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Notes to Accounts of ITC Ltd.

Mar 31, 2015

1. Additional Notes to the Financial Statements

(i) Expenditure incurred under Section 135 of the Companies Act, 2013 applicable for the first time in 2014-15 on Corporate Social Responsibility (CSR) activities - Rs. 214.06 Crores comprising employee benefits expense of Rs. 7.61 Crores and other expenses of Rs. 206.45 Crores of which Rs. 12.67 Crores is accrued for payment as on 31st March, 2015. Such CSR expenditure of Rs. 214.06 Crores excludes Rs. 4.97 Crores being the excess of expenditure of salaries of CSR personnel and administrative expenses over the limit imposed of 5% of total CSR expenditure laid down under Rule 4(6) of the Companies (Corporate Social Responsibility Policy) Rules, 2014 for such expenses.

(ii) Research and Development expenses for the year amount to Rs. 105.79 Crores (2014 - Rs. 117.18 Crores).

(iii) Contingent liabilities and commitments:

(a) Contingent liabilities

(i) Claims against the Company not acknowledged as debts Rs. 404.88 Crores (2014 - Rs. 361.50 Crores). Interest on claims, where applicable, is estimated to be Rs. 153.37 Crores (2014 - Rs. 121.34 Crores). These comprise:

- Excise duty, VAT / sales taxes and other indirect taxes claims disputed by the Company relating to issues of applicability and classification aggregating Rs. 314.43 Crores (2014 - Rs. 254.99 Crores). Interest on claims, where applicable, is estimated to be Rs. 135.58 Crores (2014 - Rs. 103.89 Crores).

- Local Authority taxes/cess/royalty on property, utilities etc. claims disputed by the Company relating to issues of applicability and determination aggregating Rs. 55.32 Crores (2014 - Rs. 63.62 Crores). Interest on claims, where applicable, is estimated to be Rs. 13.47 Crores (2014 - Rs. 12.36 Crores).

- Third party claims arising from disputes relating to contracts aggregating Rs. 29.05 Crores (2014 - Rs. 37.36 Crores). Interest on claims, where applicable, is estimated to be Rs.0.14 Crore (2014 - Rs. 1.12 Crores).

- Other matters Rs. 6.08 Crores (2014 - Rs. 5.53 Crores). Interest on other matters, where applicable, is estimated to be Rs. 4.18 Crores (2014 - Rs. 3.97 Crores).

It is not practicable for the Company to estimate the closure of these issues and the consequential timings of cash flows, if any, in respect of the above.

(ii) Corporate Guarantee given to Yes Bank Limited for credit facility availed by Broadcast Audience Research Council (BARC) outstanding - Rs. 1.30 Crores (2014 - Nil).

(b) Commitments

- Estimated amount of contracts remaining to be executed on capital accounts and not provided for Rs. 1432.41 Crores (2014 - Rs. 1528.10 Crores).

- Uncalled liability on shares partly paid Rs. 26.40 Crores (2014 - Rs. 26.40 Crores).

(iv) Micro, Small and Medium scale business entities:

A sum of Rs. 24.56 Crores is payable to Micro and Small Enterprises as at 31st March, 2015 (2014 - Rs. 23.25 Crores). There are no Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days during the year and also as at 31st March, 2015. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.

(v) The Company's significant leasing arrangements are in respect of operating leases for premises (residential, office, stores, godowns etc.). These leasing arrangements which are not non-cancellable range between 11 months and 9 years generally, or longer, and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are charged as 'Rent' under Note 28.

(vi) Derivative Instruments:

The Company uses forward exchange contracts and currency options to hedge its exposures in foreign currency related to firm commitments and highly probable forecasted transactions. The information on derivative instruments is as follows:

a) Forward exchange contracts outstanding as at year end:

(vii) The Members of the Company had approved the Scheme of Arrangement on 24th March, 2014 between its subsidiary Wimco Limited ('Wimco') and the Company and their respective shareholders under Sections 391 and 394 read with Sections 78, 80, 100 and other applicable provisions of the Companies Act, 1956 for demerger of the Non-Engineering Business including Safety Matches and Agri (Forestry) Business of Wimco to the Company on a going concern basis with effect from 1st April, 2013.

The Hon'ble High Courts at Bombay and Calcutta had sanctioned the Scheme on 10th April, 2014 and 14th May, 2014, respectively. The Scheme became effective on 27th June, 2014 on filing of the Order of the Hon'ble High Court with the respective Registrars of Companies. Consequent to such filing, Scheme has been given effect to, in the financial statements during the financial year ended 31st March, 2015.

Pavan Poplar Limited and Prag Agro Farm Limited engaged in the business of agro-forestry and other related activities, have become direct subsidiaries of the Company with effect from 27th June, 2014, consequent upon the Scheme becoming effective.

The accounting of this Arrangement was done as per the Scheme and the same has been given effect to in the financial statements as under:

a) the assets and liabilities of the Non-Engineering business of Wimco as at 1st April, 2013 have been taken over at their book values subject to adjustments as specified in the Scheme.

b) cancellation of the carrying amount of the Company's investment in Equity amounting to Rs. 113.19 Crores and Preference Shares amounting to Rs. 50.00 Crores of Wimco to the extent attributable to the Non-Engineering business of Wimco.

c) in consideration of the above, the Company issued and allotted 87,761 Ordinary Shares of Rs. 1.00 each as fully paid-up to the shareholders of Wimco in the ratio of 2 Ordinary Shares of Rs. 1.00 each of the Company for every 77 Equity Shares of Rs. 1.00 each of Wimco.

d) the excess of the value of the net assets of the Non-Engineering business of Wimco over the sum of face value of the shares allotted and cancellation of the Company's investment in Wimco, amounting to Rs. 91.00 Crores was debited to General Reserve. Further, earlier unrecognised net deferred tax assets of Rs. 45.84 Crores on carry forward of business losses and other net timing differences of Wimco have been recognised as an adjustment to revenue reserves.

Further, the loss of Rs. 8.01 Crores for the year from 1st April, 2013 (the appointed date) to 31st March, 2014 has been recognised as an adjustment to the revenue reserves.

The results for the financial year ended 31st March, 2015 reflect the effect of the Scheme. Consequently, the figures for the current year are not strictly comparable.

(viii) Pursuant to the enactment of the Companies Act 2013, (the 'Act'), the Company has, effective 1st April 2014, reviewed and revised the estimated useful lives of its fixed assets, in accordance with the provisions of Schedule II of the Act. In respect of assets, whose useful life is exhausted as at 1st April, 2014, the related carrying amount aggregating to Rs. 48.32 Crores (net of deferred tax of Rs. 24.88 Crores) has been adjusted against opening balance of Surplus in the Statement of Profit and Loss. The consequential impact on the depreciation charged to the Statement of Profit and Loss during the year on account of the aforesaid change in useful lives is not material.

(ix) a) Details of Opening and Closing Stock of Finished Goods (manufactured) and Stock-in-Trade (goods purchased for resale)

(x) Liability for earlier years towards Rates and Taxes and Interest thereon of Rs. 157.91 Crores and Rs. 34.77 Crores respectively have been written back as no longer required during the financial year ended 31st March, 2014, based on a favourable High Court Order (Refer Notes 27 and 28). Segment Results of FMCG-Cigarettes and Finance Costs include the effects of such write back (Refer Note 32) during the financial year ended 31st March, 2014.

(xi) Information regarding Employee Stock Option Scheme :

1) Method used to account for share-based payment plans :

The employee compensation cost has been calculated using the intrinsic value method of accounting for Options issued under the Company's Employee Stock Option Schemes. The employee compensation cost as per the intrinsic value method for the financial year 2014-15 is Nil.

2) Nature and extent of employee share based payment plans that existed during the period including the general terms and conditions of each plan :

Each Option entitles the holder thereof to apply for and be allotted ten Ordinary Shares of the Company of Rs. 1.00 each upon payment of the exercise price during the exercise period. The exercise period commences from the date of vesting of the Options and expires at the end of five years from (i) the date of grant in respect of Options granted under the ITC Employee Stock Option Scheme (introduced in 2001) and (ii) the date of vesting in respect of Options granted under the ITC Employee Stock Option Scheme - 2006 & the ITC Employee Stock Option Scheme - 2010.

The vesting period for conversion of Options is as follows:

- On completion of 12 months from the date of grant of the Options : 30% vests

- On completion of 24 months from the date of grant of the Options : 30% vests

- On completion of 36 months from the date of grant of the Options : 40% vests

The Company granted 68,26,355 Options during 2014-15 (2014 - 67,90,925) to the eligible employees of the Company and some of its subsidiary companies.

The Pricing Formula, as approved by the Shareholders of the Company, is such price which is no lower than the closing price of the Company's Share on the National Stock Exchange of India Limited ('the NSE') on the date of grant, or the average price of the Company's Share in the six months preceding the date of grant based on the daily closing price on the NSE, or the 'Market Price' as defined from time to time under the erstwhile Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, as determined by the Nomination & Compensation Committee.

The Options have been granted at 'market price' as defined from time to time under the aforesaid Guidelines.

In the financial year 2014-15, Options were granted at Rs. 3572.00 per Option.

4) The Options were exercised throughout the year and weighted average share price of Shares arising upon exercise of Options, based on the closing market price on NSE on the date of exercise of Options (i.e. the date of allotment of shares by the Securityholders Relationship Committee) for the year ended 31st March, 2015 was Rs. 357.59 (31st March, 2014 - Rs. 333.70).

7) The volatility used in the Black Scholes Option Pricing model is the annualised standard deviation of the continuously compounded rates of return on the stock over a period of time. The period considered for the working is commensurate with the expected life of the options and is based on the daily volatility of the Company's stock price on NSE.

8) Difference between the employee compensation cost so computed at (1) above and the employee compensation cost that shall have been recognised if it had used the fair value of the Options.

Rs. 529.44 crores

(xii) Previous year's figures have been regrouped/reclassified wherever necessary to correspond with the current year's classification/ disclosure.

2. Related Party Disclosures

1. ENTERPRISES WHERE CONTROL EXISTS: i) Subsidiaries:

a) Srinivasa Resorts Limited

b) Fortune Park Hotels Limited

c) Bay Islands Hotels Limited

d) WelcomHotels Lanka (Private) Limited, Sri Lanka

e) Landbase India Limited

f) Russell Credit Limited and its subsidiary

Greenacre Holdings Limited

g) Technico Pty Limited, Australia and its subsidiaries

Technico Agri Sciences Limited

Technico Technologies Inc., Canada

Technico Asia Holdings Pty Limited, Australia and its subsidiary Technico Horticultural (Kunming) Co. Limited, China h) Wimco Limited i) Pavan Poplar Limited 1 j) Prag Agro Farm Limited 1 k) ITC Infotech India Limited and its subsidiaries

ITC Infotech Limited, UK

ITC Infotech (USA), Inc. and its subsidiary Pyxis Solutions, LLC, USA l) Wills Corporation Limited m) Gold Flake Corporation Limited n) ITC Investments & Holdings Limited and its subsidiary

MRR Trading & Investment Company Limited (w.e.f. 30.03.2015) o) Surya Nepal Private Limited p) King Maker Marketing, Inc., USA q) BFIL Finance Limited and its subsidiary

MRR Trading & Investment Company Limited (upto 29.03.2015) r) North East Nutrients Private Limited The above list does not include ITC Global Holdings Pte. Limited, Singapore (in liquidation)

1 Pursuant to the Scheme of Arrangement [Refer Note 31(x)]

ii) Other entities under control of the Company:

a) ITC Sangeet Research Academy

b) ITC Education Trust

c) ITC Rural Development Trust

2. OTHER RELATED PARTIES WITH WHOM THE COMPANY HAD TRANSACTIONS i) Associates & Joint Ventures:

Associates

a) Gujarat Hotels Limited

b) International Travel House Limited

- being associates of the Company, and

c) Tobacco Manufacturers (India) Limited, UK

- of which the Company is an associate.

Associates of the Company's subsidiaries

a) Russell Investments Limited

b) Classic Infrastructure & Development Limited

c) Divya Management Limited

d) Antrang Finance Limited

- being associates of Russell Credit Limited, and

e) ATC Limited

- being associate of Gold Flake Corporation Limited

Joint Ventures

a) Maharaja Heritage Resorts Limited

b) Espirit Hotels Private Limited

c) Logix Developers Private Limited

Joint Venture of the Company's subsidiary

a) ITC Essentra Limited

- being joint venture of Gold Flake Corporation Limited

ii) a) Key Management Personnel:

Y. C. Deveshwar Executive Chairman

N. Anand Executive Director

P. V. Dhobale Executive Director

K. N. Grant Executive Director

A. Baijal2 Non-Executive Director

S. Banerjee1 Non-Executive Director (w.e.f. 24.07.2014)

A. Duggal2 Non-Executive Director (w.e.f. 15.09.2014)

S. H. Khan2 Non-Executive Director

A. V. Girija Kumar Non-Executive Director

R. Lerwill Non-Executive Director

S. B. Mainak Non-Executive Director (w.e.f. 25.04.2014)

S. B. Mathur2 Non-Executive Director

P. B. Ramanujam2 Non-Executive Director

S. S. H. Rehman2 Non-Executive Director

A. Ruys Non-Executive Director (ceased w.e.f. 24.07.2014) M. Shankar2 Non-Executive Director

K. Vaidyanath Non-Executive Director

1 Appointed as Independent Director w.e.f. 30.07.2014

2 Appointed as Independent Director w.e.f. 15.09.2014

Members - Corporate Management Committee

B. B. Chatterjee A. Nayak

S. Puri (w.e.f. 01.11.2014) T. V. Ramaswamy S. Sivakumar K. S. Suresh R. Tandon

b) Relatives of Key Management Personnel:

Mrs. B. Deveshwar (wife of Mr. Y. C. Deveshwar) Mrs. S. Chatterjee (wife of Mr. B. B. Chatterjee) Mrs. S. Rehman (wife of Mr. S. S. H. Rehman)

iii) Employee Trusts where there is significant influence:

a) IATC Provident Fund

b) IATC Staff X Provident Fund (merged with IATC Provident Fund w.e.f. 01.08.2014)

c) ITC Defined Contribution Pension Fund

d) ITC Management Staff Gratuity Fund

e) ITC Employees Gratuity Fund

f) ITC Gratuity Fund 'C'

g) ITC Pension Fund

h) ILTD Seasonal Employees Pension Fund

i) ITC Platinum Jubilee Pension Fund

j) Tribeni Tissues Limited Gratuity Fund

k) ITC Bhadrachalam Paperboards Limited Management Staff Pension Fund

l) ITC Bhadrachalam Paperboards Limited Gratuity Fund 'A'

m) ITC Bhadrachalam Paperboards Limited Gratuity Fund 'C'

n) ITC Hotels Limited Employees Superannuation Scheme


Mar 31, 2014

(i) Contingent liabilities and commitments:

(a)Contingent liabilities

Claims against the Company not acknowledged as debts Rs. 361.50 Crores (2013 - Rs. 466.54 Crores). These comprise:

- Excise duty, sales taxes and other indirect taxes claims disputed by the Company relating to issues of applicability and classification aggregating Rs. 254.99 Crores (2013 - Rs. 377.74 Crores).

- Local Authority taxes/cess/royalty on property, utilities etc. claims disputed by the Company relating to issues of applicability and determination aggregating Rs. 63.62 Crores (2013 - Rs. 45.16 Crores).

- Third party claims arising from disputes relating to contracts aggregating Rs. 37.36 Crores (2013 - Rs. 39.07 Crores).

- Other matters Rs. 5.53 Crores (2013 - Rs. 4.57 Crores).

It is not practicable for the Company to estimate the closure of these issues and the consequential timings of cash flows, if any, in respect of the above.

(b)Commitments

- Estimated amount of contracts remaining to be executed on capital accounts and not provided for Rs. 1528.10 Crores (2013 - Rs. 1656.29 Crores).

- Uncalled liability on shares partly paid Rs. 26.40 Crores (2013 - Rs. 26.40 Crores).

(iii) Research and Development expenses for the year amount to Rs. 117.18 Crores (2013 - Rs. 109.22 Crores).

(v) Micro, Small and Medium scale business entities:

A sum of Rs. 23.25 Crores is payable to Micro and Small Enterprises as at 31st March, 2014 (2013 - Rs. 15.12 Crores). There are no Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days during the year and also as at 31st March, 2014. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.

(vi) The Company''s significant leasing arrangements are in respect of operating leases for premises (residential, office, stores, godowns etc.). These leasing arrangements which are not non-cancellable range between 11 months and 9 years generally, or longer, and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are charged as "Rent" under Note 28.

(ix) The Employee Stock Option Scheme section in the Report on Corporate Governance and the disclosure in respect of Employees Stock Options which are outlined in this year''s Annexure to the Report of the Directors are treated as an annexure to these accounts.

(x) The Board of Directors of the Company, at its meeting held on 28th August, 2013, proposed a Scheme of Arrangement under Sections 391 and 394 read with Sections 78, 80, 100 and other applicable provisions of the Companies Act, 1956, between its subsidiary, Wimco Limited (''Wimco'') and the Company and their respective shareholders (''the Scheme'') for demerger of the Non-Engineering business of Wimco to the Company on a going concern basis with effect from 1st April, 2013. The Members of the Company approved the Scheme on 24th March, 2014. The Hon''ble High Courts at Bombay and Calcutta have also sanctioned the Scheme on 10th April, 2014 and 14th May, 2014, respectively. Certified copies of the Orders from the Courts are awaited. The Scheme would become effective upon filing of such certified copies of the Orders with the respective Registrar of Companies. Pending this, the Scheme has not been given effect to in these financial statements.

(xiv) Value of Raw materials, Spare parts and Components consumed during the year

(xvii) Liability for earlier years towards Rates and Taxes and Interest thereon of Rs. 157.91 Crores and Rs. 34.77 Crores respectively have been written back as no longer required, based on a favourable High Court Order (Refer Notes 27 and 28). Segment Results of FMCG-Cigarettes and Finance Costs include the effects of such write back (Refer Note 32).

(xviii) Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification/ disclosure.

33. Related Party Disclosures

1. ENTERPRISES WHERE CONTROL EXISTS:

i) Subsidiaries:

a) Srinivasa Resorts Limited

b) Fortune Park Hotels Limited

c) Bay Islands Hotels Limited

d) WelcomHotels Lanka (Private) Limited, Sri Lanka

e) Landbase India Limited

f) Russell Credit Limited and its subsidiary

Greenacre Holdings Limited

g) Technico Pty Limited, Australia and its subsidiaries

Technico Agri Sciences Limited

Technico Technologies Inc., Canada

Technico Asia Holdings Pty Limited, Australia and its subsidiary Technico Horticultural (Kunming) Co. Limited, China h) Wimco Limited and its subsidiaries Pavan Poplar Limited Prag Agro Farm Limited i) ITC Infotech India Limited and its subsidiaries

ITC Infotech Limited, UK

ITC Infotech (USA), Inc. and its subsidiary Pyxis Solutions, LLC, USA j) Wills Corporation Limited k) Gold Flake Corporation Limited l) ITC Investments & Holdings Limited m) Surya Nepal Private Limited n) King Maker Marketing, Inc., USA o) BFIL Finance Limited and its subsidiary

MRR Trading & Investment Company Limited p) North East Nutrients Private Limited (w.e.f. 06.02.2014) The above list does not include ITC Global Holdings Pte. Limited, Singapore (in liquidation)

ii) Other entities under control of the Company:

a) ITC Sangeet Research Academy

b) ITC Education Trust

c) ITC Rural Development Trust

2. OTHER RELATED PARTIES WITH WHOM THE COMPANY HAD TRANSACTIONS i) Associates & Joint Ventures:

Associates

a) Gujarat Hotels Limited

b) International Travel House Limited

- being associates of the Company, and

c) Tobacco Manufacturers (India) Limited, UK

- of which the Company is an associate.

Associates of the Company''s subsidiaries

a) Russell Investments Limited

b) Classic Infrastructure & Development Limited

c) Divya Management Limited

d) Antrang Finance Limited

- being associates of Russell Credit Limited, and

e) ATC Limited

- being associate of Gold Flake Corporation Limited

Joint Ventures

a) Maharaja Heritage Resorts Limited

b) Espirit Hotels Private Limited

c) Logix Developers Private Limited

Joint Venture of the Company''s subsidiary

a) ITC Essentra Limited (formerly known as ITC Filtrona Limited) - being joint venture of Gold Flake Corporation Limited

ii) a) Key Management Personnel:

Y. C. Deveshwar Executive Chairman

N. Anand Executive Director

P. V. Dhobale Executive Director

K. N. Grant Executive Director

A. Baijal Non-Executive Director

S. Banerjee Non-Executive Director (upto 26.03.2014)

S. H. Khan Non-Executive Director

A. V. Girija Kumar Non-Executive Director

R. Lerwill Non-Executive Director (w.e.f. 18.11.2013)

S. B. Mathur Non-Executive Director

D. K. Mehrotra Non-Executive Director (upto 27.10.2013)

H. G. Powell Non-Executive Director (upto 30.07.2013)

P. B. Ramanujam Non-Executive Director

S. S. H. Rehman Non-Executive Director

A. Ruys Non-Executive Director

B. Sen Non-Executive Director (upto 27.08.2013)

M. Shankar Non-Executive Director

K. Vaidyanath Non-Executive Director

B. Vijayaraghavan Non-Executive Director (upto 27.08.2013)

Members - Corporate Management Committee

B. B. Chatterjee

A. Nayak

T. V. Ramaswamy

S. Sivakumar

K. S. Suresh

R. Tandon

b) Relatives of Key Management Personnel:

Mrs. B. Deveshwar (wife of Mr. Y. C. Deveshwar) Mrs. S. Chatterjee (wife of Mr. B. B. Chatterjee)

iii) Employee Trusts where there is significant influence:

a) IATC Provident Fund

b) IATC Staff X Provident Fund

c) ITC Defined Contribution Pension Fund

d) ITC Management Staff Gratuity Fund

e) ITC Employees Gratuity Fund

f) ITC Gratuity Fund ''C''

g) ITC Pension Fund

h) ILTD Seasonal Employees Pension Fund

i) ITC Platinum Jubilee Pension Fund

j) Tribeni Tissues Limited Gratuity Fund

k) ITC Bhadrachalam Paperboards Limited Management Staff Pension Fund

l) ITC Bhadrachalam Paperboards Limited Gratuity Fund ''A''

m) ITC Bhadrachalam Paperboards Limited Gratuity Fund ''C''

n) ITC Hotels Limited Employees Superannuation Scheme


Mar 31, 2013

Terms and Conditions of Options Granted

Each Option entitles the holder thereof to apply for and be allotted ten Ordinary Shares of the Company of Rs. 1.00 each upon payment of the exercise price during the exercise period. The exercise period commences from the date of vesting of the Options and expires at the end of five years from (i) the date of grant in respect of Options granted under the ITC Employee Stock Option Scheme (introduced in 2001) and (ii) the date of vesting in respect of Options granted under the ITC Employee Stock Option Scheme -2006 & the ITC Employee Stock Option Scheme -2010.

Term loans from Banks

Repayable in equated periodic instalments upto a 5 year period from the date of respective loan. These are repayable by 2014-15 and carry an interest of 11.25% p.a.

Sales tax deferment loans

Repayable after a period of 10 to 14 years from the end of the month of respective loans. These are repayable by 2025-26 and are interest free.

* Represents dividend amounts either not claimed or kept in abeyance in accordance with Section 206A of the Companies Act, 1956, or such amounts in respect of which Prohibitory / Attachment Orders are on record with the Company.

** Represents amounts which are subject matter of pending legal disputes, details in respect of which are on record with the Company, including an amount of Rs. 0.30 Crore (2012 - Rs. 0.30 Crore) maintained with a bank for which the Company has filed a suit.

(i) Exchange difference in respect of forward exchange contracts to be recognised in the Statement of Profit and Loss in the subsequent accounting period amounts to Rs. 0.88 Crore (2012 - Rs. 0.78 Crore).

(ii) Contingent liabilities and commitments:

(a)Contingent liabilities

Claims against the Company not acknowledged as debts Rs. 466.54 Crores (2012 - Rs. 287.08 Crores). These comprise:

- Excise duty, sales taxes and other indirect taxes claims disputed by the Company relating to issues of applicability and classification aggregating Rs. 377.74 Crores (2012 - Rs. 199.23 Crores).

- Local Authority taxes/cess/royalty on property, utilities etc. claims disputed by the Company relating to issues of applicability and determination aggregating Rs. 45.16 Crores (2012 - Rs. 47.35 Crores).

- Third party claims arising from disputes relating to contracts aggregating Rs. 39.07 Crores (2012 - Rs. 37.26 Crores).

- Other matters Rs. 4.57 Crores (2012 - Rs. 3.24 Crores).

It is not practicable for the Company to estimate the timings of cash flows, if any, in respect of the above.

(b) Commitments

- Estimated amount of contracts remaining to be executed on capital accounts and not provided for Rs. 1656.29 Crores (2012 - Rs. 2246.53 Crores).

- Uncalled liability on shares partly paid Rs. 26.40 Crores (2012 - Rs. 26.40 Crores).

(iii) The status on excise matters which is treated as an annexure to these accounts are as outlined in this years Report of the Directors & Management Discussion and Analysis under the Excise section. In the opinion of the Directors, the Company does not accept any further liability.

(iv) Research and Development expenses for the year amount to Rs. 109.22 Crores (2012 - Rs. 87.84 Crores).

(v) Micro, Small and Medium scale business entities:

A sum of Rs. 15.12 Crores is payable to Micro and Small Enterprises as at 31st March, 2013 (2012 - Rs. 12.42 Crores). There are no Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days during the year and also as at 31st March, 2013. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.

(vi) The Companys significant leasing arrangements are in respect of operating leases for premises (residential, office, stores, godowns etc.). These leasing arrangements which are not non-cancellable range between 11 months and 9 years generally, or longer, and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are charged as "Rent" under Note 28.

(vii) The Employee Stock Option Scheme section in the Report on Corporate Governance and the disclosure in respect of Employees Stock Options which are outlined in this years Annexure to the Report of the Directors are treated as an annexure to these accounts.

(viii) Previous years figures have been regrouped / reclassified wherever necessary to correspond with the current years classification/ disclosure.

1. Related Party Disclosures

1. ENTERPRISES WHERE CONTROL EXISTS:

i) Subsidiaries:

a) Srinivasa Resorts Limited

b) Fortune Park Hotels Limited

c) Bay Islands Hotels Limited

d) WelcomHotels Lanka (Private) Limited, Sri Lanka

e) Landbase India Limited

f) Russell Credit Limited and its subsidiary

Greenacre Holdings Limited

g) Technico Pty Limited, Australia and its subsidiaries

Technico Agri Sciences Limited

Technico Technologies Inc., Canada

Technico Asia Holdings Pty Limited, Australia and its subsidiary

Technico Horticultural (Kunming) Co. Limited, China

h) Wimco Limited and its subsidiaries

Pavan Poplar Limited

Prag Agro Farm Limited

i) ITC Infotech India Limited and its subsidiaries

ITC Infotech Limited, UK

ITC Infotech (USA), Inc. and its subsidiary

Pyxis Solutions, LLC, USA

j) Wills Corporation Limited

k) Gold Flake Corporation Limited

l) ITC Investments & Holdings Limited

m) Surya Nepal Private Limited

n) King Maker Marketing, Inc., USA

o) BFIL Finance Limited and its subsidiary

MRR Trading & Investment Company Limited

The above list does not include ITC Global Holdings Pte. Limited, Singapore (in liquidation)

ii) Other entities under control of the Company:

a) ITC Sangeet Research Academy

b) ITC Education Trust

c) ITC Rural Development Trust

2. OTHER RELATED PARTIES WITH WHOM THE COMPANY HAD TRANSACTIONS

i) Associates & Joint Ventures:

Associates

a) Gujarat Hotels Limited

b) International Travel House Limited

- being associates of the Company, and

c) Tobacco Manufacturers (India) Limited, UK

- of which the Company is an associate.

Associates of the Companys subsidiaries

a) Russell Investments Limited

b) Classic Infrastructure & Development Limited

c) Divya Management Limited

d) Antrang Finance Limited

- being associates of Russell Credit Limited, and

e) ATC Limited

- being associate of Gold Flake Corporation Limited

Joint Ventures

a) Maharaja Heritage Resorts Limited

b) Espirit Hotels Private Limited

c) Logix Developers Private Limited

Joint Venture of the Companys subsidiary

a) ITC Filtrona Limited

- being joint venture of Gold Flake Corporation Limited

ii) a) Key Management Personnel:

Y. C. Deveshwar Executive Chairman

N. Anand Executive Director

P. V. Dhobale Executive Director

K. N. Grant Executive Director

A. Baijal Non-Executive Director

S. Banerjee Non-Executive Director

S. H. Khan Non-Executive Director

A. V. Girija Kumar Non-Executive Director

S. B. Mathur Non-Executive Director

D. K. Mehrotra Non-Executive Director

H. G. Powell Non-Executive Director

P. B. Ramanujam Non-Executive Director

S. S. H. Rehman (w.e.f. 27.07.2012) Non-Executive Director

A. Ruys Non-Executive Director

B. Sen Non-Executive Director

M. Shankar (w.e.f. 06.09.2012) Non-Executive Director

K. Vaidyanath Non-Executive Director

B. Vijayaraghavan Non-Executive Director

Members - Corporate Management Committee

B. B. Chatterjee

A. Nayak

T. V. Ramaswamy

S. Sivakumar

K. S. Suresh

R. Tandon

b) Relatives of Key Management Personnel:

Mrs. B. Deveshwar (wife of Mr. Y. C. Deveshwar)

Mrs. S. Chatterjee (wife of Mr. B. B. Chatterjee)

iii) Employee Trusts where there is significant influence:

a) IATC Provident Fund

b) IATC Staff X Provident Fund

c) ITC Defined Contribution Pension Fund

d) ITC Management Staff Gratuity Fund

e) ITC Employees Gratuity Fund

f) ITC Gratuity Fund C

g) ITC Pension Fund

h) ILTD Seasonal Employees Pension Fund

i) ITC Platinum Jubilee Pension Fund

j) Tribeni Tissues Limited Provident Fund

k) Tribeni Tissues Limited Gratuity Fund

l) ITC Bhadrachalam Paperboards Limited Management Staff Pension Fund

m) ITC Bhadrachalam Paperboards Limited Gratuity Fund A

n) ITC Bhadrachalam Paperboards Limited Gratuity Fund C

o) ITC Bhadrachalam Paperboards Limited Staff Provident Fund

p) ITC Hotels Limited Employees Superannuation Scheme

q) ITC Hotels Limited Employees Gratuity Fund


Mar 31, 2012

1. Additional Notes to the Financial Statements

(i) The revised Schedule VI has become effective from 1st April, 2011 for the preparation of financial statements. This has significantly impacted the disclosure and presentation made in the financial statements. Previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current year's classification / disclosure.

(ii) Exchange difference in respect of forward exchange contracts to be recognised in the Statement of Profit and Loss in the subsequent accounting period amounts to Rs 0.78 Crore (2011 - Rs 0.26 Crore).

(iii) Contingent liabilities and commitments:

(a) Contingent liabilities

Claims against the Company not acknowledged as debts Rs 287.08 Crores (2011 - Rs 255.17 Crores). These comprise:

- Excise duty, sales taxes and other indirect taxes claims disputed by the Company relating to issues of applicability and classification aggregating Rs 199.23 Crores (2011 - Rs 182.87 Crores).

- Local Authority taxes/cess/royalty on property, utilities etc. claims disputed by the Company relating to issues of applicability and determination aggregating Rs 47.35 Crores (2011 - Rs 33.83 Crores).

- Third party claims arising from disputes relating to contracts aggregating Rs 37.26 Crores (2011 - Rs 35.08 Crores).

- Other matters Rs 3.24 Crores (2011 - Rs 3.39 Crores).

(b)Commitments

- Estimated amount of contracts remaining to be executed on capital accounts and not provided for Rs 2246.53 Crores (2011 - Rs 1976.62 Crores).

- Uncalled liability on shares partly paid Rs 26.40 Crores (2011 - Rs 26.40 Crores).

(iv) The status on excise matters which is treated as an annexure to these accounts are as outlined in this year's Report of the Directors & Management Discussion and Analysis under the Excise section. In the opinion of the Directors, the Company does not accept any further liability.

(v) Research and Development expenses for the year amount to Rs 87.84 Crores (2011 - Rs 90.24 Crores).

(vi) Micro, Small and Medium scale business entities: A sum of Rs 12.42 Crores is payable to Micro and Small Enterprises as at 31st March, 2012 (2011 - Rs 4.60 Crores). There are no Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days during the year and also as at 31st March, 2012. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.

(vii) The Company's significant leasing arrangements are in respect of operating leases for premises (residential, office, stores, godowns etc.). These leasing arrangements which are not non-cancellable range between 11 months and 9 years generally, or longer, and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are charged as "Rent" under Note 25.

(viii) The Employee Stock Option Scheme section in the Report on Corporate Governance and the disclosure in respect of Employees Stock Options which are outlined in this year's Annexure to the Report of the Directors are treated as an annexure to these accounts.

(ix) Gross Revenue from sale of products and services comprise*

NOTES : (1) The Company's corporate strategy aims at creating multiple drivers of growth anchored on its core competencies. The Company is currently focused on four business groups: FMCG, Hotels, Paperboards, Paper and Packaging and Agri Business. The Company's organisational structure and governance processes are designed to support effective management of multiple businesses while retaining focus on each one of them.

(2) The business groups comprise the following:

FMCG : Cigarettes – Cigarettes, Cigars and Smoking Mixtures.

: Others – Branded Packaged Foods (Staples, Biscuits, Confectionery, Snack Foods, Pasta & Noodles, Ready to Eat Foods), Garments, Educational and other Stationery products, Matches, Agarbattis and Personal Care products.

Hotels – Hoteliering. Paperboards,

Paper and Packaging – Paperboards, Paper including Specialty Paper and Packaging including Flexibles.

Agri Business – Agri commodities such as soya, spices, coffee and leaf tobacco.

(3) The geographical segments considered for disclosure are:

– Sales within India.

– Sales outside India.

(4) Segment results of 'FMCG: Others' are after considering significant business development, brand building and gestation costs of Branded Packaged Foods and Personal Care Products businesses.

(5) The Company's Agri Business markets agri commodities in the export and domestic markets; supplies agri raw materials to the Branded Packaged Foods Business and sources leaf tobacco for the Cigarettes Business. The segment results for the year are after absorbing costs relating to the strategic e-Choupal initiative.

2. Related Party Disclosures

1. ENTERPRISES WHERE CONTROL EXISTS:

i) Subsidiaries:

a) Srinivasa Resorts Limited

b) Fortune Park Hotels Limited

c) Bay Islands Hotels Limited

d) Russell Credit Limited and its subsidiary Greenacre Holdings Limited

e) Technico Pty Limited, Australia and its subsidiaries

Technico Agri Sciences Limited

Technico Technologies Inc., Canada

Technico Asia Holdings Pty Limited, Australia and its subsidiary

Technico Horticultural (Kunming) Co. Limited, China

f) Wimco Limited and its subsidiaries

Pavan Poplar Limited

Prag Agro Farm Limited

g) ITC Infotech India Limited and its subsidiaries

ITC Infotech Limited, UK

ITC Infotech (USA), Inc. and its subsidiary

Pyxis Solutions, LLC

h) Wills Corporation Limited

i) Gold Flake Corporation Limited

j) Landbase India Limited

k) BFIL Finance Limited and its subsidiary

MRR Trading & Investment Company Limited

l) Surya Nepal Private Limited

m) King Maker Marketing, Inc., USA

The above list does not include ITC Global Holdings Pte. Limited, Singapore (in liquidation)

ii) Other entities under control of the Company:

a) ITC Sangeet Research Academy

b) ITC Education Trust

c) ITC Rural Development Trust

2. OTHER RELATED PARTIES WITH WHOM THE COMPANY HAD TRANSACTIONS

i) Associates & Joint Ventures:

Associates

a) Gujarat Hotels Limited

b) International Travel House Limited

- being associates of the Company, and

c) Tobacco Manufacturers (India) Limited, UK

- of which the Company is an associate.

Associates of the Company's subsidiaries

a) Russell Investments Limited

b) Classic Infrastructure & Development Limited

c) Divya Management Limited

d) Antrang Finance Limited

- being associates of Russell Credit Limited, and

e) ATC Limited

- being associate of Gold Flake Corporation Limited

Joint Ventures

a) Maharaja Heritage Resorts Limited

b) Espirit Hotels Private Limited

c) Logix Developers Private Limited (w.e.f. 27.09.2011)


Mar 31, 2011

(i) Exchange difference in respect of forward exchange contracts to be recognised in the Profit and Loss Account in the subsequent accounting period amounts to Rs. 0.26 Crore (2010 - Rs. 0.54 Crore).

(ii) (a) Claims against the Company not acknowledged as debts Rs. 255.17 Crores (2010 - Rs. 258.73 Crores). These comprise:

- Excise Duty, Sales Taxes and other Indirect Taxes claims disputed by the Company relating to issues of applicability and classification aggregating Rs. 182.87 Crores (2010 - Rs. 193.74 Crores).

- Local Authority Taxes/Cess/Royalty on property, utilities etc. claims disputed by the Company relating to issues of applicability and determination aggregating Rs. 33.83 Crores (2010 - Rs. 33.49 Crores).

- Third party claims arising from disputes relating to contracts aggregating Rs. 35.08 Crores (2010 -Rs. 29.22 Crores).

- Other matters Rs. 3.39 Crores (2010 - Rs. 2.28 Crores).

* After considering Bonus issue.

During the year Bonus Shares in the ratio of 1:1 were allotted on 6th August, 2010. Previous year figures have been restated

for the purpose of computation of Earnings per share.

(iv) The status on excise matters which is treated as an annexure to these accounts are as outlined in this years Report of the Directors & Management Discussion and Analysis under the Excise section. In the opinion of the Directors, the Company does not accept any further liability.

(v) Research and Development expenses for the year amount to Rs. 90.24 Crores (2010 - Rs. 77.08 Crores).

(vii) Micro and Medium scale business entities :

There are no Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days during the year and also as at 31st March, 2011. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.

(viii) The Companys significant leasing arrangements are in respect of operating leases for premises (residential, office, stores, godowns etc.). These leasing arrangements which are not non-cancellable range between 11 months and 9 years generally, or longer, and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are charged as "Rent" under Schedule 17.

(ix) The following donations were made to political parties during the year : Indian National Congress – Rs. 0.50 Crore (2010 – Rs. 2.50 Crores), Bharatiya Janata Party – Rs. Nil (2010 – Rs. 2.50 Crores), Samajwadi Party – Rs. Nil (2010 – Rs. 0.42 Crore), Rashtriya Janata Dal – Rs. Nil (2010 – Rs. 0.33 Crore), Dravida Munnetra Kazhagam – Rs. Nil (2010 – Rs. 0.22 Crore), Shiv Sena Rs. Nil (2010 – Rs. 0.17 Crore) and Nationalist Congress Party – Rs. Nil (2010 – Rs. 0.14 Crore).

(xi) DIRECTORS REMUNERATION

The above (a) excludes contribution to the approved group pension and gratuity funds and provisions for leave encashment, which are actuarially determined on an overall Company basis and (b) includes Rs. 0.89 Crore, in respect of two Executive Directors, Mr. P. V. Dhobale and Mr. N. Anand, whose appointment by the Board of Directors for tenures commencing from 3rd January, 2011 are subject to approval of the Members at the forthcoming Annual General Meeting.

(xii) Derivative Instruments :

The Company uses Forward Exchange Contracts and Currency Options to hedge its exposures in foreign currency related to firm commitments and highly probable forecasted transactions. The information on Derivative Instruments is as follows :

* Figures in brackets indicate Open Exports. Figures without brackets indicate Open Imports.

(xiii) The Employee Stock Option Scheme section in the Report on Corporate Governance and the disclosure in respect of Employees Stock Options which are outlined in this years Annexure to the Report of the Directors are treated as an annexure to these accounts.

(xv) ADDITIONAL INFORMATION PURSUANT TO THE PROVISIONS OF PARAGRAPHS 3, 4C AND 4D OF PART II OF SCHEDULE VI OF THE COMPANIES ACT, 1956.

a) The "Registered/Licensed Capacity" (including as approved by "Letters of Intent") is exclusive of additional capacities permissible under the policy of the Government of India.

b) Includes production meant for internal consumption.

c) Based on Capacity rated by equipment manufacturers/project consultants at the time of installation. N.A. - Not Applicable

* Relates to the Companys main products and the principal raw materials.

# Others primarily include Hotel Consumables, Spices, Skimmed Milk Powder, Fabrics, Agri Inputs etc.

Note : The Board of Directors of the Company have specifically consented to the continued disclosure of certain items individually constituting less than 10% of the total value of turnover, purchases, opening and closing stocks, and raw materials consumed, covered in (B), (C) and (D), as appropriate, in the Additional Information provided above.

NOTES :

(1) The Companys corporate strategy aims at creating multiple drivers of growth anchored on its core competencies. The Company is currently focused on four business groups : FMCG, Hotels, Paperboards, Paper & Packaging and Agri Business. The Companys organisational structure and governance processes are designed to support effective management of multiple businesses while retaining focus on each one of them.

(2) The business groups comprise the following :

FMCG : Cigarettes - Cigarettes, Cigars and Smoking Mixtures.

: Others - Branded Packaged Foods (Staples, Biscuits, Confectionery, Snack Foods, Noodles, Ready to Eat Foods), Garments, Educational and other Stationery products, Matches, Agarbattis and Personal Care products.

Hotels - Hoteliering.

Paperboards, Paper and Packaging - Paperboards, Paper including Specialty Paper and Packaging including Flexibles.

Agri Business - Agri commodities such as rice, soya, coffee and leaf tobacco.

(3) The geographical segments considered for disclosure are :

- Sales within India.

- Sales outside India.

(4) Segment results of ‘FMCG : Others are after considering significant business development, brand building and gestation costs of Branded Packaged Foods and Personal Care Products businesses.

(5) The Companys Agri Business markets agri commodities in the export and domestic markets; supplies agri raw materials to the Branded Packaged Foods Business and sources leaf tobacco for the Cigarettes Business. The segment results for the year are after absorbing costs relating to the strategic e-Choupal initiative.

21. Related Party Disclosures

1. ENTERPRISES WHERE CONTROL EXISTS:

i) Subsidiaries :

a) Srinivasa Resorts Limited

b) Fortune Park Hotels Limited

c) Bay Islands Hotels Limited

d) Russell Credit Limited and its subsidiaries

Greenacre Holdings Limited

Wimco Limited and its subsidiaries

Pavan Poplar Limited

Prag Agro Farm Limited

Technico Pty Limited, Australia and its subsidiaries

Technico ISC Pty Limited, Australia (deregistered on 03.11.2010)

Technico Agri Sciences Limited

Technico Technologies Inc., Canada

Technico Asia Holdings Pty Limited, Australia and its subsidiary

Technico Horticultural (Kunming) Co. Limited, China

e) ITC Infotech India Limited and its subsidiaries

ITC Infotech Limited, UK

ITC Infotech (USA), Inc. and its subsidiary

Pyxis Solutions, LLC

f) Wills Corporation Limited

g) Gold Flake Corporation Limited h) Landbase India Limited

i) BFIL Finance Limited and its subsidiary

MRR Trading & Investment Company Limited

j) Surya Nepal Private Limited

k) King Maker Marketing, Inc.

The above list does not include :

a) ITC Global Holdings Pte. Limited, Singapore (in liquidation) and its subsidiaries

Hup Hoon Traders Pte. Limited, Singapore (struck off w.e.f. 31.03.2011 by the Registrar of Companies, Singapore)

AOZT "Hup Hoon", Moscow

Hup Hoon Impex SRL, Romania, and

b) BFIL Securities Limited (a subsidiary of BFIL Finance Limited) which is under voluntary winding up proceedings.

ii) Other entities under control of the Company :

a) ITC Sangeet Research Academy

b) ITC Education Trust

c) ITC Rural Development Trust

2. OTHER RELATED PARTIES WITH WHOM THE COMPANY HAD TRANSACTIONS

i) Associates & Joint Ventures : Associates

a) Gujarat Hotels Limited

b) International Travel House Limited

- being associates of the Company, and

c) Tobacco Manufacturers (India) Limited, UK

- of which the Company is an associate.

Associates of the Companys Subsidiaries

a) Russell Investments Limited

b) Classic Infrastructure & Development Limited

c) Divya Management Limited

d) Antrang Finance Limited

- being associates of Russell Credit Limited, and

e) ATC Limited

- being associate of Gold Flake Corporation Limited

Joint Ventures

a) Maharaja Heritage Resorts Limited

b) Espirit Hotels Private Limited (w.e.f. 24.09.2010)

- being joint ventures of the Company

Joint Venture of the Companys subsidiary

a) ITC Filtrona Limited

- being joint venture of Gold Flake Corporation Limited

ii) a) Key Management Personnel (KMP) :

Y. C. Deveshwar Executive Chairman

N. Anand Executive Director

P. V. Dhobale Executive Director (KMP w.e.f. 26.07.2010)

K. N. Grant Executive Director

A. Singh Executive Director (upto 23.07.2010)

A. Baijal Non-Executive Director

S. Banerjee Non-Executive Director

S. H. Khan Non-Executive Director

A. V. Girija Kumar Non-Executive Director

S. B. Mathur Non-Executive Director

D. K. Mehrotra Non-Executive Director

H. G. Powell Non-Executive Director

P. B. Ramanujam Non-Executive Director

A. Ruys Non-Executive Director

B. Sen Non-Executive Director

K. Vaidyanath Non-Executive Director

B. Vijayaraghavan Non-Executive Director

Members - Corporate Management Committee

A. Nayak

S. Sivakumar

T. V. Ramaswamy

R. Tandon

B. B. Chatterjee

K. S. Suresh

b) Relatives of Key Management Personnel :

Mrs. B. Deveshwar (wife of Mr. Y. C. Deveshwar)

Mrs. S. Chatterjee (wife of Mr. B. B. Chatterjee)

iii) Employee Trusts where there is significant influence :

a) IATC Provident Fund

b) IATC Staff X Provident Fund

c) ITC Defined Contribution Pension Fund

d) ITC Management Staff Gratuity Fund

e) ITC Employees Gratuity Fund

f) ITC Gratuity Fund ‘C

g) ITC Pension Fund

h) ILTD Seasonal Employees Pension Fund

i) ITC Platinum Jubilee Pension Fund

j) Tribeni Tissues Limited Provident Fund

k) Tribeni Tissues Limited Gratuity Fund

l) ITC Bhadrachalam Paperboards Limited Management Staff Pension Fund

m) ITC Bhadrachalam Paperboards Limited Gratuity Fund ‘A

n) ITC Bhadrachalam Paperboards Limited Gratuity Fund ‘B

o) ITC Bhadrachalam Paperboards Limited Gratuity Fund ‘C

p) ITC Bhadrachalam Paperboards Limited Staff Provident Fund

q) ITC Hotels Limited Employees Superannuation Scheme

r) ITC Hotels Limited Employees Gratuity Fund


Mar 31, 2010

Employee Benefits

To make regular monthly contributions to various Provident Funds which are in the nature of defined contribution scheme and such paid / payable amounts are charged against revenue. To administer such Funds through duly constituted and approved independent trusts with the exception of Provident Fund and Family Pension contributions in respect of Unionised Staff which are statutorily deposited with the Government.

To administer through duly constituted and approved independent trusts, various Gratuity and Pension Funds which are in the nature of defined benefit/contribution schemes. To determine the liabilities towards such schemes, as applicable, and towards employee leave encashment by an independent actuarial valuation as per the requirements of Accounting Standard - 15 (revised 2005) on “Employee Benefits”. To determine actuarial gains or losses and to recognise such gains or losses immediately in Profit and Loss Account as income or expense.

To charge against revenue, actual disbursements made, when due, under the Workers’ Voluntary Retirement Scheme.

Lease Rentals

To charge Rentals in respect of leased equipment to the Profit and Loss Account.

Research and Development

To write off all expenditure other than capital expenditure on Research and Development in the year it is incurred.

Capital expenditure on Research and Development is included under Fixed Assets.

Taxes on Income

To provide Current tax as the amount of tax payable in respect of taxable income for the period, measured using the applicable tax rates and tax laws.

To provide Deferred tax on timing differences between taxable income and accounting income subject to consideration of prudence, measured using the tax rates and tax laws that have been enacted or substantially enacted by the balance sheet date.

Not to recognise Deferred tax assets on unabsorbed depreciation and carry forward of losses unless there is virtual certainty that there will be sufficient future taxable income available to realise such assets.

Foreign Currency Translation

To account for transactions in foreign currency at the exchange rate prevailing on the date of transactions. Gains / Losses arising out of fluctuations in the exchange rates are recognised in the Profit and Loss Account in the period in which they arise.

To account for differences between the forward exchange rates and the exchange rates at the date of transactions, as income or expense over the life of the contracts.

To account for profit/loss arising on cancellation or renewal of forward exchange contracts as income/expense for the period.

To account for premium paid on currency options in the Profit and Loss Account at the inception of the option.

To account for profit / loss arising on settlement or cancellation of currency option as income/expense for the period.

To recognise the net mark to market losses in the Profit and Loss Account on the outstanding portfolio of options as at the Balance Sheet date, and to ignore the net gain, if any.

To account for gains / losses in the Profit and Loss Account on foreign exchange rate fluctuations relating to monetary items at the year end.

Claims

To disclose claims against the Company not acknowledged as debts after a careful evaluation of the facts and legal aspects of the matter involved.

Segment Reporting

To identify segments based on the dominant source and nature of risks and returns and the internal organisation and management structure.

To account for inter-segment revenue on the basis of transactions which are primarily market led.

To include under “Unallocated Corporate Expenses” revenue and expenses which relate to the enterprise as a whole and are not attributable to segments.

Financial and Management Information Systems

To practise an Integrated Accounting System which unifies both Financial Books and Costing Records. The books of account and other records have been designed to facilitate compliance with the relevant provisions of the Companies Act on one hand, and meet the internal requirements of information and systems for Planning, Review and Internal Control on the other. To ensure that the Cost Accounts are designed to adopt Costing Systems appropriate to the business carried out by the Division with each Division incorporating into its Costing System, the basic tenets and principles of Standard Costing, Budgetary Control and Marginal Costing as appropriate.