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Notes to Accounts of Magma Fincorp Ltd.

Mar 31, 2016

NOTE 1:

(a) Commissioner of service tax had issued a show cause notice in respect of the financial years 2002-03 to 2006-07 on 16 October 2007 and the matter was adjudicated vide Order dated 31 March 2009, confirming the service tax liability at Rs. 464 lacs plus interest and penalty against which Rs. 404 lacs has been paid which has been charged to the statement of profit and loss in earlier years. Both the Company and the Department had gone into appeal in CESTAT against the order. There were multiple hearings for the case in the CESTAT and High Court of Kolkata on this matter. Finally, the Honorary Bench of CESTAT in its order dated 28 March 2016 have remanded the matter back to the Commissioner to examine the nature of the transactions and to make a fresh decision on the taxability of the transactions under consideration. There is no outstanding demand as of now. The Company is planning to file an appeal before the High Court of Kolkata.

(b) Commissioner of service tax had issued a show cause notice dated 7 April 2008 in respect of the financial years 2002-03 to 2005- 06 in the matter of erstwhile Shrachi Infrastructure Finance Limited which was merged with the Company with effect from 1 April 2006. The matter was decided by the Commissioner of service tax vide Order dated 24 September 2009, confirming the service tax liability at Rs. 83 lacs plus interest and penalty. The Company had made payment of Rs. 68 lacs in the financial year 2010-11 against the said Order and charged the same to the statement of profit and loss. Simultaneously, the Company had preferred an appeal against the impugned Order of Commissioner of service tax in CESTAT, Kolkata which have stayed the balance of the demand amounting to Rs. 15 lacs. The said amount of Rs. 15 lacs has been shown as a contingent liability.

(c) Commissioner of service tax had issued another show cause notice dated 4 April 2008 in respect of the financial years 2002-03 to 2005-06 in the matter of erstwhile Shrachi Infrastructure Finance Limited which was merged with the Company with effect from 1 April 2006. The matter was decided by the Commissioner of service tax vide Order dated 24 September 2009, confirming the service tax liability at Rs. 125 lacs plus interest and penalty. The Company had preferred an appeal against the impugned Order of Commissioner of service tax before CESTAT, Kolkata. In course of hearing at CESTAT, the Company made a payment of Rs. 25 lacs as pre-deposit in financial year 2011-12 which had been charged to the statement of profit and loss. CESTAT, Kolkata has stayed the balance of the demand amounting to Rs. 100 lacs. The said amount of Rs. 100 lacs has been shown as a contingent liability.

(d) Fringe benefit tax had been levied on fringe benefit provided to employees as per Section 115W of the Income Tax Act, 1961. The Company had filed a writ petition before the Hon''ble Court of Kolkata and had been granted stay order on the same. The case has since been transferred to Hon''ble Supreme Court and is yet to be finally disposed off by the Hon''ble Supreme Court. In view of this, the Company had not provided for any liability against fringe benefit tax in the earlier years. In terms of Finance Act, 2009, Fringe Benefit Tax has been withdrawn effective 1 April 2009.

NOTE 2 : DISCLOSURES RELATING TO FRAUD IN TERMS OF THE NOTIFICATION ISSUED BY RESERVE BANK OF INDIA

During the year ended 31 March 2016, 25 cases (2015: 26 cases) of frauds have been detected and reported aggregating to Rs. 380.91 lacs (2015: Rs. 611.96 lacs). The un-recovered amounts have been fully provided for / written-off.

NOTE 3 : SEGMENT REPORTING

As per paragraph 4 of Accounting Standard (AS) 17, on "Segment Reporting" prescribed under section 133 of the Companies Act, 2013, where a single financial report contains both consolidated financial statements and the separate financial statements of the holding Company, segment reporting needs to be presented only on the basis of consolidated financial statements. In view of this, segment information has been presented in the consolidated financial statements.

NOTE 4 : PREVIOUS YEAR''S FIGURE

Previous year''s figure including those in brackets have been regrouped and / or rearranged wherever necessary.


Mar 31, 2014

Note: 1 Company Overview

Magma Fincorp Limited (''the Company''), incorporated and headquartered in Kolkata, India is a publicly held non-banking finance company engaged in providing asset finance through its pan India branch network. Magma is registered as a systemically important non deposit taking Non-Banking Financial Company (''NBFC'') as defined under Section 45-IA of the Reserve Bank of India (RBI) Act, 1934. Its equity shares are listed on National Stock exchange and Bombay Stock exchange.

Note 2 : Segment reporting

As per paragraph 4 of Accounting Standard (AS) 17, on "Segment Reporting" notified by the Companies (Accounting Standards) Rules 2006, where a single financial report contains both consolidated financial statements and the separate financial statements of the holding company, segment reporting needs to be presented only on the basis of consolidated financial statements. In view of this, segment information has been presented at Note 28 of the consolidated financial statements.

Note 3 : Related party disclosures

Aggregated related party disclosures as at and for the year ended 31 March 2014

Subsidiaries

Magma Advisory Services Limited (w.e.f. 21 May 2012) and Magma ITL Finance Limited (a joint venture with International Tractors Limited).

Step down subsidiaries

Magma Housing Finance (A Public Company with Unlimited Liability) (w.e.f. 11 February 2013) and International Autotrac Finance Limited (w.e.f. 11 June 2012 upto 22 November 2013).

Joint venture

Magma HDI General Insurance Company Limited and Jaguar Advisory Services Private Limited.

Enterprises having significant infuence

Fluence Advisory Services Limited (w.e.f. 25 September 2012), Pragati Sales Private Limited, Microfrm Capital Private Limited, Magma Consumer Finance Private Limited, Celica Developers Private Limited, Bhiwadi Polypack Limited (w.e.f. 16 September 2013), Smitkriti enterprises Private Limited (w.e.f. 20 September 2013), Bengal Speed Automobiles Private Limited (w.e.f. 01 April 2013), Camaro Infrastructure Private Limited, CLP Business LLP, Solvex estates LLP, Mask Corp, USA, Finprop estates Private Limited, Varuneha Commerce Private Limited.

Key management personnel Mayank Poddar and Sanjay Chamria

Relative of key management personnel

Anuj Poddar, Ashita Poddar, Kalpana Poddar, Mansi Tulshan, Nidhi Mansingka, Rajat Poddar, Shaili Poddar, Urmila Devi Poddar, Harshvardhan Chamria, Rajashree Tikmani, Vanita Chamria.

Note 4 : Contingent liabilities and commitments (to the extent not provided for)

(Rs. in Lacs)

As at As at 31 March 2014 31 March 2013

(a) Contingent liabilities

(a) Claims against the Company not acknowledged as debt

(i) Income tax matters under dispute 4.48 15.67

(ii) VAT matters under dispute 248.79 254.53

(iii) Service tax matters under dispute 115.00 115.00

(iv) Legal cases against the company * 255.88 322.33

(b) Guarantees

(i) Recourse obligation in respect of securitised assets [net of cash collaterals of 2,617.33 2,617.33

Rs. 1,746.00 lacs (2013: Rs. 1,746.00 lacs)] (ii) Unexpired bank guarantee 42,630.34 39,413.59

(iii) Corporate guarantee given for a subsidiary company - 1,000.00

(b) Commitments

(a) estimated amount of contracts remaining to be executed on capital account and not 333.43 1,151.83 provided for

(b) Redemption of preference shares (including premium) 11,672.44 17,984.48

* The Company is also involved in other law suits, claims, investigations and proceedings, including collection and repossession related matters, which arise in the ordinary course of business. However, there are no significant claims on such cases.

Note 5 : Additional notes

(a) C.I.F. value of imports of goods acquired for asset financing arrangements Rs. 132.66 (2013: Rs. Nil).

(b) earnings in foreign currency on account of market entry fee Rs. Nil (2013: Rs. 2,796.00 lacs).

(c) expenditure in foreign currency on account of professional fees, travelling and others Rs. 57.58 lacs (2013: Rs. 60.08 lacs).

Note 6 :

(a) Commissioner of Service Tax had issued a show cause notice in respect of the financial years 2002-03 to 2006-07 on 16 October 2007 and the matter was adjudicated vide Order dated 31 March 2009, confrming the service tax liability at Rs. 464 lacs plus interest and penalty. The Company had made payment of Rs. 304 lacs in financial year 2010-11 in relation to the said Order and charged the same to the statement of Profit and loss. Simultaneously, the Company had preferred an appeal against the Order of Commissioner of Service Ta x at the Customs, excise and Service Ta x Appellate Tribunal (CESTAT), Kolkata. The service tax department had also preferred an appeal against the said Order of the Commissioner with CESTAT, Kolkata. In course of hearing at CESTAT the Company made a further payment of Rs. 100 lacs as pre-deposit in financial year 2011-12 which had been charged to the statement of Profit and loss. Vide its Order dated 21 March 2012 the Hon''ble CESTAT has set aside the impugned Order of the Commissioner of Service Tax Kolkata and has passed an Order remanding the matter to the Commissioner of Service Tax, Kolkata for a revised assessment. Further the Company has filed a writ petition before the Hon''ble High Court of Calcutta against the impugned order of CESTAT. The Hon''ble High Court of Calcutta has admitted our writ and set aside and quashed the impugned order. The Hon''ble High Court vide it''s order has mentioned that Tribunal shall decide the Appeal afresh in accordance with law expeditiously. Now the matter is pending before CESTAT, Kolkata.

(b) Commissioner of service tax had issued a show cause notice dated 7 April 2008 in respect of the financial years 2002-03 to 2005-06 in the matter of erstwhile Shrachi Infrastructure Finance Limited which was merged with the Company with effect from 1 April 2006. The matter was decided by the Commissioner of service tax vide Order dated 24 September 2009, conforming the service tax liability at Rs. 83 lacs plus interest and penalty. The Company had made payment of Rs. 68 lacs in the financial years 2010-11 against the said Order and charged the same to the statement of Profit and loss. Simultaneously, the Company had preferred an appeal against the impugned Order of Commissioner of service tax in CESTAT, Kolkata which have stayed the balance of the demand amounting to Rs. 15 lacs. The said amount of Rs. 15 lacs has been shown as a contingent liability.

(c) Commissioner of service tax had issued another show cause notice dated 4 April 2008 in respect of the financial years 2002-03 to 2005-06 in the matter of erstwhile Shrachi Infrastructure Finance Limited which was merged with the Company with effect from 1 April 2006. The matter was decided by the Commissioner of service tax vide Order dated 24 September 2009, conforming the service tax liability at Rs. 125 lacs plus interest and penalty. The Company had preferred an appeal against the impugned Order of Commissioner of service tax before CESTAT, Kolkata. In course of hearing at CESTAT the Company made a payment of Rs. 25 lacs as pre-deposit in financial year 2011-12 which had been charged to the statement of Profit and loss. CESTAT, Kolkata has stayed the balance of the demand amounting to Rs. 100 lacs. The said amount of Rs. 100 lacs has been shown as a contingent liability.

(d) Fringe benefit tax had been levied on fringe benefit provided to employees as per Section 115W of the Income Ta x Act, 1961. The Company had filed a writ petition before the Hon''ble High Court of Calcutta and had been granted stay order on the same. The case has since been transferred to Hon''ble Supreme Court and is yet to be finally disposed off by the Hon''ble Supreme Court. In view of this, the Company had not provided for any liability against fringe benefit tax in the earlier years. In terms of Finance Act, 2009, Fringe Benefit Ta x has been withdrawn effective 1 April 2009.

(b) Accounting for Excess Interest Spread (EIS)

The Company recognises EIS on securitisation transactions in line with RBI circular "Revisions to the Guidelines on Securitisation Transactions" issued on 21 August 2012 which requires recognition of EIS only when redeemed in cash. Accordingly, the gross income on securitisation and assignment of loans aggregating to Rs. 7,292.85 lacs for the year ended 31 March 2014 (2013: Rs. 338.55 lacs) has not been recognised.

(d) During the year, the Company has also undertaken direct assignment transaction in terms of guidelines on securitisation transaction issued by Reserve Bank of India on 21 August 2012, for a value of Rs. 2,27,842.00 lacs (2013: Rs. 10,434.52 lacs).

Note 7 : Additional income tax on income distributed by Securitisation Trusts

In the Finance Act, 2013, a new provision has been introduced w.e.f. 1 June 2013 in respect of ''Tax on Distributed Income by Securitisation Trusts'' (''SDT''). The income so received is exempt in the hands of the Company. During the year, the income amounting to Rs. 5,302.98 lacs has been received by the Company as an investor after withholding SDT of Rs. 1,802.48 lacs.

Note 8 : Disclosures relating to Fraud in terms of the notification issued by Reserve Bank of India

During the year ended 31 March 2014, 38 cases of frauds has been detected and reported aggregated to Rs. 464.71 lacs (2013: Rs. 649.04 lacs). The Company has subsequently recovered an amount of Rs. 106.84 lacs (2013: Rs. 62.14 lacs) till the balance sheet date. The un-recovered amounts have been fully provided for.

(b) In view of the proposed regulatory changes in capital adequacy, income recognition, asset classification and provisioning norms recommended in the RBI draft guidelines released on 12 December 2012, the Company classifies non-performing assets (NPAs) at 4 months default as compared to present requirement of 6 months. The Company also makes higher provision for NPAs as well as standard assets as given in the Table in Note 2 (v).

As a result of the above, the cumulative charge to statement of Profit & loss on account of additional provisioning including standard asset provisioning and interest reversal is higher by an amount of Rs. 7,674.03 lacs (2013: Rs. 4,095.99 lacs) as compared to the present RBI requirement.

Note 9 : Derivative transaction

The Company has recognised gain of Rs. 197.06 lacs for the year ended 31 March 2014 (2013: gain of Rs. 283.30 lacs) relating to derivative financial instrument.

The Company does not have any un-hedged foreign currency exposure.

Note 10 : Transfer pricing

The Company has developed a system of maintaining of information and documents as required by the transfer pricing legislation under the Income Ta x Act, 1961. Management is of the opinion that its domestic transactions are at arm''s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

Note 11 : Previous year''s figure

Previous year''s figure including those in brackets have been regrouped and / or rearranged wherever necessary.


Mar 31, 2013

Note: 1 COMPANY OVERVIEW

Magma Fincorp Limited (''the Company''), incorporated and headquartered in Kolkata, India is a publicly held non-banking finance company engaged in providing asset finance through its pan India branch network. Magma is registered as a systemically important non deposit taking Non-Banking Financial Company (''NBFC'') as defined under Section 45-IA of the Reserve Bank of India (RBI) Act, 1934. Its shares are listed on National Stock Exchange and Bombay Stock Exchange.

(A) CHANGE IN ACCOUNTING POLICIES / ESTIMATES

Change in provisioning norms

In view of the imminent regulatory changes in capital adequacy, income recognition, asset classification and provisioning norms proposed in the RBI draft guidelines released on 12 December 2012, and expected to become effective at a future date, the Company has proactively refined its method of recognising delinquencies and loan losses giving effect to such refinements from 1 April 2012. Following the change, the Company recognises delinquencies and commences provisioning at 120 days, rather than recognising delinquencies at 180 days and writing off 100% of loan outstanding as done previously. These provisioning norms are considered the minimum and higher provision is made based on perceived credit risk where necessary.

The aforesaid revision in provisioning norms has resulted in reduction of interest income by Rs. 911.98 lacs, and a net lower provision/ write-off of Rs. 1,938.41 lacs for the year ended 31 March 2013. Recoveries made from loans previously written off are included in ''Other Income''.

Further, the Company has increased the standard provisioning by 0.05% to a total of 0.30% of the Standard Assets, from the existing 0.25% to progressively comply with the draft guidelines. This increase has resulted in an additional charge of Rs. 480.00 lacs for the year ended 31 March 2013.

2 Segment reporting

As per paragraph 4 of Accounting Standard (AS) 17, on "Segment Reporting" notified by the Companies (Accounting Standards) Rules 2006, where a single financial report contains both consolidated financial statements and the separate financial statements of the holding company, segment reporting needs to be presented only on the basis of consolidated financial statements. In view of this, segment information has been presented at Note no. 28 of the consolidated financial statements.

3 Related party disclosures

Aggregated Related Party disclosures as at and for the year ended 31 March 2013

Subsidiaries

Magma Advisory Services Limited * and Magma ITL Finance Limited (a joint venture with International Tractors Limited).

Step down subsidiaries

Magma Housing Finance (A Public Company with Unlimited Liability) ** and International Autotrac Finance Limited ***.

Joint venture

Magma HDI General Insurance Co. Limited and Jaguar Advisory Services Private Limited.

Enterprises having significant influence

Fluence Advisory Services Limited ****, Pragati Sales Private Limited, Microfirm Capital Private Limited (formerly Microfirm Softwares Private Limited), Magma Consumer Finance Private Limited, Celica Developers Private Limited, Camaro Infrastructure Private Limited, CLP Business LLP, Solvex Estates LLP, Mask Corp, USA, Finprop Estates Private Limited.

Key management personnel

Mayank Poddar and Sanjay Chamria

Relative of key management personnel

Anuj Poddar, Ashita Poddar, Kalpana Poddar, Mansi Tulshan, Nidhi Mansingka, Rajat Poddar, Shaili Poddar, Urmila Devi Poddar, Harshvardhan Chamria, Rajashree Tikmani, Vanita Chamria.

4 Additional notes

(a) C.I.F. value of imports of goods acquired for asset financing arrangements Rs. Nil (2012: Rs.641.33 lacs).

(b) Earnings in Foreign Currency on account of Market entry fee Rs.2,796.00 lacs (2012: Nil).

(c) Expenditure in Foreign Currency on account of Travelling and Others Rs.37.25 lacs (2012: Rs.44.51 lacs).

(d) Expenditure in Foreign Currency on account of Professional fees during the year amounting to Rs.22.83 lacs (2012: Rs.81.55 lacs).

5 (a) Commissioner of service tax had issued a Show Cause Notice in respect of the financial years 2002-03 to 2006-07 on 16 October 2007 and the matter was adjudicated vide Order dated 31 March 2009, confirming the service tax liability at Rs.464 lacs plus interest and penalty. The Company had made payment of Rs.304 lacs in financial year 2010-11 in relation to the said Order and charged the same to the statement of profit and loss. Simultaneously, the Company had preferred an appeal against the Order of Commissioner of Service Tax at the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata. The service tax department had also preferred an appeal against the said Order of the Commissioner with CESTAT, Kolkata. In course of hearing at CESTAT the Company made a further payment of Rs.100 lacs as pre-deposit in financial year 2011-12 which had been provided for in the statement of profit and loss. Vide its Order dated 21 March 2012 the Hon''ble CESTAT has set aside the impugned Order of the Commissioner of Service Tax Kolkata and has passed an Order remanding the matter to the Commissioner of Service Tax, Kolkata for a revised assessment. Further the Company has filed a writ petition before the Hon''ble High Court of Calcutta against the impugned order of CESTAT. The Hon''ble High Court of Calcutta has admitted our writ and set aside and quashed the impugned order. The Hon''ble High Court vide it''s order has mentioned that Tribunal shall decide the Appeal afresh in accordance with law expeditiously. Now the matter is pending before CESTAT, Kolkata.

(b) Commissioner of service tax had issued a show cause notice dated 7 April 2008 in respect of the financial years 2002-03 to 2005-06 in the matter of erstwhile Shrachi Infrastructure Finance limited which was merged with the Company with effect from 1 April 2006. The matter was decided by the Commissioner of service tax vide Order dated 24 September 2009, confirming the service tax liability at Rs.83 lacs plus interest and penalty. The Company had made payment of Rs. 68 lacs in the financial years 2010-11 against the said Order and charged the same to the statement of profit and loss. Simultaneously, the Company had preferred an appeal against the impugned Order of Commissioner of service tax in CESTAT, Kolkata which have stayed the balance of the demand amounting to Rs.15 lacs. The said amount of Rs.15 lacs has been shown as a contingent liability.

(c) Commissioner of service tax had issued another Show Cause Notice dated 4 April 2008 in respect of the financial years 2002-03 to 2005-06 in the matter of erstwhile Shrachi Infrastructure Finance limited which was merged with the Company with effect from 1 April 2006. The matter was decided by the Commissioner of service tax vide Order dated 24 September 2009, confirming the service tax liability at Rs.125 lacs plus interest and penalty. The Company had preferred an appeal against the impugned Order of Commissioner of service tax before CESTAT, Kolkata. In course of hearing at CESTAT the Company made a payment of Rs. 25 lacs as pre-deposit in financial year 2011-12 which had been provided for in the statement of profit and loss. CESTAT, Kolkata has stayed the balance of the demand amounting to Rs.100 lacs. The said amount of Rs.100 lacs has been shown as a contingent liability.

(d) Fringe benefit tax had been levied on fringe benefit provided to employees as per Section 115W of the Income Tax Act, 1961. The Company had filed a writ petition before the Hon''ble Court of Calcutta and had been granted stay order on the same. The case has since been transferred to Hon''ble Supreme Court and is yet to be finally disposed off by the Hon''ble Supreme Court. In view of this, the Company had not provided for any liability against fringe benefit tax in the earlier years. In terms of Finance Act, 2009, Fringe Benefit Tax has been withdrawn effective 1 April 2009.

6 Disclosures relating to Fraud in terms of the notification issued by Reserve Bank of India on 2 July 2012

The total frauds detected and reported during the year ended 31 March 2013 aggregated to Rs.649.04 lacs. The Company has subsequently recovered an amount of Rs.62.14 lacs till the balance sheet date. The un-recovered amounts have been fully provided for.

7 Transfer Pricing

The Company has developed a system of maintaining of information and documents as required by the transfer pricing legislation under the Income-tax Act, 1961. Management is of the opinion that its domestic transactions are at arm''s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

8 Derivative transaction

The Company has recognized profit of Rs.283.30 lacs for the year ended 31 March 2013 (2012: loss of Rs.522.68 lacs) relating to derivative financial instrument.

The Company does not have any unhedged foreign currency exposure.

9 Previous year''s figure

Previous year''s figure including those in brackets have been regrouped and / or rearranged wherever necessary.


Mar 31, 2012

Note 01 COMPANY OVERVIEW

Magma Fincorp Limited ('Magma', 'MFL' or 'the Company'), incorporated in Kolkata, India is a publicly held non-banking finance company engaged in providing asset finance through its pan India branch network. Magma is registered as a systemically important non deposit taking Non-Banking Financial Company ('NBFC') as defined under Section 45-IA of the Reserve Bank of India (RBI) Act, 1934. The Company is headquartered at Kolkata.

(i) Employee benefits Gratuity benefit plan

The following tables set out the status of the gratuity plan as required under AS 15 (revised) Employee Benefit.

(a) Reconciliation of opening and closing balances of the present value of defined benefit obligation

(b) Discount rate: The discount rate is based on the prevailing market yields of Indian government securities as at the balance sheet date for the estimated term of the obligations.

(c) Expected rate of return on plan assets: This is based on the expectation of the average long-term rate of return expected on investments of the fund during the estimated term of the obligations.

(ii) Segment reporting

The Company's sole business segment is 'financing' and only geographical segment is 'India'. The Company considers business segment as the primary segment and geographical segment based on location of customers as a secondary segment. Since the Company has a single business segment and a single geographical segment, disclosures pertaining to the primary and secondary segments have not been presented.

(iii) Change in accounting policy

(a) The Company has been doing bilateral assignment of homogeneous retail financial assets generated by itself to Banks/ FIs under a deed of assignment in two types of structures in past. First type of structure involved sale of both principal and interest parts of the future receivables (known as premium structure) and second type of structure involved sale of only principal part of its future receivables (known as par structure). From the current year the Company has decided to assign its receivables only under par structure i.e assign only the principal component of the loans in order to ensure stability of income year on year. Accordingly, with effect from 1 April 2011, the Company has decided to recognise the income i.e. excess interest spread (the difference between the interest receivable from the customer and the interest payable by the Company to the assignee of such loan receivables) arising out of assignment of receivables based on the contractual accrual of the same. The Company believes that the revised method of accounting results into better information about the impact of the said items on the Company's periodic performance, leads to more conservative accounting, and is in line with the recommended practice of the Company's principal regulator. Consequently, an amount of Rs. 15,394.17 Lacs, being income relating to future period will be recognised over the tenure of the contracts assigned.

(b) Simultaneously with the change in income recognition on assets assigned, the Company has decided to amortise upfront brokerage expenses / income pertaining to all loan originations over the tenure of the underlying contracts. This change in method of accounting is in line with international practices on recognition of loan origination costs. Consequently, net expense of Rs. 6,553.89 Lacs for the year is not charged off in the statement of profit and loss and is amortised over the tenor of the contracts.

(c) In view of the changes in business practices and accounting policies as above, the profit for the year is not comparable with the previous year.

(iv) Related Party disclosures

Aggregated Related Party disclosures as at and for the year ended 31 March 2012

Subsidiary company

Magma ITL Finance Limited (a joint venture with International Tractors Limited).

Associates

Magma HDI General Insurance Co. Limited Enterprises having significant influence

Camaro Infrastructure Private Limited, Celica Developers Private Limited, CLP Business LLP, Finprop Estates Private Limited, Jaguar Advisory Services Private Limited, Magma Consumer Finance Private Limited, Mask Corp. USA, Microfirm Softwares Private Limited, Pragati Sales Private Limited, Solvex Estates LLP (Formerly Solvex Estates Private Limited), AMRI Hospitals Limited *, Bengal Tools Limited *, Calcutta Becon Engineering Co. Limited *, Chinar Builders & Contractors Limited *, Escort Projects Private Limited *, Everfast Promoters Private Limited *, Gagan Tradelink Private Limited *, GNB Credit Private Limited *, GNB Logistics Private Limited *, Hilife Infra Private Limited *, Hilltop Plaza Private Limited *, Juhi Investment Private Limited *, Kanaiya Engineering & Finance Limited *, Liberty Pharma Limited *, Lifelong Realtors Private Limited *, Nadia Security Printing & Stationery Company Limited *, Neobeam Properties Private Limited *, Romex Promoters Private Limited *, Shivangan Developers Private Limited *, Shrachi Developers Private Limited *, Shrachi Insurance Agencies Private Limited *, Shrachi Realty Private Limited *, Sino India Agro Machinery *, Spectra Realcon Private Limited *, Noblesse Crystal Private Limited (upto 8 November 2011), Pragati Cement (India) Private Limited (upto 30 September 2011)

Key management personnel

Mayank Poddar and Sanjay Chamria Ravi Todi *

Relative of key management personnel

Anuj Poddar, Ashita Poddar, Kalpana Poddar, Mansi Tulshan, Nidhi Mansingka, Rajat Poddar, Shaili Poddar, Urmila Devi Poddar, Harshvardhan Chamria, Rajashree Tikmani, Vanita Chamria, Chitralekha Todi *, Rahul Todi *, Rhea Todi *, Ruchi Todi *, Sarika Todi * and Shrawan Kumar Todi*

* upto 27 May 2011

(vii) The Company along with its associates had entered into a Joint Venture Agreement with HDI Gerling International Holding AG ("HDI"), now replaced with HDI-Gerling Industrie Verischerung AG, a part of the Talanx AG Group, Germany for the purpose of undertaking general insurance business in India through Magma HDI General Insurance Company Limited (the "Insurance Company") subject to necessary regulatory approvals. As per the terms of the Joint Venture Agreement, it has been agreed between the Company and HDI that set up costs and expenses shall be borne by the Company and HDI equally and on Completion (i.e. R2 approval being received from Insurance Regulatory Development Authority), the Insurance Company will reimburse to the Company and HDI the costs incurred by them respectively. Pursuant to the application seeking license for carrying on the business of general insurance in India, the Insurance Company, has since received the approval for its R1 and R2 application and is in the process of obtaining the R3 approval from the IRDA.

(v) Contingent liabilites and commitments (to the extent not provided for)

(a) Contingent liabilities As at As at Particulars 31 March 2012 31 March 2011

(a) Claims against the Company not acknowledged as debt

(i) Income tax matters under dispute 15.67 82.37

(ii) VAT matters under dispute 165.50 25.85

(iii) Service tax matters under dispute 115.00 300.65

(iv) Legal cases against the company* 53.29 371.79

(b) Guarantees

(i) Recourse obligation in respect of securitised assets (net of cash collaterals 7,085.22 14,634.15 Rs.46,267.94 and previous year Rs.48,513.19)

(ii) Unexpired bank guarantee 40,544.05 30,331.49

(iii) Corporate Guarantee given for a Subsidiary Company 2,000.00 4,344.35

* The Company is also involved in other law suits, claims, investigations and proceedings, including collection and repossession related matters, which arise in the ordinary course of business. However, there are no significant claims on such cases.

(vi) Additional Notes

(a) C.I.F. value of imports of goods acquired for asset financing arrangements Rs.641.33 Lacs (Previous year: Rs.1,991.77 Lacs).

(b) Expenditure in Foreign Currency on account of Travelling and Others Rs.44.51 Lacs (Previous year: Rs.90.52 Lacs).

(c) Expenditure in Foreign Currency on account of Professional fees during the year amounting to Rs.81.55 Lacs (Previous year: Nil).

(d) Dividend remitted in foreign currency

(vii) (a) Commissioner of service tax had issued a Show Cause Notice in respect of the financial years 2002-03 to 2006-07 on 16 Oct 2007 and the matter was adjudicated vide Order dated 31 March 2009, confirming the service tax liability at Rs.464 Lacs plus interest and penalty. The Company had made payment of Rs.304 Lacs in financial year 2010-11 in relation to the said Order and charged the same to the statement of profit and loss. Simultaneously the Company had preferred an appeal against the Order of Commissioner of Service Tax at the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata. The service tax department had also preferred an appeal against the said Order of the Commissioner with CESTAT, Kolkata. In course of hearing at CESTAT the Company made a further payment of Rs.100 Lacs as pre-deposit in the current financial year 2011-12 which has been provided for in the statement of profit and loss. Vide its Order dated 21 March 2012 the Hon'ble CESTAT has set aside the impugned Order of the Commissioner of service tax Kolkata and has passed an Order remanding the matter to the Commissioner of service tax, Kolkata for a revised assessment.

(b) Commissioner of service tax had issued a Show Cause Notice dated 7 April 2008 in respect of the financial years 2002-03 to 2005-06 in the matter of erstwhile Shrachi Infrastructure Finance limited which was merged with the Company with effect from 1 April 2006. The matter was decided by the Commissioner of service tax vide Order dated 24 September 2009, confirming the service tax liability at Rs.83 Lacs plus interest and penalty. The Company had made payment of Rs. 68 Lacs in the financial years 2010-11 against the said Order and charged the same to the statement of profit and loss. Simultaneously, the Company had preferred an appeal against the impugned Order of Commissioner of service tax in CESTAT, Kolkata which have stayed the balance of the demand amounting to Rs.15 Lacs. The said amount of Rs.15 Lacs has been shown as a contingent liability.

(c) Commissioner of service tax had issued another Show Cause Notice dated 04 April 2008 in respect of the financial years 2002-03 to 2005-06 in the matter of erstwhile Shrachi Infrastructure Finance limited which was merged with the Company with effect from 1 April 2006. The matter was decided by the Commissioner of service tax vide Order dated 24 September 2009, confirming the service tax liability at Rs.125 Lacs plus interest and penalty. The Company had preferred an appeal against the impugned Order of Commissioner of service tax before CESTAT, Kolkata. In course of hearing at CESTAT the Company made a payment of Rs. 25 Lacs as pre-deposit in the current financial year 2011-12 which has been provided for in the statement of profit and loss. CESTAT, Kolkata has stayed the balance of the demand amounting to Rs.100 Lacs. The said amount of Rs.100 Lacs has been shown as a contingent liability.

(d) Fringe benefit tax had been levied on fringe benefit provided to employees as per Section 115W of the Income Tax Act, 1961. The Company had filed a Writ Petition before the Hon'ble Court of Calcutta and had been granted stay order on the same. The case has since been transferred to Hon'ble Supreme Court and is yet to be finally disposed off by the Hon'ble Supreme Court. In view of this, the Company had not provided for any liability against Fringe benefit tax in the earlier years. In terms of Finance Act, 2009, Fringe Benefit tax has been withdrawn effective 1 April 2009.

(viii) The Company has prepared these financial statements as per the format prescribed by revised schedule VI to the Companies Act, 1956 ('the schedule') issued by Ministry of Corporate Affairs. Previous years' figures have been recast/restated to conform to the classification required by the revised schedule VI.

 
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