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Notes to Accounts of Johnson Controls-Hitachi Air Conditioning India Ltd.

Mar 31, 2016

1. Background

Hitachi Home and Life Solutions (India) Limited (''the Company'') was incorporated in December 1984 as "Acquest Air conditioning Systems Private Limited" under the provisions of Companies Act, 1956.

The Company is engaged in the business of manufacturing, selling and trading of ''Hitachi'' brand of Air conditioners, refrigerators, washing machines, air purifiers, chillers and VRF (variable refrigerant flow) systems. Manufacturing facility for Air conditioners is set up at Kadi (North Gujarat). The Company performs its marketing activities through twenty branches and forty service centers spread across India.

On 1st October, 2015, Johnson Controls Inc., Hitachi Ltd. and Hitachi Appliances, Inc. have completed Global Joint Venture agreement and commenced operations of Johnson Controls - Hitachi Air Conditioning Company (JCH). Through this agreement Johnson Controls had acquired 60 per cent ownership stake of the JCH and Hitachi Appliances, Inc. retained ownership of remaining 40 percent of the Company. Consequent to that, Hitachi Home & Life Solutions (India) Limited has become a subsidiary of Johnson Controls - Hitachi Air Conditioning Company.

2. Segment reporting

Business segment:

The Company is engaged in the business of manufacturing, trading and other related services of Air Conditioners, Refrigerators, washing machines, air purifiers, chillers and VRF (variable refrigerant flow) systems. Since the Company''s business falls within a single business segment of Cooling Products for comfort and commercial use, disclosures under Accounting Standard (AS) 17 - Segment Reporting are not reported upon separately.

Geographical segment:

Secondary segment reporting is based on the geographical areas of operations. The geographical segments have been identified based on revenues within India (sales to customers within India) and revenues outside India (sales to customers located outside India).

Since the export market revenue and assets constitute less than 10% of the total revenue and assets respectively, the same has not been disclosed.

3. Disclosure as per Accounting Standard-15 (Revised) on Employee Benefits Gratuity:

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with Life Insurance Corporation in the form of a qualifying insurance policy.

The following tables summarise the components of net benefit expense recognised in the Statement of profit and loss and the funded status and amounts recognised in the balance sheet for the plan.

4. Leases

(a) Company as lessee

Certain premises are obtained on cancellable and non-cancellable operating leases that are renewable either at the option of lessor or lessee or both. Further, there are no subleases nor any restrictions imposed in lease agreements. Lease rentals debited to Statement of profit and loss for the year is Rs.2,358.50 lacs (Previous year Rs.1,666.25 lacs).

(b) Company as lessor

Certain premises are given on cancellable operating leases that are renewable either at the option of lessor or lessee or both. Further, there are no subleases nor any restrictions imposed in lease agreements. Lease rentals credited to Statement of profit and loss for the year is Rs.23.88 lacs (Previous year Rs.20.11 lacs)

5. Capital Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) as on March 31, 2016: Rs.518.67 lacs (Previous year: Rs.252.89 lacs).

6. Details of dues to Micro & Small enterprises as defined under MSMED Act, 2006

Based on information available with the Company, there are no suppliers who are registered as micro, small or medium enterprise under "The Micro, Small and Medium Enterprise Development Act, 2006" (Act) till 31st March, 2016. Accordingly, no disclosures are required to be made under said Act.

Note :

a) The Company gives 5/10 years warranty on compressors at the time of sale to purchasers of its products. Product warranty expense is calculated based on past historical data of replacement of compressors and cost incurred thereon and is provided for in the year of sale. It is expected that the most of expenses against the provision will be incurred within next five / ten years, as the case may be.

b) Other provision includes likely claims against the Company in respect of certain legal matters like VAT, Service tax, excise duty etc., whose outcome depends on ultimate settlement / conclusion with relevant authorities.

7. The Company was eligible for refund of excise duty paid on goods manufactured and removed from Jammu unit, other than the amount of duty paid by utilisation of CENVAT credit, in terms of Notification No. 56/2002-CE dated 14-11-2002. Excise duty recovered as disclosed in the Statement of profit and loss is net of such refund of Rs.Nil lacs (Previous year Rs.52.30 lacs).

8. During the year, the Company has changed the basis of estimation of provision for obsolete/ non-moving inventories and provision for doubtful debts and as a result, the provision for obsolete inventories and doubtful debts have increased by Rs.1,131.35 lacs and Rs.140.24, which have been included in change in inventories of finished goods, work in progress & stock in trade and other expenses respectively.

9. The Company accrues certain sales related expenses on an estimated basis, which are reviewed at the each period end and any excess or short provisions are reversed or accounted for in respective expense heads. Accordingly, respective expenses under the head "Other Expenses" are net of write back of excess provision of earlier years amounting to Rs.1,421.05 lacs (Previous year Rs.758.82 lacs).

10. CSR Expenditure

Gross amount required to be spent during the year : Rs.90.72 lacs (Previous year Rs.57.56 lacs)

Amount spent during the year : Rs.Nil (Previous year Rs.16.07 lacs)

11. Prior year comparatives

The previous year figures have been regrouped wherever necessary to confirm to current year''s classification.


Mar 31, 2013

1. Background

Hitachi Home and Life Solutions (India) Limited (''the Company'') was incorporated in December 1984 as "Acquest Air conditioning Systems Private Limited" under the provisions of Companies Act, 1956.

The Company is engaged in the business of manufacturing, selling and trading of ''Hitachi'' brand of Air conditioners, refrigerators, chillers and VRF (variable refrigerant flow) systems. Manufacturing facility for Air conditioners is set up at Kadi (North Gujarat) and Jammu. The Company performs its marketing activities through twenty one branches and thirty five service centers spread across India.

The Company is a subsidiary of Hitachi Appliances, Inc., Japan.

2. Segment reporting Business segment:

The Company is engaged in the business of manufacturing, trading and other related services of Air conditioners, Chillers and Refrigerators. Since the Company''s business falls within a single business segment of Cooling Products for comfort and commercial use, disclosures under Accounting Standard (AS) 17 - Segment Reporting are not required.

Geographical segment:

Secondary segment reporting is based on the geographical areas of operations. The geographical segments have been identified based on revenues within India (sales to customers within India) and revenues outside India (sales to customers located outside India).

Since the export market revenue, results and assets constitute less than 10% of the total revenue, results and assets, the same has not been disclosed.

3. Disclosure as per Accounting Standard-15 (Revised) on Employee Benefits Gratuity:

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with Life Insurance Corporation in the form of a qualifying insurance policy.

The following tables summaries the components of net benefit expense recognised in the Statement of profit and loss and the funded status and amounts recognised in the balance sheet for the plan.

4. Leases

Certain premises are obtained on cancellable and non-cancellable operating lease that are renewable either at the option of lessor or lessee or both. Further, there are no subleases nor any restrictions imposed in lease agreements. Lease rentals debited to Statement of profit and loss for the year is Rs. 971.06 lacs (Previous year Rs. 1024.84 lacs).

5. Capital Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) as on March 31, 2013: Rs. 149.87 lacs (Previous year: Rs. 643.68 lacs).

6. Contingent Liabilities

March 31, 2013 March 31, 2012 Rs.Lacs Rs. Lacs

Legal matters under dispute *:

Service tax 144.80 199.57

Sales tax 284.18 264.77

Customs duty 0.92 0.92

Excise duty 17.16 0.50

Guarantees given by the bankers on behalf of the Company 78.15 44.09

Claims against the Company not acknowledged as debts 64.32 59.21

589.53 569.06

* The company is contesting the demands and the management believe that its position will likely be upheld in the appellate process. It is not practicable to estimate the timing of cash outflows, if any in respect of legal matters, pending resolution of the proceedings with the appellate authorities.

7. Details of dues to Micro & Small enterprises as defined under MSMED Act, 2006

Based on information available with the Company, there are no suppliers who are registered as micro, small or medium enterprise under "The Micro, Small and Medium Enterprise Development Act, 2006" (Act) till 31st March, 2013. Accordingly, no disclosures are required to be made under said Act.

Note :

a) The Company gives 5 years warranty on compressors at the time of sale to purchasers of its products. Product warranty expense is calculated based on past historical data of replacement of compressors and cost incurred thereon and is provided for in the year of sale. It is expected that the most of expenses against the provision will be incurred within next five years.

b) Other provision includes likely claims against the Company in respect of certain legal matters like VAT, Service tax, excise duty etc, whose outcome depends on ultimate settlement / conclusion with relevant authorities.

8. The Company is eligible for refund of excise duty paid on goods manufactured and removed from Jammu unit, other than the amount of duty paid by utilisation of CENVAT credit, in terms of Notification No. 56/2002-CE dated 14-11-2002. Excise duty recovered as disclosed in the Statement of profit and loss is net of such refund of Rs. 295.88 lacs (Previous year Rs. 414.44 lacs).

9. The Company avails input tax credit on purchases made by it from the dealers availing VAT Remission Scheme under the Jammu and Kashmir Value Added Tax Act, 2005 (J&K VAT Act) since FY 2005-06. During the year, the Company has accounted input tax credit as per section 21 & 22 of J&K VAT Act of Rs. 183.12 lacs (aggregated till date Rs. 908.37 lacs) net of Rs. 46.41 lacs (aggregated till date Rs. 466.80 lacs), being the amount adjusted against the payment of Central Sales Tax and Value Added Tax liabilities on sales made from Jammu and Kashmir unit ("VAT Set off''). In respect of the said matter, the Company has received a demand of Rs. 17.79 lacs being the VAT set off claimed in FY 2005-06, which has been challenged by the Company in High Court of Jammu & Kashmir and the matter is subjudise till the date of balance sheet. The Company, based on the external opinion, has considered the entire input tax credit of Rs. 908.37 lacs (net of VAT setoff claimed of Rs. 466.80 lacs) as recoverable.

10. There was a major fire on 18th July, 2012 at Unit II in Kadi plant due to which it had become non-operational, which has been reconstructed and production has recommenced from 13th January 2013. The loss incurred by the Company is adequately covered under insurance policy, which is on replacement cost basis. Accordingly, the Company has recognized insurance claim to the extent of written down value of fixed assets and costs of inventories destroyed / damaged only. The Company is in advanced stage of finalization of claim with insurers and has so far received Rs. 7,000 lacs from the Insurance Company by way of an "on account" payment in addition to the salvage value of destroyed assets / inventories. Balance amount of claim is disclosed as Insurance claim receivable in note no. 18.

Based on affirmation of Insurance Company, the management believes that there is certainty with respect to the realization of balance insurance claim and accordingly, no other adjustments are required in the financial in this regard.

11. a) The Company accrues certain sales related expenses on an estimated basis, which are reviewed at the each period end and any excess or short provisions are reversed or accounted for in respective expense heads. Accordingly, respective expenses under the head "Other Expenses" are net of write back of excess provision of earlier years amounting to Rs. 924.90 lacs (Previous year Rs. 788.73 lacs).

b) Employee benefits expense is net of write back of excess provision of earlier year amounting to Rs. 137.25 lacs (Previous year Rs. 72.80 lacs).

12. Prior year comparatives

The previous year figures have been regrouped wherever necessary to confirm to current year''s classification.


Mar 31, 2012

1. Background

Hitachi Home and Life Solutions (India) Limited ('the Company') was incorporated in December 1984 as "Acquest Air conditioning Systems Private Limited" under the provisions of Companies Act, 1956.

The Company is engaged in the business of manufacturing, selling and trading of 'Hitachi' brand of air conditioners, refrigerators and chillers. Manufacturing facility for air conditioners is set up at Kadi (North Gujarat) and Jammu. The Company performs its marketing activities through eighteen branches and thirty four service centers spread across India.

The Company is a subsidiary of Hitachi Appliances Inc., Japan.

(a) Terms / rights attached to Equity shares

The Company has only one class of Equity shares having a face value ofRs 10/- per share. Each holder of Equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend recommended by the Board of Directors is subject to the approval of the Shareholders in the ensuing Annual General Meeting.

During the year ended 31st March, 2012, the amount per share recognized as dividend distributions to Equity shareholders is Rs 1.50 (Previous year: Rs 1.50).

In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

Above ECB, carrying interest @ 1.65% p.a., was availed in financial year 2008-09 and 2009-10 from the Holding Company. The same was repayable in two equal installments, out of which one has been repaid in financial year 2011-12 and another is repayable in financial year 2012-13.

2. Income Tax a. Current Tax

The Company has taxable earnings. Provision for tax has been computed under normal taxation after claiming deductions under section 80-IB of Income Tax Act, 1961 for Jammu unit.

Working capital loan (Rate of Interest ranging from 10.5% to 14% per annum) and Buyers' Credit (Rate of Interest 1.8% per annum) facilities from banks are secured by hypothecation of inventories, book debts, movable fixed assets and by equitable mortgage of certain immovable fixed assets of the Company.

Notes:

1. Plant & Machinery includes testing equipment and moulds and tools with net block of Rs 845.56 Lacs (Previous year: Rs 1,287.13 Lacs) gross block Rs 3,239.35 Lacs (Previous year: Rs 3,196.29 Lacs).

2. Buildings include Rs 130.36 lacs (Previous year: Rs 130.36 lacs) in respect of ownership of premises in co-operative housing society and non trading corporations. Shares with face value of Rs 1 (Previous year: Rs 1) are fully paid up and unquoted.

3 Segment reporting Business segment:

The Company is engaged in the business of manufacturing, trading and other related services of Air Conditioners, Chillers and Refrigerators. Since the Company's business falls within a single business segment of Cooling Products for comfort and commercial use, disclosures under Accounting Standard (AS) 17 - Segment Reporting are not required.

Geographical segment:

Secondary segment reporting is based on the geographical areas of operations. The geographical segments have been identified based on revenues within India (sales to customers within India) and revenues outside India (sales to customers located outside India).

Since the export market revenue, results and assets constitute less than 10% of the total revenue, results and assets, the same has not been disclosed.

4. Disclosure as per Accounting Standard-15 (Revised) on Employee Benefits Gratuity:

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days' salary (last drawn salary) for each completed year of service. The scheme is funded with Life Insurance Corporation in the form of a qualifying insurance policy.

The following tables summaries the components of net benefit expense recognized in the Statement of profit and loss and the funded status and amounts recognized in the Balance sheet for the plan.

5. Capital Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) as on March 31, 2012: Rs 643.68 Lacs (Previous year: Rs 285.16 Lacs).

6. Contingent Liabilities

31st March, 2012 31st March, 2011 Rs Lacs Rs Lacs

Legal matters under dispute *:

Service tax 199.57 192.02

Sales tax 264.77 326.15

Customs duty 0.92 0.92

Excise duty 0.50 -

Guarantees given by the bankers on behalf of the Company 44.09 24.30

Claims against the Company not acknowledged as debts 59.21 50.35

569.06 593.74

* The company is contesting the demands and the management believe that its position will likely be upheld in the appellate process. It is not practicable to estimate the timing of cash outflows, if any in respect of legal matters, pending resolution of the proceedings with the appellate authorities.

7. Details of dues to Micro & Small enterprises as defined under MSMED Act, 2006

Based on information available with the Company, there are no suppliers who are registered as micro, small or medium enterprise under "The Micro, Small and Medium Enterprise Development Act, 2006" (Act) till 31st March, 2012. Accordingly, no disclosures are required to be made under said Act.

Note :

a) The Company gives 5 years warranty on compressors at the time of sale to purchasers of its products. Product warranty expense is calculated based on past historical data of replacement of compressors and cost incurred thereon and is provided for in the year of sale. It is expected that the most of expenses against the provision will be incurred within next five years.

b) Other provision includes likely claims against the Company in respect of VAT related matters, whose outcome depends on ultimate settlement / conclusion with relevant authorities.

8. The Company is eligible for refund of excise duty paid on goods manufactured and removed from Jammu unit, other than the amount of duty paid by utilization of CENVAT credit, in terms of Notification No. 56/2002-CE dated 14-11-2002. Excise duty recovered as disclosed in the Statement of profit and loss is net of such refund of Rs 414.44 Lacs (Previous year Rs 525.51 Lacs).

9. The Company avails input tax credit on purchases made by it from the dealers availing VAT Remission Scheme under the Jammu and Kashmir Value Added Tax Act, 2005 (J&K VAT Act) since FY 2005-06. During the year, the Company has accounted input tax credit as per section 21 & 22 of J&K VAT Act of Rs 147.15 Lacs (aggregated till date Rs 725.25 Lacs) net of Rs 39.77 Lacs (aggregated till date Rs 420.39 Lacs), being the amount adjusted against the payment of Central Sales Tax and Value Added Tax liabilities on sales made from Jammu and Kashmir unit ("VAT Set off"). In respect of the said matter, the Company has received a demand of Rs 17.79 Lacs being the VAT set off claimed in FY 2005-06, which has been challenged by the Company in High Court of Jammu & Kashmir and the matter is subjudise till the date of Balance sheet. The Company, based on the external opinion, has considered the entire input tax credit of Rs 725.25 Lacs (net of VAT set off claimed of Rs 420.39 Lacs) as recoverable.

10. The Company has paid custom duty under protest of Rs 231.89 Lacs (Previous year Rs 268.19 Lacs) during the year for which provision has been created which is included in the purchase of stock-in-trade.

11. The Company accrues certain sales related expenses on an estimated basis, which are reviewed at the each period end and any excess or short provisions are reversed or accounted for in respective expense heads. Accordingly, Other Expenses are net of write back of excess provision of earlier years amounting to Rs 788.73 Lacs (Previous year Rs 704.91 Lacs).

12. Prior year comparatives

Till the year ended 31st March, 2011, the company was using pre-revised Schedule VI to the Companies Act 1956 for preparation and presentation of its financial statements. During the year ended 31st March, 2012, the revised Schedule VI notified under the Companies Act 1956, has become applicable to the company. The Company has reclassified previous year figures to conform to this year's classification. The adoption of revised Schedule VI does not impact recognition and measurement principles followed for preparation of financial statements. However, it significantly impacts presentation and disclosures made in the financial statements, particularly presentation of Balance sheet.


Mar 31, 2011

1. Background

Hitachi Home and Life Solutions (India) Limited (‘the Company) was incorporated in December 1984 as "Acquest Air conditioning Systems Private Limited" under the provisions of Companies Act, 1956.

The Company is engaged in the business of manufacturing, selling and trading of ‘Hitachi brand of air conditioners, refrigerators and chillers. Manufacturing facility for air conditioners is set up at Kadi (North Gujarat) and Jammu. The Company performs its marketing activities through eighteen branches.

The Company is a subsidiary of Hitachi Appliances, Inc., Japan.

2. Segment Reporting

Business Segment:

The Company is engaged in the business of manufacturing, trading and other related services of Air Conditioners, Chillers and Refrigerators. Since the Companys business falls within a single business segment of Cooling Products for comfort and commercial use, disclosures under Accounting Standard (AS) 17 – Segment Reporting are not reported upon separately.

Geographical Segment:

Secondary segment reporting is based on the geographical areas of operations. The geographical segments have been identified based on revenues within India (sales to customers within India) and revenues outside India (sales to customers located outside India).

Since the export market revenue, results and assets constitute less than 10% of the total revenue, results and assets, the same has not been disclosed.

3. Related Party Transactions

(a) List of related Parties and Relationship

Relation Party

A. Related parties exercising control Hitachi Ltd., Japan, (ultimate Holding Company)

Hitachi Appliances Inc., Japan (Holding Company)

B. Parties under common control (Fellow Subsidiaries) Hitachi Air Conditioning Products (M) Sdn. Bhd.

Hitachi Asia Ltd. – Singapore

Hitachi Household Appliances (Wuhu) Co. Ltd.

Hitachi Procurement Service Co. Ltd.

Hitachi Metglas (India) Pvt. Ltd.

Luvata Hitachi Cable (Thailand) Ltd.

Shanghai Hitachi Electrical Appliances Co. Ltd.

Shanghai Hitachi Household Appliances Co.

Hitachi Consumer Products (Thailand) Ltd.

Hitachi Koki India Ltd.

Hitachi Air Conditioning & Refrigerating Products (Guangzhou) Co. Ltd.

Hitachi India Pvt. Ltd.

Hitachi Lift India Private Ltd.

Hitachi Transport System India Pvt. Ltd.

C. Key Managerial personnel

Mr. Motoo Morimoto (Managing Director)

Mr. Vinay Chauhan (Executive Director)

Mr. Amit Doshi (Executive Director)

Mr. Anil Shah (Executive Director)

4. Contingent Liabilities

Particulars As at As at

March 31, 2011 March 31, 2010

Income tax matters — 1,266

Excise duty, service tax, sales tax and customs duty matters under dispute:

Service tax 19,202 22,403

Sales tax 32,615 29,895

Customs duty 92 92

Guarantees given by the bankers to various authorities on behalf of the Company 2,430 4,349

Miscellaneous Claims against the Company not acknowledged as debts 5,035 4,231

Total 59,374 62,236

5. Capital Commitments

The estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs. 28,516 (Previous year: Rs. 42,980).

6. Based on information available with the Company, there are no suppliers who are registered as micro, small or medium enterprise under "The Micro, Small and Medium Enterprise Development Act, 2006" (Act) till March 31, 2011. Accordingly, no disclosures are required to be made under said Act and Schedule VI to the Companies Act, 1956.

7. Income Tax

Current Tax -

The Company has taxable earnings. Provision for tax has been computed under normal taxation after claiming deductions under section 80-IB of Income Tax Act, 1961 for Jammu unit.

8. Disclosure as per Accounting Standard-15(Revised) on Employee Benefit.

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with Life Insurance Corporation in the form of a qualifying insurance policy.

The following tables summarise the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the plan.

9. The Company is eligible for refund of excise duty paid on goods manufactured and removed from Jammu unit, other than the amount of duty paid by utilisation of CENVAT credit, in terms of Notification No. 56/2002-CE dated 14-11-2002. Excise duty recovered as disclosed in the Profit and Loss Account is net of such refund of Rs.52,551 (Previous year Rs. 39,453).

10. The Company avails input tax credit on purchases made by it from the dealers availing VAT Remission Scheme under the Jammu and Kashmir Value Added Tax Act, 2005 (J&K VAT Act) since FY 2005-06. During the year, the Company has accounted input tax credit as per section 21 & 22 of J&K VAT Act of Rs. 17,572 (aggregated till date Rs. 57,808) net of Rs. 4,720 (aggregated till date Rs. 38,061), being the amount adjusted against the payment of Central Sales Tax and Value Added Tax liabilities on sales made from Jammu and Kashmir unit ("VAT Set off"). In respect of the said matter, the Company has received a demand of Rs. 1,779 being the VAT set off claimed in FY 2005-06, which has been challenged by the Company in High Court of Jammu & Kashmir and the matter is subjudise till the date of balance sheet. The Company, based on the external opinion, has considered the entire input tax credit of Rs. 57,808 (net of VAT setoff claimed of Rs. 38,061) as recoverable.

11. The Company has working capital facilities from banks secured by hypothecation of inventories, book debts and movable fixed assets and by equitable mortgage of certain immovable fixed assets of the Company.

12. The Company has paid custom duties under protest of Rs. 26,819 (previous year Rs.27,527) during the year for which provision has been created by debiting ‘raw material consumed and cost of trading goods sold account.

13. During the year, Department of Scientific and Industrial Research (DSIR), Ministry of Science and Technology, Government of India, has accorded recognition to In-house research and development centre of the Company. Pursuant thereto, the Company has applied to DSIR for claiming deduction under the Income tax Act, 1961, which is yet to come. Accordingly, the Company has claimed weighted deductions of research and development expenditure of Rs. 70,562, as entitled under section 35(2AB) of the Income tax Act, 1961.

14. The Company accrues certain sales related expenses on an estimated basis, which are reviewed at the each period end and any excess or short provisions are reversed or accounted for in respective expense heads. Accordingly, Selling & Distribution Expenses are net of write back of excess provision of earlier years amounting to Rs. 70,491 (Previous year: Rs. 25,975).

15 Prior year comparatives

The previous year figures have been regrouped wherever necessary to confirm to current years classification.


Mar 31, 2010

1. Background

Hitachi Home and Life Solutions (India) Limited (the Company) was incorporated in December 1984 as "Acquest Air conditioning Systems Private Limited" under the provisions of Companies Act, 1956.

The Company is primarily engaged in the business of manufacturing and selling of Hitachi brand of air conditioners and trading of Hitachi brand of refrigerators, washing machines and chillers. Manufacturing facility for air conditioners is set up at Kadi (North Gujarat) and Jammu. The Company performs its marketing activities through eighteen branches. The Company is a subsidiary of Hitachi Appliances, Inc., Japan.

2. Provisions

A provision is recognised when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.

2.1 Income Taxes

Tax expense comprises current, deferred and fringe benefit tax. Current income-tax and fringe benefit tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act 1961. Deferred income tax reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax assets and deferred tax liabilities are offset.

Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. If the Company has carry forward of unabsorbed depreciation and tax losses, deferred tax assets are recognised only if there is virtual certainty backed by convincing evidence that such deferred tax assets can be realised against future taxable profits. Unrecognised deferred tax assets of earlier years are re-assessed at the balance sheet date and recognised to the extent that it has become reasonably certain that future taxable income will be available against which such deferred tax assets can be realised.

2.2 Minimum Alternate Tax (MAT) Credit

MAT credit is recognised as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. In the year in which the MAT credit becomes eligible to be recognised as an asset in accordance with the recommendations contained in guidance Note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the Profit and Loss Account and shown as MAT Credit Entitlement. The Company reviews the same at each Balance Sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that Company will pay normal Income Tax during the specified period.

2.3 Earnings Per Share (EPS)

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

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

2.4 Leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognised as an expense in the Profit and Loss Account on a straight-line basis over the lease term.

2.5 Cash and Cash equivalents

Cash and cash equivalents in the cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.

2.6 Segment Reporting

Identification of Segment

The Companys operating businesses are organised and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The analysis of geographical segments is based on the locations of Customers.

2.7 Government grants and subsidies

Grants and subsidies from the government are recognised when there is reasonable assurance that the grant or subsidy will be received and all attaching conditions will be complied with.

When the grant or subsidy relates to an expense item, such grant or subsidy is reduced from tfte expense item which it is intended to compensate.

2.8 Capital work in progress

All expenditure, including advances given during the project construction period, are accumulated and shown as capital work in progress until the assets are ready for commercial use. Assets under construction are not depreciated.

2.9 Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

3. Segment Reporting

Business Segment:

The Company is engaged in the business of manufacturing, sales and other related services of Air Conditioners. Since Companys business falls within a single reportable business segment, disclosures under Accounting Standard (AS) 17 - Segment Reporting are not reported upon separately.

The Company is also engaged in trading of Chillers, Washing Machines and Refrigerators. However, the revenue generated from trading activity is insignificant in comparison with the total revenue, hence seg- ment reporting in respect of such activities is not provided.

Geographical Segment:

Secondary segment reporting is based on the geographical location of customers. The geographical segments have been identified based on revenues within India (sales to customers within India) and revenues outside India (sales to customers located outside India).

Since the export market revenue, results and assets constitute less than 10% of the total revenue, results and assets, the same has not been disclosed.

4. Related Party Transactions

(a) List of related Parties and Relationship

Relation Party

A.Related parties Hitachi Ltd., Japan, (ultimate Holding Company) exercising control Hitachi Appliances Inc., Japan (Holding Company)

B.Parties under common control Hitachi Air Conditioning Products (M) Sdn. Bhd. (Fellow Subsidiaries) Hitachi Asia Ltd. - Singapore

Hitachi Asia Ltd. - Hong Kong

Hitachi Household Appliances (Wuhu) Co. Ltd.

Hitachi Procurement Service Co. Ltd.

Hitachi Metglas (India) Pvt. Ltd.

Luvata Hitachi Cable (Thailand) Ltd.

Shanghai Hitachi Electrical Appliances Co. Ltd.

Shanghai Hitachi Household Appliances Co.

Hitachi Consumer Products (Thailand) Ltd.

Taiwan Hitachi Co. Ltd.

Renesas Technology Singapore Pte. Ltd.

Hitachi Home Electronics Asia (S) Pte. Ltd.

Hitachi Data Systems

Hitachi Koki India Ltd.

Hitachi Air Conditioning & Refrigerating Products

(Guangzhou) Co. Ltd.

Hitachi India Trading Pvt. Ltd.,

Hitachi India Pvt. Ltd.

Hitachi Air Conditioning Systems Co. Ltd.

Hitachi Lift India Private Ltd.

Hitachi Transport System (Asia) Pte. Ltd.

Hitachi Transport System India Pvt. Ltd.

C. Key Managerial personnel

Mr. Shinichi lizuka (Managing Director upto 28/03/2010)

Mr. Vinay Chauhan (Executive Director)

Mr. Amit Doshi (Executive Director)

Mr. Anil Shah (Executive Director)

(Currency: Rupees in thousands unless otherwise stated)

5. Contingent Liabilities

Particulars As at As at March 31, 2010 March 31, 2009

Income tax matters 1,266 1,266

Excise duty, service tax, sales tax and customs duty matters under dispute:

Excise duty - 2,760

Service tax 22,403 7,430

Sales tax 29,895 29,616

Customs duty 92 92

Guarantees given by the bankers to various authorities on behalf of the Company 4,349 3,566

Miscellaneous Claims against the Company not acknowledged as debts 4,231 3,536

Total 62,236 48,266

6. Capital Commitments

The estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs. 42,980 (Previous year: Rs. 197,252).

7. Based on information available with the Company, there are no suppliers who are registered as micro, small or medium enterprise under "The Micro, Small and Medium Enterprise Development Act, 2006" (Act) till March 31, 2010. Accordingly, no disclosures are required to be made under said Act and Schedule VI to the Companies Act, 1956.

8. Income Tax

Current Tax -

The Company has taxable earnings. Provision for tax has been computed under normal taxation after claiming deductions under section 80-IB of Income Tax Act, 1961 for Jammu unit. Tax expense for the year is net of reversal of excess provision of Rs.4,126 (previous year Rs. Nil) created in earlier years.

9. Provisions (AS-29 disclosure)

The movement in the product warranty and other provisions during the year is as under: (Figures in parenthesis represent previous year numbers).

10. Lease

Assets taken under operating leases are cancellable leases. Amount debited to Profit and Loss Account for the year Rs. 18,965 (Previous year: Rs. 14,713).

11. Disclosure as per Accounting Standard-15(Revised) on Employee Benefit.

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with Life Insurance Corporation in the form of a qualifying insurance policy.

The following tables summarise the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the plan.

12. The Company is eligible for refund of excise duty paid on goods manufactured and removed from Jammu unit, other than the amount of duty paid by utilisation of CENVAT credit, in terms of Notification No. 56/2002- CE dated 14-11-2002. Excise duty recovered as disclosed in the Profit and Loss Account is net of such refund of Rs. 39,453 (Previous year: Rs.46,245). *

13. The Company is of the view, supported by the external opinion, that it can avail the input tax credit in respect of the purchases effected by it from the dealers availing VAT Remission Scheme under the Jammu and Kashmir Value Added Tax Act, 2005 (J&K VAT Act). Accordingly, the Company has accounted input tax credit as per section 21 & 22 of J&K VAT Act aggregating Rs.11,960 (Previous year Rs. 8,066) during the year net of amount adjusted against payment of Central Sales Tax and Value Added Tax liabilities on sales made from Jammu and Kashmir unit. An amount of Rs.41,250 (Previous year Rs. 29,192) is outstanding as recoverable/ adjustable on account of input tax credit at year end.

14. The Company has working capital facilities from banks secured by hypothecation of inventories, book debts and movable fixed assets and by equitable mortgage of certain immovable fixed assets of the Company.

15. The Company has paid custom duties of Rs.27,527 (previous year Rs.Nil) during the year for which provision has been created by debiting raw material consumed and cost of trading goods sold account.

16. Prior year comparatives

The previous year figures have been regrouped wherever necessary to confirm to current years classification.

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