities in those countries.

3 Matters in respect of erstwhile SmithKline Beecham Pharmaceuticals (India) Limited:

(i) Rs. 1,44.44 lakhs received from Beckman Instruments International S.A. on account of disputed alleged additional commission has been included under Sundry Creditors and Income tax paid thereon aggregating to Rs. 64.77 lakhs has been included under Loans and Advances. The Company is contesting the matter with the concerned authorities.

(ii) Refund of surtax Rs. 96.81 lakhs, and interest thereon amounting to Rs. 48.52 lakhs, received during 1994, have not been adjusted against the provision for tax in the books of account and recognised as income respectively, since the Income tax department had filed a reference application against the income tax tribunals order which was pending before the High Court of Karnataka. The Company has received an order dated 18th April, 2007 from the High Court of Karnataka which is partially in the Companys favour. On the basis of the aforesaid order, Income Tax Appellate Tribunal (ITAT), Bangalore will pass an order giving directions. On receipt of the ITAT order, the Company will take appropriate steps in the matter.

Previous year

Rupees in Rupees in lakhs lakhs

4 Contingent Liabilities not provided for:

(i) Cheques discounted with banks 3,97.41 6,85.69

(ii) In respect of claims made against the Company not acknowledged as debts by the Company

Sales tax matters . . 29,73.24 32,29.65

Excise matters 7,98.19 7,98.63

Service tax matters . . 2,42.18 2,42.18

Labour matters 37,41.03 33,75.66

Other legal matters . . . . . . 8,62.09 8,69.90

which net of current tax amount to 56,87.90 56,21.42

(iii) Taxation matters in respect of which appeals are pending

Tax on matters in dispute 110,78.74 87,87.48

Other consequential matters (net of tax) 3,74.39 3,74.39

Notes:

Future cash outflows in respect of (i) above are dependant on the return of cheques by banks.

Future cash outflows in respect of (ii) and (iii) above are determinable on receipt of decisions / judgements pending with various forums / authorities.

5 The tax year for the Company being the year ending 31st March, the provision for taxation for the year is the aggregate of the provision made for the three months ended 31st March, 2009 and the provision based on the figures for the remaining nine months up to 31st December, 2009, the ultimate tax liability of which will be determined on the basis of the figures for the period 1st April, 2009 to 31st March, 2010.

6 In the previous year:

(a) Profit on sale / redemption of investments (net) (Exceptional Item) comprises profit on sale of long term investments amounting to Rs. 132,66.51 lakhs, current investments of Rs. 14,54.07 lakhs and loss on sale of current investments of Rs. 6.74 lakhs.

(b) Miscellaneous expenses in Schedule - 16 Operating and Other Expenses include loss on sale of long term investments Rs. 5.69 lakhs.

7 The recurring expenditure on research and development charged off to revenue amounts to Rs. 4,66.82 lakhs (Previous year - Rs. 4,63.69 lakhs).

8 "Recovery of expenses (net)" in Schedule 16 are amounts recovered from GlaxoSmithKline Asia Private Limited Rs. 7,02.62 lakhs (Previous year - Rs. 10,61.83 lakhs), from subsidiary company Rs. 5,12.25 lakhs (Previous year - Rs. 4,13.61 lakhs), from GlaxoSmithKline Pte Limited Rs. 28.03 lakhs (Previous year - Rs. 11.18 lakhs), from GlaxoSmithKline S.A.E Rs. 15.29 lakhs (Previous year - Rs. 14.17 lakhs), from GlaxoSmithKline Pharmaceutical Sdn Bhd Rs. 25.54 lakhs (Previous year - Rs. 22.26 lakhs) and paid to GlaxoSmithKline Consumer Healthcare Limited Rs. 8,89.83 lakhs (Previous year - Rs. 7,27.07 lakhs) towards the value of costs apportioned, in accordance with the agreements on allocation of expenses with the companies.

9 Employee Benefits

The disclosures as required as per the revised AS 15 are as under:

1 Brief description of the Plans

The Company has various schemes for long-term benefits such as provident fund, superannuation, gratuity and post retirement medical. In case of funded schemes, the funds are recognised by the Income tax authorities and administered through trustees/ appropriate authorities. The Companys defined contribution plans are superannuation and employees pension scheme (under the provisions of the Employees Provident Funds and Miscellaneous Provisions Act, 1952) since the Company has no further obligation beyond making the contributions. The Companys defined benefit plans include gratuity and post retirement medical. In terms of the Guidance on implementing the revised AS 15, issued by the Accounting Standards Board of the Institute of Chartered Accountants of India, the provident fund set up by the Company is treated as a defined benefit plan since the Company has to meet the interest shortfall, if any. However, as at the year end no shortfall remains unprovided for. As advised by an independent actuary, itis not practical or feasible to actuarially value the liability considering that the rate of interest as notified by the Government can vary annually. Further the pattern of investments for investible funds is as prescribed by the Government. Accordingly other related disclosures in respect of provident fund have not been made. The employees of the Company are also entitled to leave encashment and compensated absences as per the Companys policy.

10 The Company has only one reportable segment which Is Pharmaceuticals. Accordingly, no separate disclosures of segment information have been made.

11 Related Party disclosures

Related party disclosures, as required by Accounting Standard 18, "Related Party Disclosures", notified under sub-section (3C) of Section 211 of the Companies Act, 1956 are given below:

1 Relationships (during the year):

(i) Shareholders (the GlaxoSmithKline (GSK) Group shareholding) in the Company Glaxo Group Limited, U.K. Eskaylab Limited, U.K.

Burroughs Wellcome International Limited, U.K. Castleton Investment Limited, Mauritius

Holding company / ultimate holding company of the above shareholders *

GlaxoSmithKline pic, U.K.

GlaxoSmithKline Finance pic, U.K.

SmithKline Beecham pic, U.K.

Wellcome Limited, U.K.

Wellcome Foundation Limited, U.K.

Wellcome Consumer Healthcare Limited, U.K.

* no transactions during the year

(ii) Subsidiary of the Company

Biddle Sawyer Limited, a wholly owned subsidiary of the Company

(iii) Other related parties in the GlaxoSmithKline (GSK) Group where common control exists and with whom the Company had transactions during the year: SmithKline Beecham Private Limited, Sri Lanka GlaxoSmithKline Bangladesh Limited, Bangladesh GlaxoSmithKline Pakistan Limited, Pakistan GlaxoSmithKline Asia Private Limited, India GlaxoSmithKline Consumer Healthcare Limited, India GlaxoSmithKline Biologicals S.A., Belgium GlaxoSmithKline Services Unlimited, U.K. Laboratoire GlaxoSmithKline S.A.S., France GlaxoSmithKline Export Limited, U.K. GlaxoSmithKline Pte Limited, Singapore GlaxoSmithkline Philippines Inc., Philippines GlaxoSmithKline Australia Pty Limited, Australia GlaxoSmithKline Canada Inc, Canada GlaxoSmithKline Trading Services Limited, Ireland GlaxoSmithKline Limited, Hong Kong Stiefel India Private Limited, India US Pharmaceuticals, U.S.A.

(iv) Directors and members of GSK India Management Team and their relatives:

Dr. A. Banerjee Mr. P.V. Nayak

Mr. A.M. Nimbalkar (w.e.f 27th July, 2009) Mr. R. Bartaria (w.e.f 23rd April, 2009)

Mr. C.T. Renganathan (w.e.f 22nd May, 2009) Mr. R.C. Sequeira

Mr. D.S. Parekh Mr. R.R. Bajaaj

Mr. D. Sundaram (w.e.f 27th July, 2009) Mr. R. Limaye (up to 30th April, 2009)

Mr. H. Singh (up to 23rd March, 2009) Dr. S. Joglekar

Dr. H.B. Joshipura Mr. Sunder Rajan

Mr. H. Buch (w.e.f 23rd April, 2009) Mr. S. Khanna

Mr. M.B. Kapadia Mrs. S. Patel

Mr. M.K. Vasanth Kumar Mr. V. Narayanan

Dr. M. Reilly (up to 27th July, 2009) * Mr. V. Thyagarajan

Mr. N. Kaviratne Mrs. Neeru Nayak (up to 15th October, 2009) Mr. P. Bains (up to 27th July, 2009) *

* no transactions during the year

12 Disclosures as required by Accounting Standard 19, "Leases", notified under sub-section (3C) of Section 211 of the Companies Act, 1956, are given below:

(i) The Company has taken various residential, office and godown premises under operating lease or leave and licence agreements. These are generally not non-cancellable and range between 11 months and 3 years under leave and licence, or longer for other leases and are renewable by mutual consent on mutually agreeable terms. The Company has given refundable interest free security deposits under certain agreements.

(ii) Lease payments are recognised in the Profit and Loss Account under Rent in Schedule 16.

13 Amount recognised as expense for the year under the long-term incentive plan is Rs. 1,72.64 lakhs (Previous year - Rs. 1,26.03 lakhs).

The total carrying amount of the corresponding liability at the year end is Rs. 3,21.26 lakhs (Previous year - Rs. 2,69.92 lakhs).

14 Provision for taxation represents provisions in excess of payments of Rs. 1938,85.90 lakhs and includes a net tax refund with interest of Rs. 110,35.00 lakhs which has been held as provison pending the final outcome of a litigation. (Previous year - Current taxation represents payments in excess of provisions of Rs. 1709,15.11 lakhs).

15 Fringe benefits tax represents payments in excess of provisions of Rs. 30,37.48 lakhs (Previous year - provision in excess of payments of Rs. 28,35.00 lakhs ).

16 Previous years figures have been regrouped wherever necessary.

 
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