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Notes to Accounts of Helios and Matheson Information Technology Ltd.

Sep 30, 2013

1. CORPORATE INFORMATION

Helios and Matheson Information Technology Ltd (the Company) is a publicly held Company engaged in the manufacturing and export of Leather Shoes and Shoe Uppers and company is also engaged in Restaurant activity.

The majority sales of the Company comprises of exports. The Company is engaged in production of industrial shoe / uppers segment both internationally and in the domestic market. The Equity Shares of the ompany are presently listed with the Bombay Stock Exchange Limited (BSE).

(a) Revenue Recognition

Revenue is recognized only when it can be reliably measured and it is reasonable to expect ultimate collection. Interest income is recognized on time proportion basis taking into account the amount outstanding and rate applicable. Sales within India are exclusive of Sales Tax and Excise Duty. Cutoff date for accounting Export Sales is based on the date of bill lading. Export sales are accounted for on FOB Basis.

(b) Employee Benefits

(i) The Company has Defied Contribution Plan for its employee''s retirement benefits comprising of Provident Fund & Employee''s State Insurance Fund. The Company and eligible employees make monthly contribution to the above mentioned funds at a specified percentage of the covered employee''s salary. The Company recognizes its contribution as expenses of the year in which the liability is incurred.

(ii) Gratuity Liability under the Payment of Gratuity Act is based on actuarial valuation carried out at the close of the financial year in accordance with the scheme administered by Life Insurance Corporation of India through a Gratuity Trust Fund and contribution payable under the said scheme are charged to Profit & Loss Account. In absences of information Company is not in a position to disclose details as per AS-15 (Employee Benefits) in respect of defined benefit Plan (Gratuity).

(iii) Earn Leave Accruing to employees as on the last day of Financial Year on accrual basis.

(iv) Compensation to Employees who have opted for retirement under the Voluntary Retirement Scheme of the Company is charged to Profit & Loss Account in the year of exercise of option.

(a) Borrowing Costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets. Which are assets that necessarily take a substantial period of time to get ready for their intended use or sale are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognized in statement of Profit and Loss in the period in which they are incurred.

(I) Taxation

Income Tax Provision comprises Current Tax and Deferred Tax charge or credit. Provision for current tax is made on Assessable Income at the tax rate applicable to the relevant assessment year. The Deferred Tax Assets and Liability is calculated by applying tax rate and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets arising mainly on account of unabsorbed depreciation under tax laws are recognized only if there is virtual certainty of its realization, supported by convincing evidence. Deferred tax assets on account of other timing differences are recognized, only to the extent there is a reasonable certainty of its realization. At each Balance Sheet date, the carrying amount of deferred assets is reviewed to reassure realization.

(J) Impairment

The carrying amount of Assets are reviewed at each Balance Sheet date if there is any Indication of Impairment based on Internal as well as external factors. An Impairment Loss will be recognized wherever carrying amount of Assets exceeds its estimated Recoverable amount. The recoverable amount is greater of the assets net selling price and value in use. In assessing the value in use, the estimated future cash flows are discounted to the present value at weighted average cost of capital. After, impairment, depreciation is provided on revised carrying amount of assets over the remaining useful life. Previously recognized impairment loss is further provided or reversed depending on changes in circumstances.

(K) Provisions, Contingent Liabilities & Contingent Assets

The company recognizes a provision where there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A Disclosure for a contingent liability is made when there is possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation that the likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent assets are neither recognized nor disclosed. Provisions, Contingent Liabilities and Contingent Assets are reviewed at each Balance Sheet date.

(L) Lease Tra nsaction

For assets taken on operating lease, lease rentals payable are charged to revenue.

(M) Investments

Investments are valued at cost. Provision for diminution in the value of long term investments is made. Only if such decline is other than temporary.

(N) Research & Development

Revenue expenditure pertinent to research &. development is charged to the Profit & Loss Account in the year in which it is incurred.

(O) Cash & Cash Equivalent

In the Cash Flow Statement, Cash and Cash Equivalents includes cash in hand, demand deposits with banks, other short-term highly liquid investments with original maturities of three months or less.

(P) Use of Esti mates

The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognized in the period in which the results are known / materialized.

vi. In absence of necessary information with the company relating to the registration status of suppliers under the Micro, Small and Medium Enterprises Development Act, 2006, the information required under the said act could not be complied and disclosed.

(2) Operating Lease

(i) The total of future minimum lease payments under non-cancelable operating lease for each of the following periods :-

(a) Not later than one year Nil

(b) Laterthan one year and not later than five years Nil

(c) Laterthan Five Years Nil

(ii) Lease payments recognized in the statement of profit & loss for the year ended on 31st March, 2013 is Rs.45.84 Lacs(48.76) Lacs.

(iii) The Company has not given any sub-lease during the year.

1. CONTINGENT LIABILITIES

Current Year (Rs.) Previous Year (Rs.)

Contingent Liabilities NIL NIL

3. Company has accounted Export benefit on account of Duty Credit Scrip (Focus Product) on the basis of Export Invoices raised during the year.

4. In the opinion of the management and to the best of their knowledge and belier the value of realization of advances and other current assets in the ordinary course of business will not be less than the amount at which they are stated in the Balance sheet.

5. The debit & credit balances of suppliers are subject to confirmation and reconciliation.

6. The Company did not have convertible, partly convertible debentures as on 31st March, 2013.

7. Figure in brackets denotes figures for previous year ended on 31st March, 2012.

8. Figures for previous year are regrouped and rearranged wherever necessary.


Sep 30, 2012

L.corporate information;

helios and matheson information technology ltd is a public ltd company registered in india and incorporated under the provisions of the companies act,1956. its shares are listed in nse and bse in india and its subsidiary company helios and matheson information technology inc, usa is listed in NASDAQ.

helios and matheson information technology ltd along with its subsidiaries namely helios and matheson information technology inc, usa, maruthi consulting inc, usa ,the laxmi group inc, usa, helios matheson inc,usa , helios & matheson(singapore) pte ltd helios & matheson it (bangalore)ltd, bangalore and jayamaruthi software services (p) ltd, chennai provide a wide range of information technology and consultancy services including software management solution, technology corporate training education services, the company''s full services portfolio consist of application development and maintenance ,system integration, independent verification ,managed services, the company caters to the bfsi (banking financial services and insurance),health care and technology sectors in india and across the global

(a) rights, preferences and restrictions attaching to various classes of shares equity

the company has issued only one type of share, ie, equity, the rights and resrictions are as per the provisions of the companies act and the articles of association.

note 2

money received against share warrants

share application money received as on September 30,2012 represents the amount received from the promoters towards preferential allotment of equity shares as per sebi guidelines.

note 3

advance received towards subscription of redeemable preference shares

this represents advance amount received from the sellers of vMoksha towards subscription of redeemable preference shares of your company as provided in the transaction agreements dated may 11, 2005. however, the sellers tried to renege the agreements and the company initiated arbitration proceedings, this matteris, therefore, sub-judice.

this is a contra entry - refer to note 14 - arising out of a cash neutral structure envisioned in the transaction agreements, based on the legal opinion received, in the opinion of the management, outcome of the arbitration proceedings is unlikely to have any adverse effect on the operations of the company.

note 4

advance

the represents the advance paid by our company for investment in 100% equity of vMoksha entities - 3,31,165 equity share of Rs.. 100 each (unquoted) as provided in the transaction agreements dated may 11, 2005. however, the sellers tried to renege the agreements and the company initiated arbitration proceedings, this matter is, therefore, sub-judice.

this is a contra entry - refer to note 6 - arising out of a cash neutral structure envisioned in the transaction agreements, based on the legal opinion received, in the opinion of the management, outcome of the arbitration proceedings is unlikely to have any adverse effect on the operations of the company.

5) quantitative details

the company is engaged in software development, software consultancy and maintenance of computer software, the production and sale of such software cannot be expressed in any generic unit, hence, it is not possible to give the quantitative details of sales and certain information as required under part ii of schedule vi to the companies act, 1956.

the tax year for the company being the year ending 31st, march, the provision for taxation for the period is the aggregate of the provision made for the twelve months ended 31st march, 2012 and the provision based on the figures for the remaining six months up to 30th September, 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.

6) dues to ssi, micro, small and medium enterprises:

sundry creditors includes amount due to ssi, micro, small and medium enterprises as on 30.09.12: Rs.. nil (nil) with available information from micro, small and medium enterprises regarding their registration with central/state government authorities the disclosure as per sec 23 of the micro small medium enterprises development act 2006 is made.

7) segment reporting

the company is operating in a single segment and the risk and reward are same for the segment in all the locations and hence segment reporting is not applicable to the company.

the company transferred Rs..3,08,162/- to the investor education and protection fund, this is the amount the dividend payable account for the year ended 31.03.2005 remaining unclaimed and unpaid for a period of seven years from the date that they first became due for payment u/s. 205c of the companies act, 1956.

8) names of the key management personnel

mr. muralikrishna g.

mr. diwakar sai yerra

9) contingent liability

a. the income tax demand of Rs..1,94,98,583/- on account of section 10a disallowances for the a.y.2006-2007 is contested before the commissioner of appeals and the company has paid Rs..5,00,000/- and contested the demand.

b. the income tax demand of Rs..15,94,66,361/-(revised) on account of section 10 a of the income tax act for the assessment year 2008-09 and is contested before the commissioner of appeals, the company has already paid Rs..1,80,00,000/- towards the demand.

c. the income tax demand of Rs..2,47,10,740 on account of section 10 a of the income tax act for the assessment year 2009-10 and is contested before the commissioner of appeals and the company has paid Rs..40,00,000/- against the demand and contested.

d. the company has given corporate guarantee on behalf of its subsidiary company for Rs..55.34crore for the business requirements of the subsidiary.

e. the service tax demand of Rs..3,93,720/- on sponsorship services as the recipient of services is appealed before the commissioner of central excise (appeals) and the appeal is yet to be taken upand the company has paid under protest Rs..1,90,000/- towards demand.

10) consequent to the notification issued by the ministry of corporate affairs on december 29, 2011, the company adopted the option given in paragraph 46a of the accounting standard-11 "the effects of changes in foreign exchange rates" . accordingly the exchange difference on foreign currency denominated long term borrowings and derivative contracts thereon with banks relating to acquisition of depreciable capital assets are adjusted in the carrying cost of such assets.

11) during the year ended September 30, 2012, the revised schedule vi notified under the companies act 1956, has become applicable to the company, for preparation and presentation of its financial statements, accordingly, the company has reclassified / regrouped/ amended the previous year figures in accordance with the requirements applicable in the current year.


Sep 30, 2011

Contingent liability

a. the case relating to income tax demand of 7.2,38,53,150 excluding interest relating to earlier years due to certain disallowances is decided against the company by madras high court, the company has already paid 7.2,42,77,990 towards the demand, the company has preferred an appeal before the supreme court.

b. the income tax demand of 7.1,94,98,583 on account of section 10a disallowances for the a.y.2006-2007 is contested before the commissioner of appeals.

c. the income tax demand of 7.15,94,66,361 (revised) on account of section 10 a of the income tax act for the assessment year 2008-09 and is contested before the commissioner of appeals, the company has already paid 7.1,25,00,000 towards the demand.

d. the income tax demand of 7.2,47,10,740 on account of section 10 a of the income tax act for the assessment year 2009-10 and is contested before the commissioner of appeals.

e. the company has given corporate guarantee on behalf of its subsidiary company for 7.55.34 crore for the business requirements of the subsidiary.

f. the service tax demand of 7.3,93,720 on sponsorship services as the recipient of services is appealed before the commissioner of central excise (appeals) and the appeal is yet to be taken up.

Fccbs

a. the company bought back fccb bonds for a face value of usd 1.40 mn (accrued value being usd 1.95 mn) during the year pursuant to the approval of reserve bank of india. this has resulted in capital receipt of 7.2,00,93,252 which has been accounted in capital reserves account, the company paid an amount of 7.10 lakhs to the reserve bank of india towards compounding fee in compliance of the order ca no 1441/2011 dated march 22, 2011 and obtained approval for the issue and buy back of fccbs.

b. the company repaid its fccb on maturity for 7.96,39,72,379 which includes the redemption premium of 7.27,17,58,932 the share premium as on the date of redemption has been applied to the extent of redemption premium of fccb as per section 78 (2) of the companies act, 1956.

c. the total deduction of 7.29,18,52,184 of share premium represents 7.27,17,58,932 being the amount of premium paid on redemption of fccb and 7.2,00,93,252 being the difference between the fccb premium payable on buy back and the actual premium paid, this amount has been taken to capital reserve.

mtm

consequent to the notification issued by the ministry of corporate affairs on december 29, 2011, the company adopted the option given in paragraph 46a of the accounting standard-11 'the effects of changes in foreign exchange rates', accordingly the exchange difference (mark to market) of 7.1,19,01,345 on foreign currency denominated longterm borrowings and derivative contracts thereon with banks relating to acquisition of depreciable capital assets are adjusted in the carrying cost of such assets.

previous year's figures are recast and regrouped wherever necessary to conform to current year's presentation.


Sep 30, 2010

Segment reporting

the company is operating in a single segment and the risk and reward is same for the segment in all the location and hence the segment reporting is not applicable to the company.

current year figures are recast and regrouped wherever necessary to confirm with current years presentation, the current year figures are for 12 months as against 18 months in the previous period and hence, are not directly comparable.

related party disclosure

name of the related party relationship

maruthi consulting inc, usa subsidiary

the laxmi group inc, usa step down subsidiary

helios and matheson it (bangalore) ltd., bangalore subsidiary

helios and matheson inc , usa subsidiary

helios and matheson inc , north america subsidiary

jayamaruthi software systems pvt ltd., subsidiary

helios and matheson it (Singapore) pte ltd., subsidiary

name of the key management personnel and their remuneration :

mr. g.k. muralikrishna managing director rs.3,00,000

mr. diwakar sai yerra executive director rs.6,28,800

deferred revenue expenditure

deferred revenue expenditure represents fccb issue related expenses of rs.465.21 lacs and as the benefit is expected to accrue over the life of the bonds, the balance amount is carried over to balance sheet after writing off of rs. .98.98 lakhs for the year ended.

contingent liability

a. the case relating to income tax demand of rs. 2,38,53,150 excluding interest relating to earlier years due to certain disallowances is decided against the company by madras high court. the company has already paid rs.2,17,77,990 towards the demand, the company intends to prefer an appeal before the supreme court.-

b. the income tax demand of rs. 17,84,49,640 on account of certain disallowance under section section 10 Aof the income tax act for the assessment year 2008-09 and the same is contested before the commissioner of appeals.

c. the company has given corporate guarantee on behalf of its subsidiary company for rs. 55.34 crore for the business requirements of the subsidiary.

d. the service tax demand of rs.3,93,720 on sponsorship services as the recipient of services is appealed before the commissioner of central excise (appeals) and the appeal is yet to be taken up.

e. sebi has alleged violation of certain regulations under prevention of unfair trade practices and prevention of insider trading regulations and imposed a penalty of rs. 50 lacs on the company vide its order dated January 31,2011. the company is preferring an appeal before the securities appellate tribunal (SAT).


Sep 30, 2009

Current year figures are for 18 months as against 12 months in the previous year and hence not directly comparable.

related party disclosure

name of the related party relationship

maruthi consulting inc, usa subsidiary

the laxmi group inc, usa subsidiary

helios and matheson IT (bangalore) ltd., bangalore subsidiary

helios and matheson inc , usa subsidiary

helios and matheson inc , north america subsidiary

jayamaruthi software systems ltd., subsidiary

helios and matheson IT (Singapore) pte ltd., subsidiary

name of the key management personnel

name of the related party relationship

g.k. muralikrishna managing director

deferred revenue expenditure

out of the fccb issue related expenses of rs.4.65 crore, benefit of which is expected to accrue over the life of the bonds, a sum of rs. 3.17 crore has so far been written off, leaving rs. 1.48 crore outstanding at the end of the year.

contingent liability

a. the case relating to income tax demand of rs. 2,38,53,150 excluding interest relating to earlier years due to certain disallowances is being heard by madras high court. the company has paid rs.57,77,990 towards the demand to prove its bonafide. based on the opinion of tax advisors , the company believes that the demand can not be sustained and that the company would eventually win the appeal.

b. the company has given corporate guarantee to its subsidiary company in Singapore for usd 8.41 mn (rs.34.50 crore) for the business requirements of its subsidiary.

c. the company received service tax demand of rs.3,93,720 on sponsorship services as the recipient of services from indian school of business, the company preferred an appeal against the order before the commissioner of central excise (appeals).

foreign currency convertible bonds (fccb)

the company has funded a significant part of its overseas acquisitions and capex expenditure through fccb . the company has used this instrument effectively as it has got the advantages of both a debt and an equity instrument, as debt, they carry 2.0% coupon rate till redemption and as equity, they convert at a premium, thereby reducing the dilution impact to existing shareholders.

apart from coupon rate of 2%, fccbs carry yield to maturity (ytm) which gets payable only if they are redeemed or repurchased, since payment of premium is contingent upon certain factors the outcome of which is not determinable as of now, the management has treated the premium payable as mentioned in the above table as contingent in nature accordingly premium of rs.16.54 crore would be accounted and adjusted against share premium account in the year of redemption or repurchase, as per accounting standards, there is no need to make a provision for the premium payable on redemption since it is only contingent on repayment and is not payable if the fccbs get converted.

accounting year

pursuant to the approval received from the registrar of companies, chennai, the company extended its accounting year for 2008-09 to cover a period of 18 months from april 01, 2008 to September 30, 2009. consequently, in future, the accounting year of the company will be from 1 st October to 30th September of the following year

in view of the exemption granted under section 212(8) by the government of india, the audited financial statements and other reports of subsidiary companies are not enclosed with this report, however, the statement pursuant to section 212 of the companies act is given elsewhere in the annual report.

previous years figures have been regrouped/ recast wherever necessary to confirm with current periods comparison.

 
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