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Notes to Accounts of Mahanagar Telephone Nigam Ltd.

Mar 31, 2016

1. Estimated amount of contracts remaining to be executed on capital account is Rs. 12.85 crore (Rs. 13.35 crores). In respect of incomplete contracts where the expenditure already incurred has exceeded the contract value, the additional expenditure required to complete the same cannot be quantified.

2. 3. Certain Lands and Buildings capitalized in the books are pending registration/legal vesting in the name of the company and the landed properties acquired from DOT have not been transferred in the name of the company and in the case of leasehold lands, the documentation is still pending. Stamp Duty on the lands and buildings acquired from DOT is payable by DOT as per sale deed and in respect of properties acquired after 1.4.1986, the documentation shall be contemplated at the time of sale or disposal as and when effected.

3. 4. Department of Telecommunications (DOT) has levied one time spectrum charges for the GSM and CDMA spectrum on MTNL and it also included the spectrum given on trial basis to the extent of 4.4 Mhz in 1800 Mhz frequency while calculating the spectrum charges. The calculations are further subject to change in accordance with the changes in the quantum of spectrum holding and the remaining valid period of license as per DOT MTNL has surrendered some of the spectrum allotted on trial basis and does not require to pay for CDMA spectrum since it holds only 2.5 Mhz spectrum in respect of CDMA. DOT has been apprised of the same and the matter is still under correspondence. Apart from this, the issue of charges for spectrum given on trial basis is also to be decided. Further MTNL has finally surrendered CDMA spectrum w.e.f. 28.02.2016.

Besides, ab-initio, the very policy of levy of one time spectrum charges by DOT itself has been challenged by private operators and is sub judice as on date whereas MTNL''s case is also to be decided by DOT on the basis of outcome of the court case and the spectrum surrendered or retained. The finalization of charges and the modalities of payment are therefore to be crystallized yet and as on date the position is totally indeterminable as to the quantum of charges and also the liability.

Pending final outcome of the issue which itself is sub judice and non finality of quantum of charges payable, if at all, to DOT, no provision is made in the books of accounts as the amount is totally indeterminable. However the contingent liability of Rs. 3205.71 crores is shown on the basis of the demand raised by DOT in respect of GSM.

4. License fee on the Adjusted Gross Revenue (AGR) was calculated and accounted for on accrual basis in respect of both revenue and revenue sharing with other operators till F.Y. 2011-12. As per the directions of Supreme Court given earlier in respect of calculation of License Fees and AGR, the matter was referred back to TDSAT. TDSAT vide its judgment dated 23.04.2015 set aside the impugned demands of DOT and DOT was directed to rework the license fee in the light of their findings. However, MTNL is not a party to the dispute and the AGR is calculated as per License Agreement.

The issue of deduction claimed in AGR upto F.Y. 2011-12 in respect of revenue sharing on netting basis with BSNL has been taken up with DOT and BSNL while paying License Fees on actual payment basis from 2012-13 onwards. The impact of Rs.140.36 crores on this account upto the year 2011-12 has been shown as contingent liability.

5. The company had subscribed to 8.75% Cumulative Preference Shares of M/s. ITI Limited, amounting to Rs. 100 crores during the year 2001-02. As per the terms of allotment, the above Preference Shares were proposed to be redeemed in five equal installments. Accordingly, five installments amounting to Rs.20 crores each, aggregating to Rs.100 crores have become redeemable, which have not been redeemed by ITI Limited. As per letter No.U-59011-10/2002-FAC dated 31.07.2009 issued by DOT, the repayment schedule of the above cumulative Preference Shares was deferred to 2012-13 onwards in five equal installments. M/S ITI vide letter no: ITI/Corp/Fin/MTNL dated 7-5-2014 informed that upon receipt of the financial assistance from the Govt. the redemption process would be initiated. Further DOT has also been reminded to issue directions to M/S ITI to redeem Preference Share capital and make repayment vide letter no.MTNL/CO/GM (BB & IA)/ITI Inve / 2013-14 dated 06.05.2015, 21.07.15, 27.08.15 and 29.01.16. Further a proposal for conversion of above cumulative Preference Shares to Equity Shares of ITI was given by ITI vide its letter no.K/B3/Pref-Shares/2016 dated 20.01.16 but the same was regretted by MTNL and communicated to ITI to pay the due amount at the earliest vide letter no. MTNL/CO/GM(BB&IA)/ITI Investment/2013-14 dated 09.02.2016. The installments which were due in 2012-13, 2013-14 ,2014-15 and 2015-16 have not been paid and necessary provision for the overdue installments as well as for that due in 2016-17 has been made since although in letter of Dept. of Telecom No: 20-37/2012-FAC.II dated 25-4-2014, the Cabinet Committee on Economic Affairs has approved the financial assistance to M/S ITI( which includes the grants -in -aid for payment of commitments made by M/S ITI) no payment is forthcoming till date and above developments.

6. a) Certain claims in respect of damaged/lost fixed assets and inventory has been lodged with Insurance Companies by MTNL but the settlement of the claims is pending. Final adjustment in respect of difference between amount claimed and assets withdrawn will be made in the year of settlement of claim.

b) Amount of Gross Block, Accumulated Depreciation and value of inventory has been withdrawn in respect of such damaged/lost fixed assets and inventory in the respective years except an amount of Rs.24.52 crores in Mumbai Basic unit. Suitable instructions have been issued and necessary accounting adjustment in respect of such assets will be made after receipt of details.

7. a) The company had claimed benefit under section 80 - IA of the Income Tax Act, 1961 for the financial years from 1997-98 to 2005-06. The appellate authorities have allowed the claim to the extent of 75% of the amount claimed. The company has preferred appeals for the remaining claim before the Hon''ble Courts of Delhi. The company has retained the provision of Rs.400.33 crores (Rs.400.33 crores) for this claim for the financial years 1997-98, 1998-99 and 1999-2000, however, the demands on this account amounting to Rs.345.72 crores (Rs.345.72 crores) for the financial years 1999-2000 to 2005-06 have been shown as contingent reserve to meet the contingency that may arise out of disallowances of claim of benefit u/s 80-IA of Income Tax Act, 1961.

b) Income Tax receivable include appeal effect of Rs.101.54 crores pertaining to financial year 1999-00 which is pending for settlement by the Income Tax Department. This include Tax amount of Rs.60.30 crores and interest accrued thereon amounting to Rs.41.24 crores.

c) The balances appearing in advance tax, provisions for income tax and interest on income tax refunds are subject to reconciliation with the figures of the tax records. The company is in the process of compilation of tax records on yearly basis and reconciliation thereof with the financial records.

8. Company has unabsorbed depreciation and brought forward business losses as on 31.3.2016. However, there is no virtual certainty of availability of sufficient future taxable income. Hence, the Deferred Tax Asset has not been accounted for. Deferred Tax asset shall be created in the year in which the company will have virtual certainty of future taxable income as required by Accounting Standard 22 - “Accounting for Taxes on Income” as per Rule 7 of Companies (Accounts) Rules, 2014.

9. During the year, Company has received an amount of Rs.492.26 crores against the payment of Minimum Alternative Tax (MAT) on back to back basis as financial support on account of liability incurred on book profits in the financial year 2013-14 towards MAT. The same has accordingly been accounted for under the head “Tax Adjustment for Earlier years.”

10. In line with the Notification No. G.S.R. 627(E) dated 29th August 2014 issued by Ministry of Corporate Affairs regarding identification of the components having significant cost and/or separate useful life than the main asset and to determine the useful life of that component separately, Company has exercised the option to implement the same during the F.Y. 2015-16. Depreciation of Rs.49.09 crores on account of assets/component of assets, whose useful life is already exhausted before 01.04.2015, has been adjusted against opening retained earnings.

11. Litigations:

a) The MTNL entered into contracts with M/s. M & N Publications Limited for printing, publishing and supply of telephone directories for Delhi and Mumbai unit for a period of 5 years starting from 1993. After printing and issue of 1993 (main & supplementary) and 1994 main directory, M/s. M & N Publications Ltd terminated the contract prematurely on 04.04.1996. MTNL, Mumbai & Delhi invoked Bank Guarantees on 09.04.1996, issued Legal Notice on 22.07.1996 and terminated the contract.

Sole Arbitrator has been appointed by CMD, MTNL. The Sole Arbitrator has since given his award on 09.04.2013 partly in favor of MTNL, Mumbai and on 31.07.2013 in favor of MTNL, Delhi. The claim and counter claim under arbitration will be accounted for in the year when the ultimate collection/ payment of the same becomes reasonably certain.

M/s. M & N Publications has approached the Bombay & Delhi High Courts against the arbitration awards and MTNL also approached the Bombay & Delhi High Courts for balance amount due.

The claim of Rs.49.04 crores on this account has been shown as contingent liability in Delhi unit.

b) As per directions of the Hon''ble Delhi High Court one UASL operator had paid to MTNL, Mumbai Rs.124.93 crores and Rs.33.99 crores in 2004-05 and 2005-06 respectively against the claim of Rs.158.92 crores. The company has recognized the amount realized as revenue in the respective period. The Hon''ble TDSAT has ordered for refund of Rs.96.71 crores. The Company has filed a Civil Appeal and application for stay of operation of the order of TDSAT in the Hon''ble Supreme Court of India in which Supreme Court directed on 08.05.2014 that TDSAT will review the impugned order on seeking of it by appellant. MTNL filed review application which had been disposed off by Hon''ble TDSAT vide order dated 27.05.2014 on which MTNL filed CWP no.022764 dated 16.07.2014 in Hon''ble Supreme Court and the same is pending. Meanwhile UASL operator also filed appeal in Hon''ble Supreme Court.

The claim of Rs.96.71 crores on this account has been shown as contingent liability.

c) MTNL Mumbai has received claims from M/s. BEST, Electricity supply provider categorizing MTNL at Commercial tariff instead of Industrial tariff. The claim has been made with retrospective effect for the period Feb-2007 to May-2009 in respect of HT connection and Jan-2002 to Apr-2011 in respect of LT connection. MTNL has represented to BEST for reconsideration which has not been accepted by BEST. Hence MTNL has approached Hon''ble Mumbai High Court and got a stay on the arrears claimed by BEST amounting to Rs.20.82 crores.

In the opinion of the management, there is remote possibility of the case being settled against MTNL.

d) In respect of Mobile Services Delhi, a sum of Rs.25.89 crores claimed by TCL towards ILD charges for the period Oct-09 to March-10 has not been paid due to heavy spurt in ILD traffic towards M/S TCL. On technical analysis it was found that these calls were made to some dubious and tiny destination. These destinations do not confirm to international numbering plan of the respective countries and are not approved destinations as per approved interconnect agreement. Further these calls have not got physically terminated to the destinations. The observations were shared with M/S TCL. M/S TCL has also been advised that the balance, which relates to fraudulent calls, is not payable and accordingly no provision has been made in the books of accounts. The matter was handed over to the committee for investigation. Subsequently M/S TCL filed a case in Hon''ble TDSAT for recovery of the amount, decision for which is awaited.

The claim of Rs.25.89 crores on this account has been shown as contingent liability.

In addition, the company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The company''s management perceives that these legal actions, when ultimately concluded and determined, will not have any material impact on the company''s financial statements.

12. Settlements with BSNL:

a) The amount recoverable from BSNL is Rs.5117.82 crores (Rs.4765.87 crore) and amount payable is Rs.2019.43 crores (Rs.2003.63 crores). The net recoverable of Rs.3098.39 crores (Rs.2762.24 crores) is subject to reconciliation and confirmation.

b) Certain claims of BSNL on account of Signaling charges Rs.21.93 crores (Rs.21.93 crores), Transit tariff '' 25.19 crores (Rs.25.19 crores), MP Billing Rs.6.01 crores (Rs.6.01 crores), Service Connections Rs.40.15 crores (Rs.40.15 crores), IUC Rs.10.14 crores (Rs.10.14 crores) and IUC from Gujrat Circle Rs.1.11 crore (Rs. 1.11 crore) are being reviewed. Pending settlement of similar other claims from BSNL, no provision is considered necessary.

c) Delhi Unit has accounted for the expenditure on account of telephone bills of service connections raised by BSNL towards MTNL for the period from 01.10.2000 to 30.09.2006 to the tune of Rs.9.80 crores (Rs.9.80 crores) on the basis of actual reimbursement made for subsequent periods against the disputed claim of Rs.31.27 crores (Rs.31.27 crores), since no details / justifications are received till date from BSNL in spite of repeated persuasion. The balance amount of Rs.21.47 crores (Rs.21.47 crores) is shown as contingent liability.

13. The Bank Reconciliation Statements as at 31st March 2016 include unmatched/unlinked credits/debits amounting to Rs.3.31 crore (Rs.1.78 crore) and Rs.3.53 crore (Rs.2.21 crore) respectively. Reconciliation and follow up with the bank to match/rectify the same is in process.

14. Subscribers’ dues and deposits:

a) The total balance in the Subscribers'' Deposit Accounts, in all the units, is to the tune of Rs.563.31 crores (Rs.577.12 crores). Out of this, balance in Delhi Unit amounting Rs.283.87 crores (Rs.288.03 crores) is under reconciliation.

b) Interest Accrued and Due on the aforesaid subscriber deposit accounts to the tune of Rs.0.11 crores (Rs.0.13 crores) is subject to reconciliation with the relevant subsidiary records in Delhi unit.

c) Other current liabilities include credits on account of receipts including service tax from subscribers amounting to Rs.13.79 crores (Rs.10.43 crores), which could not be matched with corresponding debtors or identified as liability, as the case may be. Appropriate adjustments/ payments shall be made inclusive of service tax, when these credits are matched or reconciled. Therefore, it could not be adjusted against making provision for doubtful debts.

15. The amounts of receivables and payables (including NLD / ILD Roaming operators) are subject to confirmation and reconciliation.

16. The matching of billing for roaming receivables / payables with the actual traffic intimated by the MACH is being done. Further the roaming income is booked on the basis of actual invoices raised by MACH on behalf of MTNL. Similarly the roaming expenditure is booked on the basis of actual invoices received by MTNL from MACH on behalf of the other operators. However, regarding collection, the payment is directly received in the bank from other operators for varying periods.

In MTNL Delhi unit, the collections received from the operators are matched in totality against the bills. The allocation of collection to individual operator''s account is pending in the absence of detailed information which is being sought. Therefore although the roaming income and expenditure are booked on actual basis, the roaming debtors are reconciled in totality in the absence of detailed information and such reconciliation is being done on regular basis.

17. In case of Mumbai Unit, the balances with non-scheduled banks comprise of:

18. Settlements with DOT:

a) Amount recoverable on current account from DOT is Rs.8109.09 crores (Rs.8360.03 crores) and amount payable is Rs.49.42 crores (Rs.45.71 crores). The net recoverable of Rs.8059.67 crores (Rs.8314.32 crores) is subject to reconciliation and confirmation. There is no agreement between the Company and DOT for interest recoverable/Payable on current account. Accordingly, no provision has been made for interest payable/receivable on balances during the year except charging of interest on GPF claims receivable from DOT.

b) Deposits from applicants and subscribers as on 31st March, 1986 were Rs.81.32 crores (Rs.81.32 crores) in Mumbai unit as intimated provisionally by DOT. At the year end, these deposits amounted to Rs.103.28 crores (Rs.103.28 crores), the difference being attributable to connections/refunds granted in respect of deposits received prior to 31st March, 1986. Balance on this account still recoverable from DoT is Rs.55.85 crores (Rs.55.85 crores).

c) The total provision for Leave Encashment is Rs.1091.05 crores up to 31.3.2016 (Rs.1038.43 crores). Out of this, an amount of Rs.65.37 crores (Rs.65.37 crores ) and Rs.43.37 crores (Rs.43.37 crores ) is recoverable, from DOT in respect of Group C & D and Group B employees respectively for the period prior to their absorption in MTNL.

d) An amount of Rs.1946.56 crores (Rs.1790.76 crores) towards GPF contribution is recoverable from DOT as on 31.3.2016. The amount pertains to Group C& D and Group B employees absorbed in MTNL w.e.f. 01.11.98 and 01.10.2000 respectively.

19. As per gazette notification no.GSR 138(E) dated 3rd March 2014 pensionary benefits in respect of absorbed combined service pension optees are being paid by the Government of India on BSNL pay scales. Gratuity provision for other than combined service pension optee employees of MTNL, and Leave Encashment provision for all of the employees of MTNL has been made on the basis of actuarial valuation.

20. Employee Benefits -AS-15(R)

I. During the year, the Company has recognized the following amounts in the Statement of Profit and Loss:

V. Gratuity is payable to the employees on death or resignation or on retirement at the attainment of superannuation age. To provide for these eventualities, the Actuary has used LIC (1994-96) Ultimate table for mortality in service and LIC (1996-98) table for mortality in retirement.

VI. Mortality in service is assumed on the basis of LIC (1994-96) Ultimate and mortality in retirement is based on LIC (1996-98) table.

21. The Company has taken an Insurance Policy for medical benefits in respect of its retired and working employees. The Insurance Policy is fully funded by the Company. This is in compliance with AS-15(Revised).

Notes:-

1. The company has disclosed Business Segment as the Primary Segment. Segments have been identified taking into account the nature of the services, the deferring risks and returns, the organizational structure and internal reporting system.

2. The company caters to the needs of mainly two metro cities viz. Delhi and Mumbai, wherein the risk and return are not different to each other. As such there are no reportable geographical segments.

3. Segment Revenue, Segment Result, Segment Asset and Segment Liabilities include the respective amount identifiable to each of the segments. Items which are not directly relatable to the business segment are shown as unallowable.

4. In F.Y 2014-15, the Company has not identified the finance cost related to cellular business, therefore the total financial cost was disclosed as unallowable.

22. CDMA Service, which is reported under Cellular Segment as per AS 17 (Segment Reporting), has been discontinued from 01.03.2016 and spectrum used for CDMA services has been surrendered for Rs.458.04 crores to DOT. As at 31st March 2016, the carrying amount of the assets of CDMA was Rs.23.92 crore (Rs.82.59 crores) and its liabilities were Rs.185.77 crores (Rs.129.30 crores). The following statement shows the revenue and expenses of continuing and discontinuing operations:

23. Consolidated Financial Statements - AS-21 & AS-27

The financial statements of Millennium Telecom Limited & Mahanagar Telephone Mauritius Limited (wholly owned subsidiaries of the Company) and MTML Data Ltd & MTML International Ltd. (Step down subsidiaries) are consolidated in accordance with the Accounting Standard - 21. Consolidation of the financial statements of United Telecom Limited & MTNL STPI IT Services Limited (Joint Ventures) has been done in accordance with the Accounting Standard - 27.

MTNL holds 26.68% of Equity Shares in UTL and 50% in MTNL STPI IT Services Limited and consolidated in

24. There is no indication of any impairment of assets of the Company, on the basis of the company as a whole as a CGU under Accounting Standard 28.

25. Disclosures pursuant to General instructions for preparation of Statement of Profit & Loss as per Para 5

(viii)(a), (b) and (e) of Schedule III to the Companies Act, 2013 :

(a) Value of Imports calculated on C.I.F. basis

(i) Raw Material - Nil

(ii) Components and Spare Parts -Nil

(iii) Capital Goods -Nil

(b) Expenditure in Foreign Currency

(i) Professional & Consultancy Fees = Rs. NIL (NIL)

(ii) Travel = Rs. NIL (NIL)

(iii) Others = Rs. 5.55 crores (Rs.5.09 crores)

(c) Earning in Foreign Exchange = Rs. 4.29 crores (Rs.5.45 crores)

(d) Additional Information required under paragraphs 5 (viii) (c) of Schedule III to the Companies Act, 2013 is not ascertainable, since (i) consumption of stores is included under the normal heads of capital expenditure and/or repairs and maintenance, and (ii) the issues of imported and indigenous items are not separately priced/ identified.

26. Dues to Micro, Small and Medium Enterprises:

There is no reported Micro, Small and Medium enterprise as defined in the MSMED Act, 2006, to whom the company owes dues as at 31.3.2016. No interest has been paid during the year on account of delayed payments as required under the MSMED Act, 2006.

27. As per the accounting policy, Bonus/ Exgratia is paid based on the productivity linked parameters and it is to be provided accordingly subject to the profitability of the company. In view of losses, no provision for Bonus/ Exgratia has been made during the year.

28. Debenture Redemption Reserve: In view of losses, Debenture Redemption Reserve had not been created in F.Y. 2014-15 and 2015-16 in respect of Redeemable Non-Convertible Debentures (in the form of Bonds).

34. Corporate Social Responsibility: No funds have been spent towards CSR activities by the company during the year as there is no average net profit made by the company during the three immediately preceding financial years as per the requirement of section 135 of Companies Act 2013.

35. There is no delay in transferring amount, required to be transferred, to Investor Education and Protection Fund by the company.

36. The Company has no foreseeable losses, which requires provision under applicable laws or accounting standards on long-term contracts and not dealing into derivative contracts at all.

37. The company has undertaken a project for providing high speed Broadband connection with Wi-Fi facility using FTTH technology at the official residences of Members of Parliament (MPs) in New Delhi which is under progress. An upfront grant of Rs.43 crores to fund the CAPEX requirement has been sanctioned by the Government and out of the same Rs.18.89 crores has been shown as a deduction from the gross value of the concerned assets in arriving at its book value in the balance sheet as per AS 12 (Accounting for Government Grants). For the asset under construction, the unused amount of grant of Rs.24.11 crores is kept separately under Other Current Liabilities in the Balance Sheet.

38. Company has incurred a loss of Rs.2005.74 crores during the year under report. Although the net worth continues to be positive at the end of the year, considering the negative net worth resulted at the end of 3rd quarter of the year under report and also the positive net worth at the end of the year being not that tangible, the management has made an assessment of an entity''s ability to continue as a going concern. The company has taken up a VRS proposal with the Govt., in the current financial year for voluntary retirement of around 5312 employees of all grades going to retire in next 10 years to reduce the legacy staff costs inherited on account of absorption of employees recruited under government w.e.f. 1-11-1998 and also on 1-10-2000, which has been under active consideration of Govt. of India. On approval and implementation of the scheme, the company is likely to reduce the staff expenses which will help the company to reduce its costs and thereby losses. Besides, the Company has taken for monetization of the lands and buildings of the company which is also under consideration of the Govt.

In addition to this, the case for approval for sovereign guarantee cover of Rs.5500 crores has also been sent to the Government for the purpose of swapping of long term and short term loans by issuance of Govt. Guaranteed bonds. This debt restructuring would bring down the finance costs. All these cases are under consideration of the Govt. Besides, the CMTS License which was earlier valid up to 10-10-2017, the validity is revised by Govt. up to 5-4-2019 which facilitates the continuation of services without any additional upfront Spectrum cost till the year 2019. All these aspects are considered by the management while preparing the financial statements, and an assessment of an entity''s ability to continue as a going concern is made accordingly.

39. Figures have been rounded off to the nearest crore. Previous year figures have been regrouped/ recast to confirm to current year''s presentation. Amounts in brackets represent the previous year''s figures.


Mar 31, 2015

Note 1: NOTES TO ACCOUNTS (Rs,in Crore)

1. Contingent Liabilities 2014-15 2013-14

(a) Income Tax Demands disputed and under appeal 774.87 870.30

(b) Sales Tax, Service Tax, Excise duty, Municipal Tax 478.90 454.13 Demands Disputed and under Appeal

(c) (i) Interest to DDA on delayed payments/pending court Amount Amount cases/Tax cases Indeterminate Indeterminate

(ii) Stamp duty payable on land and buildings acquired by Amount Amount the company Presently Presently Unascertainable Unascer- tainable

(d) Claims against the company not acknowledged as Debts 3227.18 3227.18

(e) Pending arbitration/court cases 1113.43 1000.17

(f) Bank guarantee & Letter of Credit 110.60 109.13

(g) Directory dispute 285.83 285.83

(h) Interest demanded by DOT and disputed by company on 173.81 173.81 account of delay in payment of Leave Salary and Pension Contribution.

(i) Pending court cases against land Acquisition 4.61 4.61

(j) License Fee related contingent liability w.r.t. BSNL charges 140.36 140.36 paid on netting basis

(k) Contingent Liability on account of Income Tax as shown in 1(a) above excludes various notices received from TDS department creating demand due to non-matching of their records with the returns fled.

2. Estimated amount of contracts remaining to be executed on capital account - Rs.13.35 crore (Rs. 23.29 crores). In respect of incomplete contracts where the expenditure already incurred has exceeded the contract value, the additional expenditure required to complete the same cannot be quantified.

3. Certain Lands and Buildings capitalized in the books are pending registration/legal vesting in the name of the company and the landed properties acquired from DOT have not been transferred in the name of the company and in the case of leasehold lands, the documentation is still pending. Stamp Duty on the lands and buildings acquired from DOT is payable by DOT as per sale deed and in respect of properties acquired after 1.4.1986, the documentation shall be contemplated at the time of sale or disposal as and when effected.

4. Department of Telecommunications (DOT) has levied one time spectrum charges for the GSM and CDMA spectrum on MTNL and the spectrum given on trial basis to the extent of 4.4 Mhz in 1800 Mhz frequency is also included in the calculations. The calculations are further subject to changes in the quantum of spectrum holding and the remaining valid period of license as per D.O.T. MTNL has surrendered some of the spectrum allotted on trial basis and does not require to pay for CDMA spectrum since it holds only 2.5 Mhz spectrum in respect of CDMA. DOT has been apprised of the same and the matter is still under correspondence. Apart from this, the issue of charges for spectrum given on trial basis is also to be decided.

Besides, ab-initio, the very policy of levy of one time spectrum charges by DOT itself has been challenged by private operators and is sub juice as on date whereas MTNL''s case is also to be decided by D.O.T. on the basis of outcome of the court case and the spectrum surrendered or retained. The finalization of charges and the modalities of payment are therefore to be crystallized yet and as on date the position is totally indeterminable as to the quantum of charges and also the liability.

Pending final outcome of the issue which itself is sub juice and non finality of quantum of charges payable, if at all, to DOT, no provision is made in the books of accounts as the amount is totally indeterminable. However the contingent liability of Rs.3205.71 crores is shown on the basis of the demand raised by D.O.T.in respect of GSM.

5. License fee on the Adjusted Gross Revenue (AGR) was calculated and accounted for on accrual basis in respect of both revenue and revenue sharing with other operators till F.Y. 2011-12. As per the directions of Supreme Court given earlier in respect of calculation of License Fees and AGR the matter was referred back to TDSAT. TDSAT vide its judgment dated 23.04.2015 set aside the impugned demands of DOT and DOT was directed to rework the license fee in the light of their findings. However, MTNL is not a party to the dispute and the AGR is calculated as per License Agreement.

The issue of deduction claimed in AGR up to F.Y. 2011-12 in respect of revenue sharing on netting basis with BSNL has been taken up with DOT and BSNL while paying License Fees on actual payment basis from 2012-13 onwards. The impact of Rs.140.36 crores on this account up to the year 2011-12 has been shown as contingent liability.

6. In respect of sundry creditors, in Mobile services Mumbai, liability of Rs.106.73 crores is provided in the books of accounts. The available records are showing Rs.42.01 crores only as the liability to be retained.

Pending reconciliation and review of records spread over from 2006-07 to 2012-13, no impact has been taken in the financial statements for the year ended 31st March 2015.

7. The company had subscribed to 8.75% Cumulative Preference Shares of M/s. ITI Limited, amounting to Rs.100 crores during the year 2001-02. As per the terms of allotment, the above Preference Shares were proposed to be redeemed in five equal installments. Accordingly, five installments amounting to Rs.20 crores each, aggregating to Rs.100 crores have become redeemable, which have not been redeemed by ITI Limited. As per letter No.U-59011-10/2002-FAC dated 31.07.2009 issued by DOT, the repayment schedule of the above cumulative Preference Shares was deferred to 2012-13 onwards in five equal installments. The installments which were due in 2012-13, 2013-14 and 2014-15 have not been paid and necessary provision for the overdue installments has been made. Though in letter of Dept. of Telecom No: 20-37/2012-FAC.II dated 25-4-2014, the Cabinet Committee on Economic Affairs has approved the financial assistance to M/S ITI which includes the grants -in -aid for payment of commitments made by M/S ITI and as funds will be made available after budget 2014-15 is passed and hence repayment issue may be held in abeyance till such time. Subsequently M/S ITI vide letter no: ITI/Corp/Fin/MTNL dated 7-5-2014 informed that upon receipt of the financial assistance from the Govt. the redemption process would be initiated. Further DOT has also been reminded to issue directions to M/S ITI to redeem Preference Share capital and make repayment vide letter no.MTNL/CO/GM (BB & IA)/ITI Inve / 2013-14 dated 06.05.2015.

8. Certain claims in respect of damaged/lost fixed assets and inventory has been lodged with Insurance Companies by MTNL and accordingly gross block, accumulated depreciation and value of inventory have been withdrawn in the respective years pending settlement of the claim. The claims are still pending with Insurance companies. The final adjustment in respect of difference between amount claimed and assets withdrawn will be made in the year of settlement of claim.

9. a) The company had claimed benefit under section 80 - IA of the Income Tax Act, 1961 for the financial years from 1997-98 to 2005-06. The appellate authorities have allowed the claim to the extent of 75% of the amount claimed. The company has preferred appeals for the remaining claim before the Hon''ble Courts of Delhi. The company has retained the provision of Rs.400.33 crores (Rs.400.33 crores) for this claim for the financial years 1997-98, 1998-99 and 1999-2000, however, the demands on this account amounting to Rs.345.72 crores (Rs. 345.72 crores) for the financial years 1999-2000 to 2005-06 have been shown as contingent reserve to meet the contingency that may arise out of disallowances of claim of benefit u/s 80-IA of Income Tax Act, 1961.

b) Income Tax receivable include appeal effect of Rs.101.54 crores pertaining to financial year 1999-00 which is pending for settlement by the Income Tax Department. This include Tax amount of Rs 60.30 crores and interest accrued thereon amounting to Rs. 41.24 crores.

c) The balances appearing in advance tax, provisions for income tax and interest on income tax refunds are subject to reconciliation with the figures of the tax records. The company is in the process of compilation of tax records on yearly basis and reconciliation thereof with the financial records.

10. Company has unabsorbed depreciation and brought forward business losses as on 31.3.2015. However, there is no virtual certainty of availability of sufficient future taxable income. Hence, the Deferred Tax Asset has not been accounted for. Deferred Tax asset shall be created in the year in which the company will have virtual certainty of future taxable income as required by Accounting Standard 22 - "Accounting for Taxes on Income" as per Rule 7 of Companies (Accounts) Rules, 2014.

11. The Company is entitled for credit for Tax paid as MAT under section 115JAA of the IT Act, 1961. However the Company has no convincing evidence that it will pay normal tax during the specified period as is required to avail MAT Tax Credit entitlement. Accordingly, the same has not been recognized in the current year. The same will be reviewed at each balance sheet date and will be appropriately accounted for.

12. Vacant Land and Guest Houses are valued at original value for the purpose of wealth tax provisions.

13. Lives of certain fixed assets have been revised consequent upon the changes in useful life of assets in Schedule-II of Companies'' Act, 2013. Depreciation of Rs.79.89 crores on account of assets, whose useful life is already exhausted before 01.04.2014, has been adjusted against opening retained earnings.

14. Litigations:

a) The MTNL entered into contracts with M/s. M & N Publications Limited for printing, publishing and supply of telephone directories for Delhi and Mumbai unit for a period of 5 years starting from 1993. After printing and issue of 1993 (main & supplementary) and 1994 main directory, M/s. M & N Publications Ltd terminated the contract prematurely on 04.04.1996. MTNL, Mumbai & Delhi invoked Bank Guarantees on 09.04.1996, issued Legal Notice on 22.07.1996 and terminated the contract.

Sole Arbitrator has been appointed by CMD, MTNL. The Sole Arbitrator has since given his award on 09.04.2013 partly in favor of MTNL, Mumbai and on 31.07.2013 in favor of MTNL, Delhi. The claim and counter claim under arbitration will be accounted for in the year when the ultimate collection/ payment of the same becomes reasonably certain.

M/s. M & N Publications has approached the Bombay & Delhi High Courts against the arbitration awards and MTNL also approached the Bombay & Delhi High Courts for balance amount due.

The claim of Rs.285.83 crores on this account has been shown as contingent liability.

b) As per directions of the Hon''ble Delhi High Court one UASL operator had paid to MTNL, Mumbai Rs.124.93 crores and Rs.33.99 crores in 2004-05 and 2005-06 respectively against the claim of Rs.158.92 crores. The company has recognized the amount realized as revenue in the respective period. The Hon''ble TDSAT has ordered for refund of Rs.96.71 crores. The Company has filed a Civil Appeal and application for stay of operation of the order of TDSAT in the Hon''ble Supreme Court of India in which Supreme Court directed on 08.05.2014 that TDSAT will review the impugned order on seeking of it by appellant. MTNL fled review application which had been disposed off by Hon''ble TDSAT vide order dated 27.05.2014 on which MTNL fled CWP no.022764 dated 16.07.2014 in Hon''ble Supreme Court and the same is pending. Meanwhile UASL operator also fled appeal in Hon''ble Supreme Court.

The claim of Rs.96.71 crores on this account has been shown as contingent liability.

c) MTNL Mumbai has received claims from M/s. BEST, Electricity supply provider categorizing MTNL at Commercial tariff instead of Industrial tariff. The claim has been made with retrospective effect for the period Feb-2007 to May-2009 in respect of HT connection and Jan-2002 to Apr-2011 in respect of LT connection. MTNL has represented to BEST for reconsideration which has not been accepted by BEST. Hence MTNL has approached Hon''ble Mumbai High Court and got a stay on the arrears claimed by BEST amounting to Rs.20.82 crores.

In the opinion of the management, there is remote possibility of the case being settled against MTNL.

d) In respect of Mobile Services Delhi, a sum of Rs. 25.89 crores (Rs. 25.89 crores) claimed by TCL towards ILD charges for the period Oct-09 to March-10 has not been paid due to heavy spurt in ILD traffic towards M/S TCL. On technical analysis it was found that these calls were made to some dubious and tiny destination. These destinations do not confirm to international numbering plan of the respective countries and are not approved destinations as per approved interconnect agreement. Further these calls have not got physically terminated to the destinations. The observations were shared with M/S TCL. M/S TCL has also been advised that the balance, which relates to fraudulent calls, is not payable and accordingly no provision has been made in the books of accounts. The matter was handed over to the committee for investigation. Subsequently M/S TCL fled a case in Hon''ble TDSAT for recovery of the amount, decision for which is awaited.

The claim of Rs.25.89 crores on this account has been shown as contingent liability.

In addition, the company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The company''s management perceive that these legal actions, when ultimately concluded and determined, will not have any material impact on the company''s financial statements.

15. Settlements with BSNL:

a) The amount recoverable from BSNL is Rs.4765.87 crores (Rs.4192.26 crore) and amount payable is Rs.2003.63 crores (Rs. 1828.25 crores). The net recoverable of Rs.2762.24 crores (Rs. 2364.01 crores) is subject to reconciliation and confirmation.

b) Certain claims of BSNL on account of Signaling charges Rs.21.93 crores (Rs. 21.93 crores), Transit tariff Rs.25.19 crores (Rs. 25.19 crores), MP Billing Rs.6.01 crores (Rs. 6.01 crores), Service Connections Rs.40.15 crores (Rs. 40.15 crores), IUC Rs.10.14 crores (Rs. 10.14 crores) and IUC from Gujrat Circle Rs.1.11 crore (Rs. 1.11 crore) are being reviewed. Pending settlement of similar other claims from BSNL, no provision is considered necessary

c) Delhi Unit has accounted for the expenditure on account of telephone bills of service connections raised by BSNL towards MTNL for the period from 01.10.2000 to 30.09.2006 to the tune of Rs. 9.80 crores (Rs. 9.80 crores) on the basis of actual reimbursement made for subsequent periods against the disputed claim of Rs.31.27 crores (Rs. 31.27 crores), since no details / justifications are received till date from BSNL in spite of repeated persuasion. The balance amount of Rs. 21.47 crores (Rs. 21.47 crores) is shown as contingent liability.

d) Based on expert opinion, the company has not been deducting tax deducted at source on IUC services rendered by BSNL.

16. The Bank Reconciliation Statements as at 31st March 2015 include unmatched/unlinked credits/debits amounting to Rs.1.55 crore (Rs. 1.48 crore) and Rs.1.38 crore (Rs. 1.63 crore) respectively. Reconciliation and follow up with the bank to match/rectify the same is in process.

17. Subscribers'' dues and deposits:

a) The total balance in the Subscribers'' Deposit Accounts, in all the units, is to the tune of Rs.577.12 crores (Rs. 597.39 crores).Out of this, balance in Delhi Unit amounting Rs. 288.03 crores (Rs. 293.12 crores) is under reconciliation.

b) Interest Accrued and Due on the aforesaid subscriber deposit accounts for both the units of Rs.0.13 crores (Rs. 2.12 crores) is subject to reconciliation with the relevant subsidiary records.

c) In Mumbai unit, on reconciliation of balance outstanding under refund due to subscribers account with actual amount due for refund, Rs.37.13 crores (Rs. 37.13 crores) was identified as excess liability appearing in the financial books. Pending decision on final treatment of this excess amount, the same is retained as liability in the financial books.

d) Other current liabilities include credits on account of receipts including service tax from subscribers amounting to Rs.10.43 crores (Rs. 21.24 crores), which could not be matched with corresponding debtors or identified as liability, as the case may be. Appropriate adjustments/ payments shall be made inclusive of service tax, when these credits are matched or reconciled. Therefore, it could not be adjusted against making provision for doubtful debts.

18. The amounts of receivables and payables (including NLD / ILD Roaming operators) are subject to confirmation and reconciliation.

19. The matching of billing for roaming receivables / payables with the actual traffic intimated by the MACH is being done. Further the roaming income is booked on the basis of actual invoices raised by MACH on behalf of MTNL. Similarly the roaming expenditure is booked on the basis of actual invoices received by MTNL from MACH on behalf of the other operators. However, regarding collection, the payment is directly received in the bank from other operators for varying periods. The collection received from the operators are matched in totality against the total bill wise but the allocation of collection to individual operator''s account is pending in the absence of detailed information which is being sought. Therefore although the roaming income and expenditure are booked on actual basis, the roaming debtors are reconciled in totality in the absence of detailed information. Efforts are being made to allocate the collection on individual basis.

20. Settlements with DOT:

a) Amount recoverable on current account from DOT is Rs.8360.03 crores (Rs. 8458.07 crores) and amount payable is Rs.45.71 crores (Rs. 37.82 crores). The net recoverable of Rs.8314.32 crores (Rs. 8420.25 crores) is subject to reconciliation and confirmation. There is no agreement between the Company and DOT for interest recoverable/Payable on current account. Accordingly, no provision has been made for interest payable/receivable on balances during the year except charging of interest on GPF claims receivable from DOT.

b) Deposits from applicants and subscribers as on 31st March, 1986 were Rs.81.32 crores (Rs.81.32 crores) in Mumbai unit as intimated provisionally by DOT. At the yearend these deposits amounted to Rs.103.28 crores (Rs. 103.28 crores), the difference being attributable to connections/refunds granted in respect of deposits received prior to 31st March, 1986. In case of Delhi Unit, balance on this account still recoverable is Rs.12.36 crores (Rs.12.36 crores).

c) The total provision for Leave Encashment is Rs.1038.43 crores up to 31.3.2015 (Rs. 1034.96 crores). Out of this, an amount of Rs. 65.37 crores (Rs. 65.37 crores ) and Rs. 43.37 crores (Rs. 43.37 crores ) is recoverable, from DOT in respect of Group C & D and Group B employees respectively for the period prior to their absorption in MTNL.

d) An amount of Rs.1645.82 crores (Rs. 1514.08 crores) towards GPF contribution is recoverable from DOT as on 31.3.2015. The amount pertains to Group C& D and Group B employees absorbed in MTNL w.e.f. 01.11.98 and 01.10.2000 respectively.

21. As per gazette notification no.GSR 138(E) dated 3rd March 2014 pensioner benefits in respect of absorbed combined service pension optees are being paid by the Government of India on BSNL pay scales. Gratuity provision for other than combined service pension opted employees of MTNL, and Leave Encashment provision for all of the employees of MTNL has been made on the basis of actuarial valuation.

22. Employee Benefits –AS-15(R)

I. During the year, the Company has recognized the following amounts in the Statement of Profit and Loss:

V. Gratuity is payable to the employees on death or resignation or on retirement at the attainment of superannuation age. To provide for these eventualities, the Actuary has used Mortality: 1994-96 LIC Ultimate table for mortality in service and LIC (1996-98) table for mortality in retirement.

VI. Mortality in service is assumed on the basis of LIC (1994-96) Ultimate and mortality in retirement is based on LIC (1996-98) table.

23. During the year, the Company has made an Insurance Policy for medical benefits in respect of its retired and working employees. The Insurance Policy is fully funded by the Company. This is in compliance with AS- 15(Revised).

24. Information regarding Primary Business Segments: - AS – 17

25. Consolidated Financial Statements – AS-21 & AS-27

The financial statements of Millennium Telecom Limited & Mahanagar Telephone Mauritius Limited (wholly owned subsidiaries of the Company) and MTML Data Ltd & MTML International Ltd. (Step down subsidiaries) are consolidated in accordance with the Accounting Standard – 21. Consolidation of the financial statements of United Telecom Limited & MTNL STPI IT Services Limited (Joint Ventures) has been done in accordance with the Accounting Standard – 27.

26. There is no indication of any impairment of assets of the Company, on the basis of the company as a whole as a CGU under Accounting Standard 28. However during the year, provision towards difference of W.D.V. and expected realizable value of CDMA exchange, Delhi amounting to Rs.17.19 crores has been provided towards impairment based on value in use consequent upon closure of CDMA operations.

27. Disclosures pursuant to General instructions for preparation of Statement of Proft & Loss as per Para 5 (viii)(a), (b) and (e) of Schedule III to the Companies Act, 2013 :

28. Dues to Micro, Small and Medium Enterprises:

There is no reported Micro, Small and Medium enterprise as defend in the MSMED Act, 2006, to whom the company owes dues as at 31.3.2015. No interest has been paid during the year on account of delayed payments as required under the MSMED Act, 2006.

29. As per the accounting policy, Bonus/ Excreta is paid based on the productivity linked parameters and it is to be provided accordingly subject to the profitability of the company. In view of losses, no provision for Bonus/ Excreta has been made during the year.

30. Debenture Redemption Reserve: In view of losses, Debenture Redemption Reserve had not been created in current financial year in respect of Redeemable Non-Convertible Debentures (in the form of Bonds).

31. Corporate Social Responsibility: No funds have been spent towards CSR activities by the company during the year as there is no average net profit made by the company during the three immediately preceding financial years as per the requirement of section 135 of Companies Act 2013.

32. There is no delay in transferring amount, required to be transferred, to Investor Education and Protection Fund by the company.

33. The Company has no foreseeable losses, which requires provision under applicable laws or accounting standards on long-term contracts and not dealing into derivative contracts at all.

34. Addition under the head ''Building'' in the Note No.11 (Tangible Fixed Assets) includes Rs.1.18 crores being cost of tenements in the building at Govandi, Mumbai (MMRDA), which is not yet registered in the name of the company. However, the possession thereof has already been given to the company.

35. Figures have been rounded off to the nearest crore. Previous year figures have been regrouped / recast to confirm to current year''s presentation. Amounts in brackets represent the previous year''s figures.


Mar 31, 2014

(Rs. in Million)

1. Contingent Liabilities 2013-14 2012-13

(a) Income Tax 8703.00 13176.91 Demands disputed and under appeal (b) Sales Tax, Service Tax, Excise duty, Municipal Tax Demands Disputed and under Appeal 4541.31 5761.60 (c) (i) Interest to DDA on delayed Amount Amount payments/pending court cases/Tax cases Indeterminate Indeterminate

(ii) Stamp duty payable on land and buildings acquired by the Amount Amount Company Presently Presently

Unascertainable Unascertainable

(d) Claims against the company not acknowledged as Debts 32271.82 32271.82 (e) Pending arbitration/court cases 10001.72 8231.50 (f) Bank guarantee & Letter of Credit 1091.28 1243.46 (g) Directory dispute 2858.34 2858.34 (h) Interest demanded by DOT and disputed by company 1738.10 1738.10 on account of delay in payment of Leave Salary and Pension Contribution (i) Pending court cases against land 46.07 53.78 Acquisition (j) License Fee related contingent liability w.r.t. BSNL charges paid on netting basis 1403.63 1403.63 (k) Contingent Liability on account of Income Tax as shown in 1(a) above excludes various notices received from TDS department creating demand due to non-matching of their records with the returns filed.

2. Estimated amount of contracts remaining to be executed on capital account is Rs. 232.94 Million (Previous year Rs. 1341.83 million). In respect of contracts where the expenditure already incurred has exceeded the contract value and the contract remains incomplete, the additional expenditure required to complete the same cannot be quantified.

3. Change in Accounting Policy:

During F.Y. 2013-14, in case of landline services, provision to the extent of 50% has been made for debtors outstanding for more than 1 year but upto 3 years and to the extent of 100% in respect of more than 3 years but upto F.Y. 2012-13 provision was made only for debtors outstanding for more than 3 years.

Impact: The amount of Rs. 393.83 million has been charged to the Statement of Profit and Loss during the current year on account of provision made to the extent of 50% for debtors outstanding for more than 1 year but up to 3 years. Due to change in the policy, the profit for the year as well as net trade receivables have been reduced to that extent.

4. In view of gazette notification no.GSR 138(E) dated 3rd March 2014 vide which pensionary benefits in respect of absorbed combined service pension optees will be paid by the Government of India, no provision has been made for the pensionary benefits viz pension and gratuity for such employees except for the amount due to difference in pay scales of MTNL and BSNL which is payable by MTNL to the Government till next wage revision by which time MTNL and BSNL shall achieve pay scale parity. However, MTNL shall make pension contribution to the Govt. as per FR-116 as in BSNL with equivalent BSNL pay scales. Earlier provision for all such employees was made on actuarial basis.

Besides, actuarial valuation is made for gratuity provision for other than combined service pension optee employees of MTNL.

5. a) The company had claimed benefit under section 80 - IA of the Income Tax Act, 1961 for the financial years from 1997-98 to 2005-06. The appellate authorities have allowed the claim to the extent of 75% of the amount claimed. The company has preferred appeals for the remaining claim before the Hon''ble Courts of Delhi. The company has retained the provision of Rs. 4003.32 million (Rs. 4003.32 million) for this claim for the financial years 1997-98, 1998-99 and 1999-2000, however, the demands on this account amounting to Rs. 3457.16 million (Rs. 3457.16 million) for the financial years 1999-2000 to 2005-06 have been shown as contingent reserve to meet the contingency that may arise out of disallowances of claim of benefit u/s 80IA of Income Tax Act, 1961.

b) Income Tax receivable include appeal effect of Rs. 1015.43 million pertaining to financial year 1999- 00 which is pending for settlement by the Income Tax Department. This include Tax amount of Rs. 603.03 million and interest accrued thereon amounting to Rs. 412.40 million.

c) The balances appearing in advance tax, provisions for income tax and interest on income tax refunds are subject to reconciliation with the figures of the tax records.

6. In accordance with Accounting Standard 22 - "Accounting for Taxes on Income", the Company has deferred tax assets on account of unabsorbed depreciation and brought forward business losses as on 31.3.2014. However, there is no virtual certainty of availability of sufficient future taxable income against which the above asset can be realized. Hence, the Deferred Tax asset has not been accounted for. Deferred Tax asset shall be created in the year in which the company will have virtual certainty of future taxable income as required by AS-22 issued under the Companies (Accounting Standards) Rules, 2006.

7. The Company has provided for Minimum Alternate Tax (MAT) to the tune of Rs. 4971.79 million as per section 115JB of Income Tax Act, 1961. The same has been provided on provisional basis based on the estimated income and expenditure till the date the financial statements for the year 2013-14 are approved by the Board of MTNL. The same might undergo revision at the time of filing of Income Tax return of the Company for the A.Y. 2014-15. The Company is entitled for credit for Tax paid as MAT under section 115JAA of the IT Act, 1961. However the Company has no convincing evidence that it will pay normal tax during the specified period as is required to avail MAT Tax Credit entitlement. Accordingly, the same has not been recognized in the current year. The same will be reviewed at each balance sheet date and will be appropriately accounted for.

8. (a) The supplemental agreement entered into between United India Periodicals Pvt. Ltd. / United Data Base (India) Pvt. Ltd/ Sterling Computers Ltd and the company for printing of telephone directories was struck down by the Hon''ble High Court of Delhi on 30.9.92 and the said decision was upheld by the Hon''ble Supreme Court of India on 12.01.93. A claim against the Company has been raised by Sterling Computers Ltd. for Rs. 258.2 Million which being under dispute, has not been provided for. The company has filed its counter claims of Rs. 228.7 Million before the Hon''ble High Court against Sterling/UDI/UIP and has also filed arbitration claims of Rs. 561.8 Million plus interest @ 21% per annum against these parties under the original agreement. Pending finalisation of this dispute, the company has raised and recorded as ‘Claims Recoverable'', a claim for Rs. 154.91 Million (Rs. 154.91 Million) on account of royalty, interest and billing charges and on payments made through Letter of Credit; Rs. 130.47 Million (Rs. 130.47 Million) recovered there against by the company from subscribers for the issue of directories, is carried under ‘Current Liabilities''. Further claims of the company for interest and service charges aggregating Rs. 143.67 Million (Rs. 143.67 Million) have not been accounted for. Financial implication of the claim raised against the company, adjustment of the sums received against outstanding claims, any non-realisation of claim and further claims recoverable shall be effected upon determination based on the outcome of the proceedings in the court of law.

MTNL has filed OMP No. 151/1996 seeking enlargement of time under Section 28 of the Arbitration Act for the Arbitrator to publish the award. The case is still pending and will be listed along with OMP No.135/94 for final hearing. The petitioner M/s United India Periodical (Ltd.) filed OMP No.135/ 94 in the High Court of Delhi challenging the appointment of Arbitrator under Section 33 of the Arbitration Act 1940. The Petition is pending from 24.10.1994 in the High Court of Delhi. Now the petitioner has filed an application for amendment in the petition filed in the year 1994 with the prayer that the arbitration clause 20 of the original contract dated 14.3.1987 be determined by the Hon''ble Court of the subsequent events. During the financial year 2011-12, the Hon''ble High Court pass an order on 07.12.2011 directing to stop arbitration proceedings against M/s Sterling regarding the arbitration case of M/s UIP also and it is informed by learned arbitrator that this proceeding stand still in the SLP filed by UIP. However, MTNL has not received the certified copy of the order. On receipt of the same MTNL will file further to the court. The petitioner has also taken plea of res-judicata as the MTNL filed the Suit No.4628 of 1994 in Mumbai and the same is pending before the Bombay High Court. The case is now listed in the category of final matter and is on regular board of the Court for both the aforesaid OMP''s.

The suit filed by MTNL against M/s Sterling Computers and others is pending in the High Court of Mumbai in which claims to the tune of Rs. 228.7 million towards Royalty, Interest on Royalty amount upto 31.8.1994, amount paid against LC, Interest on amount of LC, L/D for non-performance and other charges etc. for Delhi and Mumbai both units. This suit is filed after non-performance of supplementary agreement dated 19.7.1991 & 26.9.1991 by M/s Sterling Computers Ltd. The case is still pending at Mumbai High Court.

(b) MTNL entered into contracts with M/s. M & N Publications Limited for printing, publishing and supply of telephone directories for Delhi and Mumbai unit for a period of 5 years starting from 1993. After printing and issue of 1993 (main & supplementary) and 1994 main directory, M/s. M & N Publications Ltd terminated the contract prematurely on 04.04.1996. MTNL, Mumbai invoked Bank Guarantee on 09.04.1996 and issued Legal Notice on 22.07.1996 and terminated the contract.

Sole Arbitrator has been appointed by CMD, MTNL. The Sole Arbitrator has since given his award on 09.04.2013 partly in favor of MTNL, Mumbai. The claim and counter claim under arbitration will be accounted for in the year when the ultimate collection/payment of the same becomes reasonably certain. M/s. M & N Publications has approached the Bombay High Court against the award vide ARBP/926/2013 and MTNL also approached the Bombay High Court vide ARBPL/14/07/2013 for balance amount due and the same is in admission stage.

9. Certain Lands and Buildings capitalized in the books are pending registration/legal vesting in the name of the company and the landed properties acquired from DOT have not been transferred in the name of the company and in the case of leasehold lands, the documentation is still pending. Stamp Duty on the lands and buildings acquired from DOT is payable by DOT as per sale deed and in respect of properties acquired after 1.4.1986, the documentation shall be contemplated at the time of sale or disposal as and when needed.

10. The Mumbai Unit had applied for amnesty under the Maharashtra Kar Nivaran Yojana, 1999 in respect of the Sales Tax demands of Rs. 8.10 Million (Rs. 8.10 Million). The application for amnesty towards demands aggregating Rs. 2.09 Million (Rs. 2.09 Million) has been accepted. The balance applications relating to demands of Rs. 6.02 Million (Rs. 6.02 Million) are under process and are not included under Contingent Liabilities.

11. a) The amount recoverable from BSNL is Rs. 41922.59 Million (Rs. 36097.39 Million) and amount payable is Rs. 18282.54 Million (Rs. 16345.13 Million). The Net recoverable of Rs. 23640.05 Million (Rs. 19752.26 Million) is subject to reconciliation and confirmation.

b) Certain claims of BSNL on account of Signaling charges Rs. 219.30 million. (Rs. 219.30 million), Transit tariff Rs. 251.90 million (Rs. 251.90 million), MP Billing Rs. 60.10 million(Rs. 60.10 million), Service Connections Rs. 401.48 million (Rs. 401.48 million), IUC Rs. 101.40 million (Rs. 101.40 million) and IUC from Gujrat Circle Rs. 11.14 million (Rs. 11.14 million) are being reviewed. Pending settlement of similar other claims from BSNL, no provision is considered necessary

c) Delhi Unit has accounted for the expenditure on account of telephone bills of service connections raised by BSNL towards MTNL for the period from 01.10.2000 to 30.09.2006 to the tune of Rs. 98.01 million (Rs. 98.01 million) on the basis of actual reimbursement made for subsequent periods against the disputed claim of Rs. 312.72 million (Rs. 312.72 million), since no details / justifications are received from BSNL in spite of repeated persuasion till date. The balance amount of Rs. 214.72 million (Rs. 214.72 million) is shown as contingent liability.

d) In both Delhi and Mumbai Unit an amount of Rs. 4428.35 million (Rs. 3782.25 million) and Rs. 4630.63 million (Rs. 2748.67 million) has been accounted as receivable and payable from BSNL respectively on account of IUC charges which is included in the recoverable & payable amounts as shown above.

e) During the year in Delhi Unit out of the Access calls and other charges Rs. 44.59 million (Rs. 76.94 million) towards interconnect charges on rate prescribed by TRAI in IUC regulation in the absence of any interconnect agreement between MTNL & BSNL. BSNL is also charging the same and the claim raised by both parties are under dispute. Direct connectivity traffic expenditure with BSNL has been booked on the basis of billing system of Delhi Unit.

f) During the year an amount of Rs. 380.72 million (Rs. 1296.55 million) have been accounted for as Infrastructure Usage charges receivable from BSNL for using the various office building and spaces of MTNL and Rs. 2.91 million (Rs. 3.27 million) is payable to BSNL in case of Mumbai Unit.

g) During the year an amount of Rs. 261.10 million (Rs. 184.02 million) has been accounted as receivable from BSNL on account of Property Tax, Electricity, water and fuel charges by both Delhi and Mumbai Units.

12. As per directions of the Hon''ble Delhi High Court one UASL operator had paid to MTNL, Mumbai Rs. 1249.30 million and Rs. 339.90 million in 2004-05 and 2005-06 respectively against the claim of Rs. 1589.20 million. The company has recognised the amount realized as revenue in the respective period. The Hon''ble TDSAT has ordered for reconciliation of the bills. The Company has filed a Civil Appeal and application for stay of operation of the order of TDSAT in the Hon''ble Supreme Court of India in which Supreme Court directed on 08.05.2014 that TDSAT will review the impugned order on seeking of it by appellant and the same is in process.

13. The Bank Reconciliation Statements as at 31st March 2014 include unmatched/unlinked credits/ debits given by the banks in the Mumbai, Delhi and Corporate office units'' bank accounts amounting to Rs. 14.78 million (Rs. 2.40 million) and Rs. 16.26 million (Rs. 1.41 million) respectively. Reconciliation and follow up with the bank to match/rectify the same is in process.

14. The company had subscribed to 8.75% Cumulative Preference Shares of M/s. ITI Limited, amounting to Rs. 1000 Million during the year 2001 -02. As per the terms of allotment, the above Preference Shares were proposed to be redeemed in 5 equal installments. Accordingly, five installments amounting to Rs. 200 Million each, aggregating to Rs. 1000 Million have become redeemable, which have not been redeemed by ITI Limited. As per letter No.U-59011 -10/2002-FAC dated 31.07.2009 issued by DOT, the repayment schedule of the above cumulative Preference Shares was deferred to 2012-13 onwards in five equal installments. The installments which were due in 2012-13 and 2013-14 have not been paid and necessary provision for the overdue installments has been made. Though in letter of Dept. of Telecom No: 20-37/2012-FAC.II dated 25-4-2014, the Cabinet Committee on Economic Affairs has approved the financial assistance to M/S ITI which includes the grants -in -aid for payment of commitments made by M/S ITI and as funds will be made available after budget 2014-15 is passed and hence repayment issue may be held in abeyance till such time. Subsequently M/S ITI vide letter no: ITI/Corp/Fin/MTNL dated 7-5-2014 informed that upon receipt of the financial assistance from the Govt. the redemption process would be initiated.

15. Amount recoverable on current account from DOT is Rs. 84580.73 Million (Rs. 35183.13 Million) and amount payable is Rs. 378.22 Million (Rs. 756.02 Million). The net recoverable of Rs. 84202.51 Million (Rs. 34427.11 Million) is subject to reconciliation and confirmation.

Deposits from applicants and subscribers as on 31st March, 1986 were Rs. 813.21 million in Mumbai unit as intimated provisionally by DOT. At the year end these deposits amounted to Rs 1032.79 million (Rs. 1032.79 million), the difference being attributable to connections/refunds granted in respect of deposits received prior to 31 st March, 1986. Out of the said amount of Rs. 1032.79 million, claims of Rs. 597.94 million (Rs. 597.94 million) have been settled and Rs. 434.85 million (Rs. 434.85 million) is due at the end of the year.

In case of Delhi Unit, balance on this account still recoverable is Rs. 123.60 million (Rs. 123.60 million).

16. a) The balance in the Subscribers Deposit Accounts is to the tune of Rs. 5973.94 million (Rs. 5979.81 million).Out of this balance in Delhi Unit an amount of Rs. 2931.21 Million (Rs. 3017.12 Million) on account of subscriber deposits is under reconciliation.

b) The reconciliation of deposits pertaining to Mumbai unit is done and on reconciliation of Balances of customer''s deposits in the CSMS billing system with financial books (WFMS), an amount of Rs. 1348.04 million (Rs. 1348.04 million) was found excess in financial books. Pending decision on final treatment of this excess amount, the same is retained as liability in the financial books.

c) Interest Accrued and Due on the aforesaid subscriber deposit accounts for both the units of Rs. 21.15 Million (Rs. 21.80 Million) is subject to reconciliation with the relevant subsidiary records.

d) In Mumbai unit, on reconciliation of balance outstanding under refund due to subscribers account with actual amount due for refund, Rs. 371.28 million (Rs. 371.28 million) was identified as excess liability appearing in the financial books. Pending decision on final treatment of this excess amount, the same is retained as liability in the financial books.

e) Other current liabilities include credits on account of receipts including service tax from subscribers amounting to Rs. 212.42 Million (Rs. 420.30 Million), which could not be matched with corresponding debtors or identified as liability, as the case may be. Appropriate adjustments/ payments shall be made inclusive of service tax, when these credits are matched or reconciled. Therefore, it could not be adjusted against making provision for doubtful debts.

f) The balance of sundry debtors as per ageing summary under subsidiary records is lower by Rs. 66.56 million (Rs. 73.83 million) as compared to the balance in general ledger and is under reconciliation. The resultant impact of the above on the account is not ascertainable.

17. License fee on the Adjusted Gross Revenue (AGR) was calculated and accounted for on accrual basis in respect of both revenue and revenue sharing with other operators till 2011-12. As per the directions of Supreme Court given earlier in respect of calculation of License Fees and AGR the matter has been referred back to TDSAT and is pending in respect of other private telecom operators. However, MTNL is not a party to the dispute and the AGR is calculated as per License Agreement. In respect of revenue sharing with BSNL, the issue has been taken up with DOT while paying License Fees on actual payment basis from 2012-13 onwards. The impact of Rs. 1403.63 Million on this account upto the year 2011-12 has been shown as contingent liability and issue is also taken up with BSNL and DOT by MTNL.

18. In case of Mumbai Unit, the balances with non-scheduled banks comprise of:

20. MTNL Mumbai has received claims from M/s. BEST, Electricity supply provider categorizing MTNL at Commercial tariff instead of Industrial tariff. The claim has been made with retrospective effect for the period Feb-2007 to May-2009 in respect of HT connection and Jan-2002 to Apr-2011 in respect of LT connection. MTNL has represented to BEST for reconsideration which has not been accepted by BEST. Hence MTNL has approached Hon''ble Mumbai High Court and got a stay on the arrears claimed by BEST amounting to Rs. 208.20 million. In the opinion of the management, there is remote possibility of the case being settled against MTNL.

21. a) Consequent upon the decision of Govt. to take over the liability of pensionary benefits of combined service pension optees, out of the total Gratuity provision of Rs. 14181.74 million, the provision to the extent of 3062.74 millions for the period upto 31-03-2014 is retained towards the liability of employees other than combined service pension optees and Rs. 729.58 million for Combined pension optees to meet the liability due to difference in BSNL and MTNL pay scales. The remaining excess provision pertaining to the combined service pension optees is written back. As on 31.03.2014 Rs. 3062.74 Millions (Rs. 14181.74 millions) is to be retained by the Gratuity Trust and excess amount to the extent of Rs. 8001.60 million is to be returned to MTNL out of its corpus being the amount pertaining to the combined service pension optees available with it due to the above decision of Government of India.

Similarly out of the total pension provision in the books as on 31.03.2013 of Rs. 101561.59 million, only Rs. 8837.16 miilion has been retained to meet out the liability due to difference in MTNL and BSNL pay scales.

b) The total provision for Leave Encashment is Rs. 10349.61 Million up to 31.3.2014 (Rs. 9386.31 Million). Out of this, an amount of Rs. 653.68 Million (Rs. 653.68 Million ) and Rs. 433.74 Million (Rs. 433.74 Million) is recoverable, from DOT in respect of Group C & D and Group B employees respectively for the period prior to their absorption in MTNL.

c) An amount of Rs. 15140.82 Million (Rs. 14732.72 Million) towards GPF contribution is recoverable from DOT as on 31.3.2014. The amount pertains to Group C& D and Group B employees absorbed in MTNL w.e.f. 01.11.98 and 01.10.2000 respectively.

d) In view of the Government of India decision for payment of pensionary benefits to Combined service pension optees as in the case of BSNL as per which the payment of pensionary benefits will be made by Govt. as per the BSNL pay scales. Correspondingly MTNL will pay pension contribution as per the BSNL pay scales to DOT. The difference in pensionary benefits on account of difference in BSNL and MTNL pay scales to combine service pension optees will be borne by MTNL.

Gratuity provision for other than combined service pension optee employees of MTNL, and Leave Encashment provision for all of the employees of MTNL has been made on the basis of actuarial valuation.

22. The diminutions in value of investments in Subsidiaries & Joint Ventures are considered as temporary in nature.

23. The amount of receivables and payables (including NLD / ILD Roaming operators) is subject to confirmation and reconciliation. Pending such confirmation/ reconciliation, the impact on the account is not ascertainable at this stage.

24. Certain claims in respect of damaged/lost fixed assets and inventory has been lodged with Insurance Companies by MTNL and accordingly gross block, accumulated depreciation and value of inventory have been withdrawn in the respective years pending settlement of the claim. The claims are still pending with insurance company. The final adjustment in respect of difference between amount claimed and assets withdrawn will be made in the year of settlement of claim.

25. There is no agreement between the Company and DOT for interest recoverable/Payable on current account. Accordingly, no provision has been made for interest payable/receivable on balances during the year except charging of interest on GPF claims receivable from DOT.

26. Vacant Land and Guest Houses are valued at original value for the purpose of wealth tax provisions.

27. Exceptional items of Rs. 116209.31 million (NIL) appearing in the Statement of Profit & Loss Account represent the following :

Pension/Gratuity provision has been written back consequent on the issue of Notification by DOP & PW vide GSR No.138 (E) dt.03/03/2014 granting pensionary benefits by the Government to erstwhile Government employees absorbed in MTNL and opted for pension on combined service in the same manner as in BSNL.

Pension payouts (net of pension contribution) made by MTNL on behalf of DOT for the period from 01. 10.2000 to 31.03.2013 have been written back in view of aforesaid notification.

Recoverable from Gratuity Trust is due to reversal of liability in respect of Combined Service Pension optee employees of MTNL in view of aforesaid notification.

Amortised amount of BWA Spectrum upto F.Y. 2012-13 has been written back during the year consequent to the decision of the Government of India to refund the one time entry fees for spectrum for BWA services initially allotted to MTNL consequent upon its return by MTNL. The Company had capitalized the one time spectrum fees for BWA services to the tune of Rs. 45339.70 Millions during the year 2009-10.The Company had amortized an amount of Rs. 14048.81 Million in the books up to F.Y.2012- 13. The amount of Rs. 45339.70 million has been shown as recoverable from DoT.

28. In respect of Mobile Services Delhi, a sum of Rs. 258.94 Million (Rs 258.94 Million) claimed by TCL towards ILD charges for the period Oct-09 to March-10 has not been paid due to heavy spurt in ILD traffic towards M/S TCL. On technical analysis it was found that these calls were made to some dubious and tiny destination. These destinations do not confirm to international numbering plan of the respective countries and are not approved destinations as per approved interconnect agreement. Further these calls have not got physically terminated to the destinations. The observations were shared with M/S TCL. M/S TCL has also been advised that the balance which relates to fraudulent calls is not payable and accordingly no provision has been made in the books of accounts. However the units have shown the above as contingent liability. The matter has been handed over to committee for investigation.

29. Disclosures pursuant to Para 5(viii) of General Instructions for preparation of Statement of Profit & Loss Account under Revised Schedule VI of the Companies Act, 1956:

(a) Value of Imports calculated on C.I.F. basis

(i) Raw Material - Nil

(ii) Components and Spare Parts -Nil

(iii) Capital Goods -Nil

(b) Expenditure in Foreign Currency

(i) Professional & Consultancy Fees =Rs. NIL(Rs. 1.25 million)

(ii) Travel =Rs. NIL (Rs. 0.30 million)

(iii) Others =Rs. 44.48 million(Rs. 42.54 million)

(c) Earning in Foreign Exchange(roaming)=Rs. 87.48 million (Rs. 105.89 million)

(d) Consumption of stores is included under the normal heads of Capital Expenditure and/or Repairs & Maintenance, and the issue of imported and indigenous items are not separately priced/ identified.

30. (a) In case of Delhi Unit NIL (Rs. 4.83 million) is outstanding against Micro, Small and Medium enterprises as defined in the Micro, Small and Medium Enterprise Development Act, 2006, to whom the company owes dues as at 31.3.2014. No interest has been paid during the year on account of delayed payments as required under the MSMED Act, 2006.

The details of amount outstanding to Micro, Small and Medium Enterprises based on available information with the company are as under:-

Notes:-

1. The company has disclosed Business Segment as the Primary Segment. Segments have been identified taking into account the nature of the services, the deferring risks and returns, the organizational structure and internal reporting system.

2. The company caters mainly to the needs of the two metro cities viz. Delhi and Mumbai, wherein the risk and return are not different to each other. As such there are no reportable geographical segments.

3. Segment Revenue, Segment Result, Segment Asset and Segment Liabilities include the respective amount identifiable to each of the segments. The expenses, which are not directly relatable to the business segment, are shown as unallocable corporate assets and liabilities respectively.

4. Finance cost is not allocated segment wise and is considered on over all basis.

31. During the year, the Company has made an Insurance Policy for medical benefits in respect of its retired and working employees. The Insurance Policy is fully funded by the Company. This is in compliance with AS-15(Revised

32. Based on expert opinion, the company has not been deducting tax deducted at source on IUC services rendered by BSNL.

39. Dept. of Telecom has levied one time spectrum charges for the GSM and CDMA spectrum on MTNL and the spectrum given on trial basis to the extent of 4.4 Mhz in 1800 Mhz frequency is also included in the calculations. The calculations are further subject to changes in the quantum of spectrum holding and the remaining valid period of license as per D.O.T. MTNL proposed to surrender some of the spectrum allotted on trial basis and does not require to pay for CDMA spectrum since it holds only 2.5 Mhz spectrum in respect of CDMA. D.O.T. has been apprised of the same and the matter is still under correspondence.Apart from this, the issue of charges for spectrum given on trial basis is also to be decided. Besides, ab-initio, the very policy of levy of one time spectrum charges by DOT itself has been challenged by private operators and is sub judice as on date whereas MTNL''s case is also to be decided by D.O.T. on the basis of outcome of the court case and the spectrum surrendered or retained. The finalisation of charges and the modalities of payment are therefore to be crystallized yet and as on date the position is totally indeterminable as to the quantum of charges and also the liability.

Pending final outcome of the issue which itself is subjudice and non finality of quantum of charges payable, if at all, to D.O.T. , no provision is made in the books of accounts as the amount is totally indeterminable. However the contingent liability of Rs.32057.10 million is shown on the basis of the demand raised by D.O.T.in respect of GSM.

33. The matching of billing for roaming receivables / payables with the actual traffic intimated by the MACH is being done. Further the Roaming Income is booked on the basis of actual invoices raised by MACH on behalf of MTNL. Similarly the Roaming Expenditure is booked on the basis of actual invoices received by MTNL from MACH on behalf of the other operators. However, regarding collection, the payment is directly made in the bank by the other operators. The payment is made by various operators and for varying periods. The collection received from the operators are matched in totality against the total bill wise but the allocation of collection to individual operator’s account is pending in the absence of detailed information which is being sought. Therefore although the Roaming Income and Expenditure are booked on actual basis, however in the absence of detailed information, the roaming debtors are reconciled in totality. Efforts are being made to allocate the collection on individual basis.

34. In view of losses, Debenture Redemption Reserve had not been created for the financial year 2012-13 in respect of 8.57% Redeemable Non-Convertible Debentures (in the form of Bonds). However, during the current year, provision for DRR have been made to the extent required under the Companies Act, 1956 and related rules etc. in this regard. During the current financial year the Company has created DRR to the tune of Rs.452.71 million which includes the provision for DRR pertaining to F.Y.2012-13.

35. As per the accounting policy, Bonus/ Exgratia is paid based on the productivity linked parameters and it is to be provided accordingly subject to the profitability of the company. However, during the current year, no provision for Bonus/ Exgratia has been made. The profits for the current year accrued not on account of increase in productivity but on the reversal of accounting entries made during the previous accounting period(s).

36. In Delhi MS unit, IUC-SMS Income and Expenditure for eight months amounting Rs.20.86 Millions and Rs.124.67 Millions respectively has been accounted for on provisional basis due to nonprocessing of data for technical problems.

37. Figures have been rounded off to the nearest million. Previous year figures have been regrouped / recast to confirm to current year’s presentation. Amounts in brackets represent the previous year’s figures.


Mar 31, 2013

1. Change in Accounting Policy

No change in the Accounting Policy has been made during the year .

2. Estimated amount of contracts remaining to be executed on capital account is Rs. 1341.83 Million (Previous yearRs. 2004.16 million). In respect of contracts where the expenditure already incurred has exceeded the contract value and the contract remains incomplete, the additional expenditure required to complete the same cannot be quantified.

3. Other liabilities include credits on account of receipts including service tax from subscribers amounting to Rs.420.30 Million (Rs.412.24 Million), which could not be matched with corresponding debtors or identified as liability, as the case may be. Appropriate adjustments/ payments shall be made inclusive of service tax, when these credits are matched or reconciled. Therefore, it could not be adjusted against making provision for doubtful debts.

4. a) The company had claimed benefit under section 80 - IA of the Income Tax Act, 1961 for the financial years from 1997-98 to 2005-06. The appellate authorities have allowed the claim to the extent of 75% of the amount claimed. The company has preferred appeals for the remaining claim before the Hon''ble Courts of Delhi. The company has retained the provision of Rs.4003.32 million (Rs.4003.32 million) for this claim for the financial years 1997-98, 1998-99 and 1999-2000, however, the demands on this account amounting to Rs.3457.16 million (Rs.3948.46 million) for the financial years 1997-98 to 2005-06 have been shown as contingent reserve to meet the contingency that may arise out of disallowances of claim of benefit u/s 80IA of Income Tax Act,1961.

b) Income Tax receivable include appeal effect of Rs.1015.43 million pertaining to financial year 1999-00 which is pending for settlement by the Income Tax Department. This include Tax amount of Rs.603.03 million and interest accrued thereon amounting to Rs.412.4 million. Efforts are being made to recover the same at the earliest.

c.) The balances appearing in Advance tax, Provisions for income tax and Interest on income tax refunds are subject to reconciliation with the figures of the tax records.

5. In accordance with Accounting Standard 22, accounting for taxes on Income, the company has deferred tax assets amounting to Rs. 40173.90 million (Rs. 25850.97 million) including Rs.9204.16 million (Rs.6897.96 million ) on account of unabsorbed depreciation and Rs.28859.41 million (Rs.16896.27 million) brought forward business losses as on 31.3.2013. However, in the current Telecom Industry Scenario, there is no virtual certainty of availability of sufficient future taxable income against which the above asset can be realized. Hence, the Deferred Tax asset has not been accounted for. DTA amounting to Rs.40173.90 million (Rs.25850.97 million) shall be created in the year in which the company will have virtual certainty of future taxable income as required by AS-22 issued under the Companies (Accounting Standards) Rules, 2006.

6. a) Provision for taxation for the current year comprises of Income Tax ofRs. Nil (Rs.Nil), Wealth Tax of Rs.1.65 Millions (Rs.2.37 million).

b) During the year, the company has suffered a business loss of Rs.53211.23 millions (Rs.41097.84 million). The company intends to carry forward its business loss including unabsorbed depreciation/ amortization to the tune of Rs.46179.10 million (Rs.35538.41 million) as per calculation made under Income Tax Act, 1961.

7. (a) The supplemental agreement entered into between United India Periodicals Pvt. Ltd. / United Data Base (India) Pvt. Ltd/ Sterling Computers Ltd and the company for printing of telephone directories was struck down by the Hon''ble High Court of Delhi on 30.9.92 and the said decision was upheld by the Hon''ble Supreme Court of India on 12.1.93. A claim against the Company has been raised by Sterling Computers Ltd. for Rs.258.2 Millions which being under dispute, has not been provided for. The company has filed its counter claims of Rs.228.7 Millions before the Hon''ble High Court against Sterling/ UDI/UIP and has also filed arbitration claims of Rs.561.8 Millions plus interest @ 21% per annum against these parties under the original agreement. Pending finalisation of this dispute, the company has raised and recorded as ''Claims Recoverable'', a claim for Rs.154.91 Millions (Rs.154.91 Millions) on account of royalty, interest and billing charges and on payments made through Letter of Credit; Rs.130.47 Millions (Rs.130.47 Millions) recovered there against by the company from subscribers for the issue of directories, is carried under ''Current Liabilities''. Further claims of the company for interest and service charges aggregating Rs.143.67 Millions (Rs.143.67 Millions) have not been accounted for.

Financial implication of the claim raised against the company, adjustment of the sums received against outstanding claims, any non-realisation of claim and further claims recoverable shall be effected upon determination based on the outcome of the proceedings in the court of law.

MTNL has filed OMP No.151/1996 seeking enlargement of time under Section 28 of the Arbitration Act for the Arbitrator to publish the award. The case is still pending and will be listed along with OMP No.135/94 for final hearing. The petitioner M/s United India Periodical (Ltd.) filed OMP No.135/94 in the High Court of Delhi challenging the appointment of Arbitrator under Section 33 of the Arbitration Act 1940. The Petition is pending from 24.10.1994 in the High Court of Delhi. Now the petitioner has filed an application for amendment in the petition filed in the year 1994 with the prayer that the arbitration clause 20 of the original contract dated 14.3.1987 be determined by the Hon''ble Court of the subsequent events. During the financial year 2011-12, the Hon''ble High Court pass an order on 7.12.2011directing to stop arbitration proceedings against M/s Sterling regarding the arbitration case of M/s UIP also and it is informed by learned arbitrator that this proceeding stand still in the SLP filed by UIP. However, MTNL is not received the certified copy of the order. On receipt of the same MTNL will file further to the court. The petitioner has also took plea of res-judicata as the MTNL filed the Suit No.4628 of 1994 in Mumbai and the same is pending before the Bombay High Court. The case is now listed in the category of final matter and is on regular board of the Court for the both the aforesaid OMP''s.

The suit filed by MTNL against M/s Sterling Computers and others is pending in the High Court of Mumbai in which claims to the tune of Rs.228.7 millions towards Royalty, Interest on Royalty amount upto 31.8.1994, amount paid against LC, Interest on amount of LC, L/D for non-performance and other charges etc. for Delhi and Mumbai both units. This suit is filed after non-performance of supplementary agreement dated 19.7.1991 & 26.9.1991 by M/s Sterling Computers Ltd. The case is still pending at Mumbai High Court.

(b) MTNL entered into contracts with M/s. M & N Publications Limited for printing, publishing and supply of telephone directories for Delhi and Mumbai unit for a period of 5 years starting from 1993. After printing and issue of 1993 (main & supplementary) and 1994 main directory, M/s. M & N Publications Ltd terminated the contract prematurely on 04.04.1996. MTNL, Mumbai invoked Bank Guarantee on 09.04.1996 and issued Legal Notice on 22.07.1996 and terminated the contract.

Sole Arbitrator has been appointed by CMD, MTNL. The Sole Arbitrator has since given his award on 09.04.2013 partly in favor of MTNL, Mumbai. The claim and counter claim under arbitration will be accounted for in the year when the ultimate collection/payment of the same becomes reasonably certain.

8. Certain Lands and Buildings capitalized in the books are pending registration/legal vesting in the name of the company and the landed properties acquired from DOT have not been transferred in the name of the company and in the case of leasehold lands, the documentation is still pending. Stamp Duty and the lands and buildings acquired from DOT is payable by DOT as per sale deed and in respect of properties acquired after 1.4.1986, the documentation shall be contemplated at the time of sale or disposal as and when needed.

9. The Mumbai Unit had applied for amnesty under the Maharashtra Kar Nivaran Yojana, 1999 in respect of the Sales Tax demands of Rs.8.10 Millions (Rs.8.10 Millions). The application for amnesty towards demands aggregating Rs.2.09 Millions (Rs.2.09 Millions) has been accepted. The balance applications relating to demands of Rs.6.02 Millions (Rs.6.02 Millions) are under process and are not included under Contingent Liabilities.

10. The amount recoverable from BSNL is Rs.36097.39 Millions (Rs.30679.67 Millions) and amount payable is Rs.16345.13 Millions (Rs.15205.76 Millions). The Net recoverable of Rs.19752.26 Millions (Rs.15473.91 Millions) is subject to reconciliation and confirmation.

a) Certain claims of BSNL on account of Signaling charges Rs.219.30 millions (Rs.219.30 millions), Transit tariff Rs.251.90 millions (Rs.251.90 millions), MP Billing Rs.60.10 millions(Rs.60.10 millions), Service Connections Rs.401.48 millions (Rs.401.48 millions), IUC Rs.101.40 millions (Rs.101.40 millions) and IUC from Gujrat Circle Rs.11.14 millions (Rs.11.14 millions) are being reviewed. Pending settlement of similar other claims from BSNL, no provision is considered necessary.

b) Delhi Unit has accounted for the expenditure on account of telephone bills of service connections raised by BSNL towards MTNL for the period from 01.10.2000 to 30.09.2006 to the tune of Rs.98.01 millions (Rs.98.01 millions) on the basis of actual reimbursement made for subsequent periods against the disputed claim of Rs.312.72 millions (Rs.312.72 millions), since no details / justifications are received from BSNL in spite of repeated persuasion till date. The balance amount of Rs.214.72 millions (Rs. 214.72 millions) is shown as contingent liability.

c) In both Delhi and Mumbai Unit an amount of Rs.3782.25 millions (3375.84 millions) and Rs.2748.67 millions (Rs.2750.38 millions) has been accounted as receivable and payable from BSNL respectively on account of IUC charges which is included in the recoverable & payable amounts as shown above.

d) During the year in Delhi Unit out of the Access calls and other charges Rs.76.94 millions (Rs.104.69 millions) towards interconnect charges on rate prescribed by TRAI in IUC regulation in the absence of any interconnect agreement between MTNL & BSNL. BSNL is also charging the same and the claim raised by both parties are under dispute. Direct connectivity traffic expenditure with BSNL has been booked on the basis of billing system of Delhi Unit.

e) During the year an amount of Rs.1296.55 millions (Rs.868.65 million) have been accounted for as Infrastructure Usage charges receivable from BSNL for using the various office building and spaces of MTNL. In case of Mumbai Unit, Rs.3.27 millions (Rs.39.72 million) as payable to BSNL.

f) During the year an amount of Rs.184.02 million (Rs.190.58 million) has been accounted as receivable from BSNL on account of Property Tax, Electricity, water and fuel charges by both Delhi and Mumbai Units.

11. As per directions of the Hon''ble Delhi High Court one UASL operator had paid to MTNL, Mumbai Rs.1249.30 million and Rs.339.90 million in 2004-05 and 2005-06 respectively against the claim of Rs.1589.20 million. The company has recognised the amount realized as revenue in the respective period. The Hon''ble TDSAT has ordered for reconciliation of the bills. The Company has filed a Civil Appeal and application for stay of operation of the order of TDSAT in the Hon''ble Supreme Court of India which is admitted by the court on 10-5-2013 for further course of action.

12. The Bank Reconciliation Statements as at 31st March 2013 include unmatched/unlinked credits/ debits given by the banks in the Mumbai Unit''s bank accounts amounting to Rs.2.40 million (Rs.1.59m) and Rs.1.41 million (Rs.2.02m) respectively. Reconciliation and follow up with the bank official to match/ rectify the same is in process. Necessary adjustments have been made in the books of accounts.

13. The company had subscribed to 8.75% Cumulative Preference Shares of M/s. ITI Limited, amounting to Rs.1000 Millions during the year 2001-02. As per the terms of allotment, the above Preference Shares were proposed to be redeemed in 5 equal installments. Accordingly, five installments amounting to Rs.200 Millions each, aggregating to Rs.1000 Millions have become redeemable, which have not been redeemed by ITI Limited. As per letter No.U-59011-10/2002-FAC dated 31.07.2009 issued by DOT, the repayment schedule of the above cumulative Preference Shares was deferred to 2012-13 onwards in five equal installments. The first installment which was due in 2012-13 has not been paid. As per the information, Dept. of Telecom''s proposal to revive the company is in an advanced stage and DOT planned to send the case for cabinet approval before 31-12-2013. In view of the revival plan being in an advanced stage the provision for the installment due in 2012-13 is only considered.

14. Amount recoverable on current account from DOT is Rs.35183.13 Millions (Rs.34328.25 Millions) and amount payable is Rs.756.02 Millions (Rs.516.44 Millions). The net recoverable of Rs.34427.11 Millions (Rs.33811.81 Millions) is subject to reconciliation and confirmation.

a) In both the units, deposits from applicants and subscribers as on 31 st March, 1986 were Rs.1503.59 million as intimated provisionally by DOT. In Mumbai Unit, at the year end these deposits amounting to Rs.1032.79 millions (Rs.1032.79 millions), the difference being attributable to connections/refunds granted in respect of deposits received prior to 31st March, 1986. Out of the said amount of Rs.1032.79 million, claims of Rs.597.94 millions (Rs.597.94 million) have been settled and Rs.434.85 millions (Rs.434.85 million) is due at the end of the year. In case of Delhi Unit, balance on this account is still recoverable is Rs.123.60 millions (Rs.123.60 millions).

b) The balance in the Subscribers'' Deposit Accounts is to the tune of Rs.5979.81 million (Rs.6588.81 million).Out of this balance in Delhi Unit an amount of Rs.3017.12 Millions (Rs.3133.56 Millions) on account of subscriber deposits is under reconciliation.

c) Interest Accrued and Due on the aforesaid subscriber deposit accounts for both the units ofRs. 21.80 Millions (Rs.23.97 Millions) is subject to reconciliation with the relevant subsidiary records.

d) The reconciliation of deposits pertaining to Mumbai unit is done and on reconciliation of Balances of customer''s deposits in the CSMS billing system with financial books (WFMS), an amount of Rs.1348.04 million is found excess in financial books. Pending decision on final treatment of this excess amount, the same is retained as liability in the financial books.

e) On reconciliation of balance outstanding under refund due to subscribers account with actual amount due for refund, Rs.371.28 million was identified as excess liability appearing in the financial books. Pending decision on final treatment of this excess amount, the same is retained as liability in the financial books.

f) In both of the units there are unlinked receipts to the tune of Rs.420.30 millions(Rs. 412.60 millions).

g) The balance of sundry debtors as per ageing summary under subsidiary records lower by Rs.73.83 millions (Rs.94.70 millions) as compared to the balance in general ledger and is under reconciliation. The resultant impact of the above on the account is not ascertainable.

h) In Mumbai Unit, the balances under sundry debtors includes accrued surcharge of Rs.3.01 millon (Rs.3.87m) for late payments.

i) In Delhi unit, provision of Debtors including spill over has been made amounting to Rs.922.94 millions (Rs.1014.53 m) against the total debtors excluding service tax amounting to Rs.1274.03 million (Rs.1321.61 m) on the basis of financial books.

15. License Fees were calculated on the AGR accounted for on accrual basis in respect of both revenue and revenue sharing with other operators till 2011-12. As regards the directions of Supreme Court given earlier in respect of calculation of License Fees and AGR the matter has been referred back to TDSAT and is pending in respect of other private telecom operators. However, MTNL is not a party to the dispute and the AGR is calculated as per License Agreement. In respect of revenue sharing with BSNL, the issue is taken up with DOT while paying License Fees on actual payment basis from 2012-13 onwards. The impact of Rs.1403.63 Million on this account upto the year 2011-12 has been shown as contingent liability and issue is also taken up with BSNL and DOT by MTNL.

16. In case of Mumbai Unit, the balances with non-scheduled banks comprise of:

17. MTNL Mumbai has received claims from M/s.BEST, Electricity supply provider categorising MTNL at Commercial tariff instead of Industrial tariff. The claim has been made with retrospective effect for the period Feb-2007 to May-2009 in respect of HT connection and Jan-2002 to Apr-2011 in respect of LT connection. MTNL has represented to BEST for reconsideration which has not been accepted by BEST. Hence MTNL has approached Hon''ble Mumbai High Court and got a stay on the arrears claimed by BEST amounting to Rs. 208.20 million. In the opinion of the management, there is remote possibility of the case being settled against MTNL.

18 a) Out of total provision of Gratuity of Rs.14181.74 Millions up to 31.3.2013 (Rs.13790.64 Millions), an amount of Rs.1943.73 Millions(Rs.1943.73 Millions) and Rs.665.40 Millions (Rs.665.40 Millions) is recoverable from DOT, in respect of Group C & D and Group B employees respectively, for the period prior to their absorption. As on 31.03.2013 Rs.12236.61 Millions (Rs.10386.13 million) is available with the Gratuity Trust.

b) The total provision of Leave Encashment is Rs.9386.31 Millions up to 31.3.2013 (Rs.7370.75 Millions). Out of this, an amount of Rs.653.68 Millions (Rs.653.68 Millions ) and Rs.433.74 Millions (Rs.433.74 Millions ) is recoverable, from DOT in respect of Group C & D and Group B employees respectively for the period prior to their absorption in MTNL.

c) An amount of Rs.14732.72 Millions (Rs.13541.11 Millions) towards GPF contribution is recoverable from DOT as on 31.3.2013. The amount pertains to Group C& D and Group B employees absorbed in MTNL w.e.f. 01.11.98 and 01.10.2000 respectively.

d) The total provision of Pension is Rs.101561.59 Millions (Rs.78991.46 Millions) upto 31.3.2013. Out of this an amount of Rs.7546.2 Millions (Rs.7546.2 Millions ) and Rs.2201.02 Millions (Rs.2201.02 Millions) is recoverable from DOT in respect of Group C&D and Group B employees for the period prior to their absorption.

The provisions of Pension, Gratuity & Leave Encashment for absorbed employees have been made on actuarial valuation.

e) The DOT has given commitment vide GOI Ministry of Communication & IT Deptt. of Telecom vide letter No. 40-29/2002-Pen(T) dated 29th August, 2002 that it has been agreed in principle that the payment of pensionary benefits including the family pension to the government employees absorbed in MTNL and who have opted for government scheme of pension shall be paid by the government. The exact modalities in this regard are being worked out by Deptt. Of Pension and Pensioners welfare. Pending decisions on the modalities of liabilities payable to DOT towards pension contribution on MTNL, so as to have a prudent method, on conservative basis, MTNL has adopted the method of valuation as per AS-15 (Revised) through actuarial valuation for defined benefit plan of Central Govt. Pension Scheme and the provision is kept separately in the books. The necessary adjustments will be made in the books on finalization of modalities.

19. Certain works have been carried out for defence network in respect of Alternate Communication System. In respect of usage of the same in Mumbai unit Rs.338.30 million has been received at Corporate Office. Out of this Rs.59.82 million has been decapitalised in 2011-12 accounts and ATD sent to Corporate Office. The AT for the balance amount of Rs.278.48 million has been received from Corporate Office in 2012-13. Out of this amount Rs.18.98 million has been decapitalised in 2012-13, Rs.32.33 million has been reduced from prior period expenses. Balance amount of Rs.227.17 million is relating to revenue for usage of the ducts. The work was completed in March-2011, the revenue is to be spread over a period of 18 years which is the life considered for depreciation of Cables. During the year Rs.25.24 million has been booked as income and balance of Rs.201.93 million is taken as unearned revenue to be recognised as income in the next 16 years.However the accounting is under review at corporate level.This being the revenue pertaining to usage of MTNL ducts etc. by defence the issue is taken up with D.O.T. for payment of annual charges to MTNL and pending decision on this , no revenue is booked for the period from 1-4-2010 to 31-3-2013 and pending finality on the issue the accounting treatment at Mumbai unit is not changed.

20. In both units, Delhi Unit & Mumbai Unit, CDMA exchanges of 100K & 50K have been decommissioned by the management during financial year 2008-09. The liability on this project amounting to Rs.736.20 millions (includes 13973820 US dollars) lying in the books for more than three years and not paid to vendors due to issue arising out of contract agreement, is not written back in view of pending arbitration case filed by vendor.

21. The diminutions in value of investments in Subsidiaries & Joint Ventures are considered as temporary in nature.

22. The amount of receivables and payables (including NLD / ILD Roaming operators) is subject to confirmation and reconciliation. Pending such confirmation/ reconciliation, the impact on the account is not ascertainable at this stage.

23. In respect of Delhi Unit, Certain claims in respect of damaged/lost fixed assets and inventory has been lodged with Insurance Companies and accordingly gross block, accumulated depreciation and value of inventory have been withdrawn in the respective years pending settlement of the claim. The claims are still pending with insurance company. The final adjustment in respect of difference between amount claimed and assets withdrawn will be made in the year of settlement of claim.

24. There is no agreement between the Company and DOT for interest recoverable/Payable on current account. Accordingly, no provision has been made for interest payable/receivable on balances during the year except charging of interest on GPF claims receivable from DOT.

25. Vacant Land and Guest Houses are valued at original value for the purpose of wealth tax provisions.

26. The company has incurred a loss of Rs.53211.23 million during the year under report and as a result thereof the net worth has become negative. The company has moved the case for reference to BRPSE(Board for Reconstruction of Public Sector Enterprises) seeking revival. The company has also moved proposals for refund of one time spectrum fees paid in 2010 towards BWA spectrum to the tune of Rs.45370 million with interest to the extent of Rs.14960 million, support of govt. for VRS of 19000 employees and approval for monetization of MTNL land. All these cases are in an advanced stage of govt. approvals and are likely to be settled in the coming months. Besides, the settlement of pension payment through Govt. trust in 2013 -14 also would reduce the liability on MTNL very drastically as the annual pension out go around Rs. 5000 million would be met by Govt. pension trust and the actuarial liability of around Rs. 20000 million also comes down to annual contribution to trust as per Fundamental Rule 116. All these actions being actively considered by Govt. could neutralize the negative net worth. As at the balance sheet while preparing financial statements, management has made an assessment of an entity''s ability to continue as an on going concern taking into account all these facts and also into the fact that these approvals are in active consideration of Govt. and also that out of expected sovereign guarantee cover ofRs. 80000 million. MTNL has already got Rs. 10050 million in 2012-13 and expects to raise balance bonds in 2013-14 to steer out of the negative net worth.

27. In case of Delhi Unit a sum of Rs.91.25 million (Rs.91.25 million) accounted for as income in financial year 2007-08 being ADCC recoverable from Project Development Company (PDC) towards development of Core knowledge park at Noida is still to be recovered and interest there on for the current period is not accounted for as the issue of funding of the project by MTNL is raised by the PDC and pending decision by corporate management and also as there is no explicit agreement for interest as such no interest income has been accounted for. Out of Rs.91.25 million, Rs.60.00 million are secured against Bank Guarantee and for rest amount ofRs. 31.25 millions, a provision has been made in year 2012-13.

28.(a) In respect of Mobile Services Delhi, a sum ofRs. 258.94 Million (Rs. 258.94 Million) claimed by TCL for ILD charges for the period Oct-09 to March-10 has not been paid due to heavy spurt in ILD traffic towards M/S TCL. On technical analysis it was found that these calls were made to some dubious and tiny destination. These destinations do not confirm to international numbering plan of the respective countries and are not approved destinations as per approved interconnect agreement. Further these calls have not got physically terminated to the destinations. The observations were shared with M/S TCL. M/S TCL has also been advised that the balance which relates to fraudulent calls is not payable and accordingly no provision has been made in the books of accounts. However the units have shown the above as contingent liability. The matter has been handed over to committee for investigation.

(b) The fire accident claim in respect of data centre at CGO Complex Delhi for Rs.40 million is already lodged with Insurance Company and is pending for settlement for full claim as major element of claims is for software which is not excluded from the courage of insurance. The insurance company''s contentions to the contrary are under challenge with IRDA and subsequently in the current year the insurance company has come up with a proposal to settle the case for Rs. 27 million which is not acceptable since MTNL is demanding the full payment.

29. Disclosures pursuant to Para 5(viii) of General Instructions for preparation of Statement of Profit & Loss Account under Revised Schedule VI of Companies Act, 1956.

(a) Value of Imports calculated on C.I.F. basis

(i) Raw Material - Nil

(ii) Components and Spare Parts -Nil

(iii) Capital Goods -Nil

(b) Expenditure in Foreign Currency

(i) Professional & Consultancy Fees = Rs.1.25 million (Rs.7.51 million)

(ii) Travel = Rs.0.30 million (Rs.1.20 million)

(iii) Others = Rs.29.24 million (Rs.27.60 million)

(c) Earning in Foreign Exchange(roaming) = Rs.39.50 million (Rs.57.90 million)

(d) Consumption of stores is included under the normal heads of Capital Expenditure and/or Repairs & Maintenance, and the issue of imported and indigenous items are not separately priced/ identified.

30.(a) In case of Delhi Unit Rs.4.83 millions is outstanding against Micro, Small and Medium enterprise as defined in the Micro, Small and Medium enterprise development Act, 2006, to whom the company owes dues as at 31.3.2013. No interest has been paid during the year on account of delayed payments as required under the MSMED Act, 2006.

The details of amount outstanding to Micro, Small and Medium Enterprises based on available information with the company are as under:-

31. During the year, the Company has made an Insurance Policy for medical benefits in respect of its retired and working employees. The Insurance Policy is fully funded by the Company. This is in compliance with AS-15(Revised).

32. During the year no provision has been made for any loss on account of impairment of assets under Accounting Standard 28 as there is no indication of any impairment of assets of the Company, on the basis of the company as a whole as a CGU.

33. Consolidated Financial Statements - AS-21 & AS-27

The financial statements of Millennium Telecom Limited & Mahanagar Telephone Mauritius Limited (wholly owned subsidiaries of the Company) and United Telecom Limited & MTNL STPI IT Services Limited (Joint Ventures) are consolidated in accordance with the Accounting Standard - 21 and Accounting Standard - 27 respectively.

34. Based on expert opinion, the company has not been deducting tax deducted at source for IUC services rendered by BSNL. Besides, liability provided on account of pension contribution expenditure on the basis of actuarial valuation is considered as an allowable expenditure based on expert opinion.

35. During the year, Dept. of Telecom has levied one time spectrum charges for the GSM and CDMA spectrum on MTNL and the spectrum given on trial basis to the extent of 4.4 Mhz in 1800 Mhz frequency is also included in the calculations. The calculations are further subject to changes in the quantum of spectrum holding and the remaining valid period of license as per D.O.T. MTNL proposed to surrender some of the spectrum allotted on trial basis and does not require to pay for CDMA spectrum since it holds only 2.5 Mhz spectrum in respect of CDMA. D.O.T. has been apprised of the same and the matter is still under correspondence .Apart from this , the issue of charges for spectrum given on trial basis is also to be decided. Besides, ab-initio,the very policy of levy of one time spectrum charges by DOT itself has been challenged by private operators and is sub judice as on date whereas MTNL''s case is also to be decided by D.O.T. on the basis of outcome of the court case and the spectrum surrendered or retained. The finalisation of charges and the modalities of payment are therefore to be crystallized yet and as on date the position is totally indeterminable as to the quantum of charges and also the liability.

Pending final out come of the issue which itself is subjudice and non finality of quantum of charges payable, if at all, to D.O.T. , no provision is made in the books of accounts as the amount is totally indeterminable. However the contingent liability of Rs.32057.10 millions is shown on the basis of the demand raised by D.O.T.in respect of GSM.

36. The matching of billing for roaming receivables / payables with the actual traffic intimated by the MACH is being done. Further the Roaming Income is booked on the basis of actual Invoices raised by MACH on behalf of MTNL. Similarly the Roaming Expenditure is booked on the basis of actual Invoices received by MTNL from MACH on behalf of the other operators. However, regarding collection,the payment is directly made in the bank by the other operators. The payment is made by various operators and for varying periods. The collection received from the operators are matched in totality against the total bill wise but the allocation of collection to individual operator''s account is pending in the absence of detailed information which is being sought. Therefore although the Roaming Income and Expenditure are booked on actual basis, however in the absence of detailed information, the roaming debtors are reconciled in totality. Efforts are being made to allocate the collection on individual basis.

37. In view of losses, Debenture Redemption Reserve has not been created for the financial year 2012-13 in respect of 8.57% Redeemable Non-Convertible Debentures (in the form of Bonds).

38. In respect of Delhi unit out of the amount of Rs.2850 millions accounted for as income from CW games in 2010-11 an amount of Rs. 430 milloins is yet to be paid. The services rendered by MTNL as per the demand of Organising Committee of CWG and sports ministry are to be paid and are under correspondence with the authorities concerned for payment .

39. Previous year figures have been regrouped / recast to confirm to current year''s presentation. Amounts in brackets represent the previous year''s figures.


Mar 31, 2012

(Rs. in Millions)

1. Contingent Liabilities 2011-12 2010-11

(a) Income Tax 11017.99 9774.02 Demands disputed and under appeal

(b) Sales Tax, Service Tax, Excise duty, Municipal Tax Demands Disputed and under Appeal 5761.43 4906.0

(c) Disputed Demand under Lease Act 49.92 37.39

(d) Interest to DDA on delayed Amount Amount payments/pending court cases/Tax cases Indeterminate Indeterminate

ii Stamp duty payable on land and buildings acquired by the Amount Amount Company Presently Presently Unascertainable Unascertainable

(e) Claims against the company not acknowledged as Debts 9859.69 10003.92

(f) Bank guarantee & Letter of Credit 981.62 951.15

(g) Directory dispute 2858.34 2858.34

(h) Interest demanded by DOT and disputed by company on account 1738.10 1738.10 of delay in payment of Leave Salary and Pension Contribution

(i) Pending court cases against land Indeterminate Indeterminate Acquisition

(j) Contingent Liability on account of Income Tax as shown in 1(a) above excludes various notices received from TDS department creating demand due to non-matching of their records with the returns filed and notices u/s115 WG(c) of I.T. Act for FBT for the Assessment year 2007-08 to 2009-10 and a notice u/s 148 of I.T. Act for the assessment year 2007-08, as the same are Indeterminable.

(k) BSNL IUC contingent liability 1403.63

2. Change in Accounting Policy

During the year the company has decided to merge the CDMA units with the Mobile (GSM) Units which were earlier merged with the Basic Units. The resultant change in provision for doubtful debts and CDMA instrument for older more than 180 days in line with the Mobile (GSM) units in comparison of provision for balances older more than three years in accordance with the policy of the Basic Units. Due to this change an additional provision of Rs..56.55 millions and Rs..65.70 millions for provision for doubtful debts and CDMA instruments respectively has been made during the year.

3. Presentation and disclosure of financial statements:

During the year ended 31 March 2012, the revised Schedule VI notified under the Companies Act 1956, has become applicable to the company, for preparation and presentation of its financial statements. The adoption of revised Schedule VI does not impact recognition and measurement principles followed for preparation of financial statements. However, it has significant impact on presentation and disclosures made in the financial statements. The bifurcation of assets and liabilities into current and non-current basis has been made on best judgement basis in consonance with the operating cycle of MTNL. The previous year figures have been regrouped on judgmental basis. The company has also reclassified the previous year figures in accordance with the requirements applicable in the current year.

4. Estimated amount of contracts remaining to be executed on capital account is Rs..2004.16 Millions (Previous year Rs. 4467.43 millions). In respect of contracts where the expenditure already incurred has exceeded the contract value and the contract remains incomplete, the additional expenditure required to complete the same cannot be quantified.

5. Other liabilities include credits on account of receipts including service tax from subscribers amounting to Rs..412.24 Millions (Rs..417.45 Millions), which could not be matched with corresponding debtors or identified as liability, as the case may be. Appropriate adjustments/ payments shall be made inclusive of service tax, when these credits are matched or reconciled. Therefore, it could not be adjusted against making provision for doubtful debts.

6. a) The company had claimed benefit under section 80 - IA of the Income Tax Act, 1961 for the financial year from 1996-97 to 2005-06. The appellate authorities have allowed the claim to the extent of 75% of the amount claimed. The company has preferred appeals for the remaining claim before the Hon'ble Court of Delhi. The company has retained the provision of Rs..4003.32 million (Rs..4003.32 million) for this claim for the years 1997-98, 1998-99 and 1999-2000, however, the demands on this account amounting to Rs..3948.46 millions (Rs..4138.30 million) for the years 1999-00 to 2005-06 have been shown as contingent reserve to meet the contingency that may arise out of disallowances of claim of benefit u/s 80IA of Income Tax Act,1961.

b) Income Tax receivable include appeal effect of Rs..1015.43 millions pertaining to assessment year 2000- 01 which is pending for settlement by the Income Tax Department. This include Tax amount of Rs. 603.03 millions and interest accrued thereon amounting to Rs. 412.4 millions ( including Rs. 101.86 millions for the year). Efforts are being made to recover the same at the earliest.

c)In accordance with Accounting Standard 22, accounting for taxes on Income, the company has deferred tax assets amounting to Rs..25850.97 million (Rs..15932.20 million) including Rs..4483.76 (Rs..3251.23) million on account of unabsorbed depreciation and Rs..21367.21 million (Rs. 12680.97 million) brought forward business losses as on 31.3.2012. However, in the current Telecom Industry Scenario, there is no virtual certainty of availability of sufficient future taxable income against which the above asset can be realized. Hence, the Deferred Tax asset has not been accounted for. DTA amounting to Rs25849.66 million shall be created in the year in which the company will have virtual certainty of future taxable income as required by AS-22 issued by ICAI.

7. a) Provision for taxation for the current year comprises of Income Tax of Rs. Nil Millions, Wealth Tax of Rs..2.37 Millions.

b) During the year, the company has suffered a business loss of Rs. 41097.84 millions. The company intends to carry forward its business loss including unabsorbed depreciation/amortization to the tune of Rs..35538.41 million as per calculation made under Income Tax 1961.

8. (a) The supplemental agreement entered into between United India Periodicals Pvt. Ltd. / United Data Base (India) Pvt. Ltd/ Sterling Computers Ltd and the company for printing of telephone directories was struck down by the Hon'ble High Court of Delhi on 30.9.92 and the said decision was upheld by the Hon'ble Supreme Court of India on 12.1.93. A claim against the Company has been raised by Sterling Computers Ltd. for Rs. 258.2 Millions which being under dispute, has not been provided for. The company has filed its counter claims of Rs. 228.7 Millions before the Hon'ble High Court against Sterling/ UDI/UIP and has also filed arbitration claims of Rs. 561.8 Millions plus interest @ 21% per annum against these parties under the original agreement. Pending finalisation of this dispute, the company has raised and recorded as 'Claims Recoverable', a claim for Rs. 154.91 Millions (Rs. 154.91 Millions) on account of royalty, interest and billing charges and on payments made through Letter of Credit;Rs..130.47 Millions (Rs..130.47 Millions) recovered there against by the company from subscribers for the issue of directories, is carried under 'Current Liabilities'. Further claims of the Nigam for interest and service charges aggregating Rs..143.67 Millions (Rs..143.67 Millions) have not been accounted for. Financial implication of the claim raised against the company, adjustment of the sums received against outstanding claims, any non-realisation of claim and further claims recoverable shall be effected upon determination based on the outcome of the proceedings in the court of law.

MTNL has filed OMP No.151/1996 seeking enlargement of time under Section 28 of the Arbitration Act for the Arbitrator to publish the award. The case is still pending and will be listed along with OMP No.135/94 for final hearing. The petitioner M/s United India Periodical (Ltd.) filed OMP No.135/94 in the High Court of Delhi challenging the appointment of Arbitrator under Section 33 of the Arbitration Act 1940. The Petition is pending from 24.10.1994 in the High Court of Delhi. Now the petitioner has filed an application for amendment in the petition filed in the year 1994 with the prayer that the arbitration clause 20 of the original contract dated 14.3.1987 be determined by the Hon'ble Court of the subsequent events. During the financial year 2011-12, the Hon'ble High Court pass an order on 7.12.2011directing to stop arbitration proceedings against M/s Sterling regarding the arbitration case of M/s UIP also and it is informed by learned arbitrator that this proceeding stand still in the SLP filed by UIP. However, MTNL is not received the certified copy of the order. On receipt of the same MTNL will file further to the court. The petitioner has also took plea of res-judicata as the MTNL filed the Suit No.4628 of 1994 in Mumbai and the same is pending before the Bombay High Court. The case is now listed in the category of final matter and is on regular board of the Court for the both the aforesaid OMP's.

The suit filed by MTNL against M/s Sterling Computers and others is pending in the High Court of Mumbai in which claims to the tune of Rs..228.7 millions towards Royalty, Interest on Royalty amount upto 31.8.1994, amount paid against LC, Interest on amount of LC, L/D for non-performance and other charges etc. for Delhi and Mumbai both units. This suit is filed after non-performance of supplementary agreement dated 19.7.1991 & 26.9.1991 by M/s Sterling Computers Ltd. The case is still pending at Mumbai High Court.

(b) MTNL entered into contracts with M/s M & N Publications Limited for printing, publishing and supply of telephone directories for Delhi and Mumbai units for a period of 5 years starting from 1993. In view of the breaches of the terms and conditions of the contracts committed by the contractor in publishing first issue of the directories of both units and their failure to execute the remaining part of the contracts, both the contracts were terminated by MTNL on 22.07.1996. Income from royalty and other applicable recoveries, for first issue published by contractor,Rs. 181.2 Millions have been accounted for and received. As regards Delhi Unit, MTNL has claimed to the extent of Rs..2110 millions (approx.) plus interest thereon at various rates while M/s M&N Publications have counter claim of Rs..2860 millions (approx.) plus interest thereon. Sole Arbitrator has been appointed by both the parties. The effect of claims under the contract for remaining issues published by contractor will be accounted for in the year of issuing of award by the Sole Arbitrator.

9. Certain Lands and Buildings capitalized in the books, are pending registration/legal vesting in the name of the company and the landed properties acquired from DOT have not been transferred in the name of the company and in the case of leasehold lands, the documentation is still pending. Stamp Duty and the lands and buildings acquired from DOT is payable by DOT as per sale deed and in respect of properties acquired after 1.4.1986, the documentation shall be contemplated at the time of sale or disposal when and if needed.

10. The Mumbai Unit had applied for amnesty under the Maharashtra Kar Nivaran Yojana, 1999 in respect of the Sales Tax demands of Rs. 8.10 Millions (Rs. 8.10 Millions). The application for amnesty towards demands aggregating Rs..2.09 Millions (Rs..2.09 Millions) has been accepted. The balance applications relating to demands of Rs..6.02 Millions (Rs..6.02 Millions) are under process and are not included under Contingent Liabilities.

11. The amount recoverable from BSNL is Rs..30679.67 Millions (Rs..24365.92 Millions) and amount payable is Rs..15205.76 Millions (Rs..12062.01 Millions). The Net recoverable of Rs..15473.91 Millions (Rs..12303.91 Millions) is subject to reconciliation and confirmation. In the absence of agreement with BSNL the sharing is on the basis of 70:30 ratio.

a) Certain claims of BSNL on account of Signaling charges Rs..219.30 millions, Transit tariff Rs..251.90 millions, MP Billing Rs..60.10 millions, Service Connections Rs..401.48, IUC Rs..101.40 millions and IUC from Gujrat Circle Rs..11.14 millions are being reviewed. Pending settlement of similar other claims from BSNL, no provision is considered necessary.

b) Delhi Unit has accounted for the expenditure on account of telephone bills of service connections raised by BSNL towards MTNL for the period from 01.10.2000 to 30.09.2006 to the tune of Rs. 98.01 millions on the basis of actual reimbursement made for subsequent periods against the disputed claim of Rs..312.72 millions, since no details / justifications are received from BSNL in spite of repeated persuasion till date. The balance amount of Rs. 214.72 millions is shown as contingent liability.

c) In both Delhi and Mumbai Unit an amount of Rs. 3375.84 (3335.88 m) and Rs..2750.38 (2625.19 m) has been accounted as receivable and payable from BSNL respectively on account of IUC charges which is included in the recoverable & payable amounts as shown above.

d) During the year in Delhi Unit an amount of Rs..104.69 millions (Rs..142.60 million) including service tax towards interconnect charges on rate prescribed by TRAI in IUC regulation in the absence of any interconnect agreement between MTNL & BSNL. BSNL is also charging the same and the claim raised by both parties are under dispute. Direct connectivity traffic expenditure with BSNL has been booked on the basis of billing system of Delhi Unit.

e) During the year an amount of Rs..868.65 millions (Rs. 586.65 m) have been accounted for as Infrastructure Usage charges receivable from BSNL for using the various office building and spaces of MTNL.

f) During the year an amount of Rs..190.58 million (Rs..184.91 million) has been accounted as receivable from BSNL on account of Property Tax, Electricity, water and fuel charges by both Delhi and Mumbai Units.

12. As per directions of the court one UASL operator has deposited Rs..1249.30 million and Rs..339.90 million in 2004-05 and 2005-06 respectively against the claim of Rs..1589.20 million. The company has recognized the amount realized as revenue in the respective period. The UASL operator has filed an application in the Hon. TDSAT in which case TDSAT delivered a judgment on 2.8.2011 wherein the petitioner has been permitted to file 6 CDRs giving the complete call record and MTNL respondent are allowed to file their reply thereafter for further review by TDSAT.

13. The company had subscribed to 8.75% Cumulative Preference Shares of M/s. ITI Limited, amounting to Rs..1000 Millions during the year 2001-02. As per the terms of allotment, the above Preference Shares were proposed to be redeemed in 5 equal installments. Accordingly, five installments amounting to Rs..200 Millions each, aggregating to Rs..1000 Millions have become redeemable, which have not been redeemed by ITI Limited. As per letter No.U-59011-10/2002-FAC dated 31.07.2009 issued by DOT, the repayment schedule of the above cumulative Preference Shares was deferred to 2012-13 onwards in five equal installments. Moreover, no dividend income has been booked in the accounts for the same, as ITI Limited has not declared any dividend.

14. Amount recoverable on current account from DOT is Rs..34328.25Millions (Rs. 33207.87 Millions) and amount payable is Rs..516.44 Millions (Rs..528.11 Millions). The net recoverable of Rs..33811.81 Millions (Rs..32679.76 Millions) is subject to reconciliation and confirmation.

a) Deposits from applicants and subscribers as on 31st March, 1986 wereRs. 1503.59 million (Rs..1503.59 million) as intimated provisionally by DOT. Corresponding assets shown under claims recoverable are being reduced by the amount of recovery of rebate on rental and by the amount of recovery of application deposit for which connections have been released to subscribers w.e.f. 1.4.1986. Balance still recoverable from DOT on this account is Rs..558.45 million (Rs..558.45 million).

b) The balance in the Subscribers' Deposit Accounts is to the tune of Rs..6588.81 million (Rs..7206.33 million). Out of this the balance pertaining to Mumbai unit of Rs. 3211.94 millions (3756.61millions) has been reconciled during the year with the relevant subsidiary record maintained under CSMS package. Pending management decision, a total excess credit amount of Rs.,1341.92 million in General Ledger than CSMS package on account of reconciliation is being kept as long term provision as at 31st March, 2012. In Delhi Unit an amount of Rs. 3133.56 Millions (Rs3368.55Millions) on account of subscriber deposits is under reconciliation and overall Interest Accrued and Due thereon for both the units of Rs..23.97 Millions (Rs..22.25 Millions) is subject to reconciliation with the relevant subsidiary records. The unlinked receipt is of the tune of Rs..412.60 millions of both the units.

c) The aggregate balance of sundry debtors as per the subsidiary records is higher by Rs..94.70 millions (Rs.-17.69 millions) as compared to the balance in general ledger and under reconciliation. The resultant impact of the above on the account is not ascertainable.

d) In Delhi unit, in circuits, provision of Debtors including spill over has been made amounting to Rs..1014.53 millions (Rs..803.23 m) against the total debtors excluding service tax amounting to Rs..1321.61 million (Rs..1307.61 m) on the basis of financial books.

15. License Fees is calculated on the AGR accounted for on accrual basis in respect of both revenue and revenue sharing with all other operators. As regards the directions of Supreme Court in respect of calculation of License Fees and AGR the matter has been referred back to TDSAT and is pending.

However, MTNL is not a party to the dispute and the AGR is calculated as per License Agreement. In respect of revenue sharing with BSNL the issue is taken up with DOT. The impact of Rs.1403.63 Million on this account has been shown as contingent liability.

16. a) Out of total provision of Gratuity of Rs. 13790.64 Millions up to 31.3.2012 (Rs. 12107.42 Millions), an amount of Rs. 1943.73 Millions(Rs. 1943.73 Millions) and Rs. 665.40 Millions (Rs. 665.40 Millions) is recoverable from DOT, in respect of Group C & D and Group B employees respectively, for the period prior to their absorption. As on 31.03.2012 Rs.10386.13 Millions is available with the Gratuity Trust.

b)The total provision of Leave Encashment is Rs. 7370.75 Millions up to 31.3.2012 (Rs. 6943.12 Millions). Out of this, an amount of Rs. 433.74 Millions (Rs. 433.74 Millions ) and Rs. 653.68 Millions (Rs. 653.68 Millions ) is recoverable, from DOT in respect of Group B and Group C & D employees respectively for the period prior to their absorption in MTNL.

c)An amount of Rs. 13541.11 Millions (Rs. 12780.66 Millions) towards GPF contribution is recoverable from DOT as on 31.3.2012. The amount pertains to Group C& D and Group B employees absorbed in MTNL w.e.f. 01.11.98 and 01.10.2000 respectively.

d)The total provision of Pension is Rs. 78991.46 Millions (Rs. 66560.93 Millions) upto 31.3.2012. Out of this an amount of Rs. 7546.2 Millions (Rs. 7546.2 Millions ) and Rs. 2201.02 Millions (Rs. 2201.02 Millions) is recoverable from DOT in respect of Group C&D and Group B employees for the period prior to their absorption.

e)The DOT has given commitment vide GOI Ministry of Communication & IT Deptt. Of Telecom vide letter No. 40-29/2002-Pen(T) dated 29th August, 2002 that it has been agreed in principle that the payment of pensionary benefits including the family pension to the government employees absorbed in MTNL and who have opted for government scheme of pension shall be paid by the government. The exact modalities in this regard are being worked out by Deptt. Of Pension and Pensioners welfare. Pending decisions on the modalities of liabilities payable to DOT towards pension contribution on MTNL, so as to have a prudent method, on conservative basis, MTNL has adopted the method of valuation as per AS-15 (Revised) through actuarial valuation for defined benefit plan of Central Govt. Pension Scheme and the provision is kept separately in the books. The necessary adjustments will be made in the books on finalization of modalities.

17. The diminutions in value of investments in Subsidiaries & Joint Ventures are considered as temporary in view of making of profit by the Joint Ventures and one subsidiary and accumulated losses earlier and nominal loss in other subsidiary, hence no provision is made.

18. The amount of receivables and payables (including NLD / ILD Roaming operators) is subject to confirmation and reconciliation. Pending such confirmation/ reconciliation, the impact on the account is not ascertainable at this stage.

19. In respect of Delhi Unit, Certain claims in respect of damaged/lost fixed assets and inventory has been lodged with Insurance Companies and accordingly gross block, accumulated depreciation and value of inventory have been withdrawn in the respective years pending settlement of the claim. The claims are still pending with insurance company. The final adjustment in respect of difference between amount claimed and assets withdrawn will be made in the year of settlement of claim.

20. In both units, Delhi Unit & Mumbai Unit, CDMA exchanges of 100K & 50K have been decommissioned during financial year 2008-09 by the management. The liability on this project amounting to Rs..736.20 millions (includes 13973820 US dollars) lying in the books for more than three years and not paid to vendor due to issue arising out of contract agreement, is not written back in view of pending arbitration case filed by vendor.

21. There is no agreement between the Company and DOT for interest recoverable/Payable on current account. Accordingly, no provision has been made for interest payable/receivable on balances during the year except charging of interest on GPF claims receivable from DOT.

22. Vacant Land and Guest Houses are valued at original value for the purpose of wealth tax provisions.

23. In case of Delhi Unit a sum of Rs..91.25 millions (Rs..131.25 millions) accounted for as income in financial year 2007-08 being ADCC recoverable from Project Development Company (PDC) towards development of Core knowledge park at Noida is still to be recovered and interest there on for the current period is not accounted for as the issue of funding of the project by MTNL is raised by the PDC and pending decision by corporate management and also as there is no explicit agreement for interest as such no interest income has been accounted for.

24. In respect of Mobile Services Delhi, A sum of Rs. 258.94 Million (Previous year Rs. 243.55 Million) claimed by TCL for ILD charges for the period Oct-09 to March-10 has not been paid due to heavy spurt in ILD traffic towards M/S TCL. On technical analysis it was found that these calls were made to some dubious and tiny destination. These destinations do not confirm to international numbering plan of the respective countries and are not approved destinations as per approved interconnect agreement. Further these calls have not got physically terminated to the destinations. The observations were shared with M/S TCL. M/S TCL has also been advised that the balance which relates to fraudulent calls is not payable and accordingly no provision has been made in the books of accounts. However the units have shown the above as contingent liability. The matter has been handed over to committee for investigation.

The fire accident claim in respect of data centre at CGO Complex Delhi is already lodged with Insurance Company and is pending for settlement for full claim and the insurance company's contentions are under challenge with IRDA.

25 Disclosures pursuant to Para 5(viii) of General Instructions for preparation of Statement of Profit & Loss Account under Revised Schedule VI of Companies Act, 1956.

(a) Value of Imports calculated on C.I.F. basis

(i) Raw Material - Nil

(ii) Components and Spare Parts -Nil

(iii) Capital Goods -Nil

(b) Expenditure in Foreign Currency

(i) Professional & Consultancy Fees =Rs. 7.51 million (ii) Travel =Rs. 1.20 million

(iii) Others =Rs..27.60 million

(c) Earning in Foreign Exchange =Rs..57.90 million

(d)Consumption of stores is included under the normal heads of Capital Expenditure and/or Repairs & Maintenance, and the issue of imported and indigenous items are not separately priced/ identified.

26. There is no reported Micro, Small and Medium enterprise as defined in the Micro,Small and Medium enterprise development Act, 2006, to whom the company owes dues. No interest has been paid during the year on account of delayed payments as required under the MSMED Act, 2006.

27. Employee Benefits -AS-15(R)

I. During the year, the Company has recognized the following amounts in the Profit and loss Account.

28. During the year, the Company has made an Insurance Policy for medical benefits in respect of its retired employees. The Insurance Policy is fully funded by the Company. This is in compliance with AS-15(Revised).

1. Segment Revenue, Segment Result, Segment Asset and Segment Liabilities include the respective amount identifiable to each of the segments. The expenses, which are not directly relatable to the business segment, are shown as unallocable corporate assets and liabilities respectively.

29. During the year no provision has been made for any loss on account of impairment of assets under Accounting Standard 28 as there is no indication of any impairment of assets of the Company.

30. Consolidated Financial Statements - AS-21 & AS-27

The financial statements of Millennium Telecom Limited & Mahanagar Telephone Mauritius Limited (wholly owned subsidiaries of the Company) and United Telecom Limited & MTNL STPI IT Service Limited (Joint Ventures) have been consolidated in accordance with the Accounting Standard - 21 and Accounting Standard - 27 respectively.

31. Based on expert opinion, the company has not been deducting tax deducted at source for IUC services rendered from BSNL. Besides liability provided on account of pension contribution expenditure on the basis of actuarial valuation is considered as on allowable expenditure based on expert opinion.

32. Previous year figures have been regrouped / recast to confirm to current year's presentation. Amounts in brackets represent the previous year's figures.


Mar 31, 2011

2010-11 2009-10

(Rs. in Million) (Rs. in Million)

1. Contingent Liabilities

(a) Income Tax

Demands disputed and under appeal 9774.02 12161.97

(b) Sales Tax, Service Tax, Excise duty, Municipal Tax Demands Disputed and under Appeal 4906.00 9429.22

(c) Disputed Demand under Lease Act 37.39 -

(d) i Interest to DDA on delayed Amount Amount

payments/pending court Indeterminate Indeterminate

cases/Tax cases

ii Stamp duty payable on land and Amount Amount

buildings acquired by the company Presently Presently

Unascertainable Unascertainable

(e) Claims against the company not

acknowledged as Debts 10003.92 10372.83

(f) Bank guarantee & Letter of Credit 951.15 950.89

(g) Directory dispute 2858.34 2858.34

(h) Interest demanded by'DOT and disputed by company on account of delay in payment of Leave Salary and Pension Contribution 1738.10 1738.10

(i) Pending court cases against land Indeterminate Indeterminate acquisition

2. Estimated amount of contracts remaining to be executed on capital account in respect of Purchase order/sanctioned estimate is Rs.4467.43 Millions (Previous year Rs. 9515.40 millions). The above figure has been arrived at on the basis of capital sanction instead of Purchase Order issued. In respect of contracts where the expenditure already incurred has exceeded the contract value and the contract remains incomplete, the additional expenditure required to complete the same cannot be quantified.

3. Other liabilities include credits on account of receipts including service tax from subscribers amounting to Rs.417.45 Million (Rs.385.21 Million), which could not be matched with corresponding debtors or identified as liability, as the case may be. Appropriate adjustments/ payments shall be made inclusive of service tax, when these credits are matched or reconciled.Therefore, it could not be adjusted against making provision for doubtful debts.

4. a) The company had claimed benefit under section 80 - IA of the Income Tax Act, 1961 for the financial year from 1996-97 to 2005-06. The appellate authorities have allowed the claim to the extent of 75% of the amount claimed. The company has preferred appeals for the remaining claim before the Hon'ble Court of Delhi. The company has retained the provision of Rs.4003.32 million for this claim for the years 1997-98,1998- 99 and 1999-2000, however, the demands on this account amounting to Rs.4138.30 million for the years 1999-00 to 2005-06 have been shown as contingent reserve. / 'peal effect for the same has been received during this year except 2004-05. However, on reconciliation certain discrepancies are noticed. Rectification application has been filed for Rs.4979.36 million.

b) A Contingency Reserve of Rs.4138.30 million was created from the Profit & Loss Appropriation Account to meet the contingency that may arise out of disallowances of claim of benefit u/s 80IA of Income Tax Act,1961 .The contingency reserve so created excludes an amount of Rs.4003.31 million for which the provision was created from the years 1996-97 to 2000-01 and the same is still maintained in the books of accounts after considering the benefit as allowed by ITAT in the current year.

c) In accordance with Accounting Standard 22, accounting for taxes on Income, the company has deferred tax assets amounting to Rs. 15932.20 million (Rs. 10571.36 million) including Rs.3251.23 million (Rs.2269.51 million) on account of unabsorbed depreciation and Rs.12680.97 million (Rs.4081.13 million) brought forward business losses as on 31.3.2011. However, in the current Telecom Industry Scenario, there is no virtual certainty of availability of sufficient future taxable income against which the above asset can be realized. Hence, the Deferred Tax asset has not been accounted for. DTA amounting to Rs. 15932.20 million shall be created in the year in which the company will have virtual certainty of future taxable income as required by AS-22 issued by ICAI.

d) Based on expert opinion, the company has not been deducting tax deducted at source for IUC services rendered from BSNL. Besides liability provided on account of pension contribution expenditure on the basis of actuarial valuation is considered as an allowable expenditure based on expert opinion.

5. a) Provision for taxation for the current year comprises of Income Tax of Rs. Nil Million, Wealth.Tax of Rs.i .91 Million.

b) During the year, the company has suffered a business loss of Rs. 28019.15 million. The company intends to carry forward its business loss including unabsorbed depreciation/amortization* to the tune of Rs. 22170.49 million as per calculation made under Income Tax 1961.

6. (a) The supplemental agreement entered into between United India Periodicals Pvt. Ltd. / United Data Base (India) Pvt. Ltd/ Sterling Computers Ltd and the company for printing of telephone directories was struck down by the Hon'ble High Court of Delhi on 30.9.92 and the said decision was upheld by the Hon'ble Supreme Court of India on 12.1.93. A claim against the Company has been raised by Sterling Computers Ltd. for Rs. 258.2 Million which being under dispute, has not been provided for. The company has filed its counter claims of Rs. 228.7 Million before the Hon'ble High Court against Sterling/UDI/UIP and has also filed arbitration claims of Rs. 561.8 Million plus interest @ 21% per annum against these parties under the original agreement. Pending finalisation of this dispute, the company has raised and recorded as 'Claims Recoverable', a claim for Rs. 154.91 Million (Rs. 154.91 Million) on account of royalty, interest and billing charges and on payments made through Letter of Credit; Rs. 130.47 Million (Rs.130.47 Million) recovered there against by the company from subscribers for the issue of directories, is carried under 'Current Liabilities'. Further claims of the Nigam for interest and service charges aggregating Rs. 143.67 Million (Rs. 143.67 Million) have not been accounted for. Financial implication of the claim raised against the company, adjustment of the sums received against outstanding claims, any non- realisation of claim and further claims recoverable shall be effected upon determination based on the outcome of the proceedings in the court of law.

MTNL has filed OMP No.151/1996 seeking enlargement of time under Section 28 of the Arbitration Act for the Arbitrator to publish the award. The case' is still pending and will be listed along with OMP No. 135/94 for final hearing. The petitioner M/s United India Periodical (Ltd.) filed OMP No. 135/94 in the High Court of Delhi challenging the appointment of Arbitrator under Section 33 of the Arbitration Act '1940. The Petition is pending from 24.10.1994 in the High Court of Delhi. Now the petitioner has filed an application for amendment in the petition filed in the year 1994 with the prayer that the arbitration clause 20 of the original contract dated 14.3.1987 be determined by the Hon'ble Court of the subsequent events. The petitioner has also took plea of res- judicata as the MTNL filed the Suit No.4628 of 1994 in Mumbai and the same is pending before the Bombay High Court. The case is now listed in the category of finaf matter and is on regular board of the Court for the both the aforesaid OMP's.

The suit filed by MTNL against M/s Sterling Computers and others is pending in the High Court of Mumbai in which claims to the tune of Rs.228.7 million towards Royalty, Interest on Royalty amount upto 31.8.1994, amount paid against LC, Interest on amount of LC, L/D for non-performance and other charges etc. for Delhi and Mumbai both units. This suit is filed after non-performance of supplementary agreement dated 19.7.1991 & 26.9.1991 by M/s Sterling Computers Ltd. The case is still pending at Mumbai High Court.

(b) MTNL entered into contracts with M/s M & N Publications Limited for printing, publishing and supply of telephone directories for Delhi and Mumbai units for a period of 5 years starting from 1993. In view of the breaches of the terms and conditions of the contracts committed by the contractor in publishing first issue of the directories of both units and their failure to execute the remaining part of the contracts, both the contracts were terminated by MTNL on 22.07.1996. Income from royalty and other applicable recoveries, for first issue published by contractor, Rs. 181.2 Millions have been accounted for and received. As regards Delhi Unit, MTNL has claimed to the extent of Rs.2110 million (approx.) plus interest thereon at various rates while M/s M&N Publications have counter claim of Rs.2860 million (approx.) plus interest thereon. Sole Arbitrator has been appointed by both the parties. The effect of claims under the contract for remaining issues published by contractor will be accounted for in the year of issuing of award by the Sole Arbitrator.

7. Certain Lands and Buildings capitalized in the books, are pending registration/legal vesting in the name of the company and the landed properties acquired from DOT have not been transferred in the name of the company and in the case of leasehold lands, the documentation is still pending. In case of Mumbai Unit legal vesting of land and building of the value of Rs. 31.42 Million acquired after 1 st April, 1986 is under process.

8. The Mumbai Unit had applied for amnesty under the Maharashtra Kar Nivaran Yojana, 1999 in respect of the Sales Tax demands of Rs 8.10 Million (Rs. 8.10 Million). The application for amnesty towards demands aggregating Rs.2.09 Million (Rs.2.09 Million) has been accepted.The balance applications relating to demands of Rs.6.02 Million (Rs.6.02 Million) are under process and are not included under Contingent Liabilities.

9. a) Delhi Unit has accounted for the expenditure on account of telephone bills of service connections raised by BSNL towards MTNL for the period from 01.10.2000 to 30.09.2006 to the tune of Rs. 98.01 million on the basis of actual reimbursement made for subsequent periods against the disputed claim of Rs.312.72 million, since no details / justifications are received from BSNL in spite of repeated persuasion till date. The balance amount of Rs. 214.72 million is shown as contingent liability.

b) No Trunk Automatic Exchange (TAX) charges has been billed to BSNL for usage of MTNL TAX vide letter No.MTNL/CO/TR/BSNL/2009-11/81 dated 11.05.2011. (Previous year Rs.700.83 Million).

c) In both Delhi and Mumbai Unit an amount of Rs.3335.88 million(Rs.3336.21 million) and Rs.2625.19 million (Rs.2616.20 million) has been accounted as receivable and payable from BSNL respectively on account of IUC charges.

d) During the year an amount of Rs.586.65 million (Rs. 403.17 million) have been accounted for as Infrastructure Usage charges receivable from BSNL for using the various office building and spaces of MTNL and Rs.33.27 million (Rs'12.62 million) vice-versa.

e) During the year an amount of Rs. 184.91 million (Rs.86.12 million) has been accounted as receivable from BSNL on account of Property Tax, Electricity, water and fuel charges by both Delhi and Mumbai Units.

10. As per directions of the court one UASL operator has deposited Rs.3412.74 million against the claim of the same amount. The company has recognized revenue of Rs.2367.90 million in the year 2004-05 and Rs. 1044.84 million in the year 2005-06. The petition filed by UASL Operator before Hon'ble High Court, Delhi is dismissed as withdrawn with a liberty to the UASL operator to take steps in accordance with the Law. The matter is presently pending with the Hon'ble Court/TDSAT

11. The company had subscribed to 8.75% Cumulative Preference Shares of M/s. ITI Limited, amounting to Rs.1000 Million during the year 2001-02. As per the terms of allotment, the above Preference Shares were proposed to be redeemed in 5 equal installments. Accordingly, five installments amounting to Rs.200 Million each, aggregating to Rs.1000 Million have become redeemable, which have not been redeemed by ITI Limited. As per letter No.U-59011 -10/2002-FAC dated 31.07.2009 issued by DOT, the repayment schedule of the above cumulative Preference Shares was deferred to 2012-13 onwards in five equal instalments/Moreover, no dividend income has been booked in the accounts for the same, as ITI Limited has not declared any dividend.

12. In respept of Mumbai Unit, the bank reconciliation statements as at 31st March, 2011 include unmatched/ unlinked credits/ debits given by the banks in the Mumbai Unit's bank accounts amounting to Rs.78.03 million (Rs.56.09 million) and Rs. 71.36 million (Rs.69.16 million) respectively, which could not be properly accounted for in the absence of adequate particulars. *

13. In respect of Mumbai MS Unit, sundry debtors as per billing system is Rs.681.73 million (excluding service tax) (Rs 697.78 million). Sundry Debtors as per WFMS is Rs.753.~55 million (excluding service tax) ( Rs.715.47 million). Difference is frozen to Rs 71.82 million (Rs 17.70 million). Out of total sundry debtors of Rs.753.55 million (Rs 715.47 million), an amount of Rs.81.09 million (Rs 84.17 million) is secured against the deposit available as *on 31.03.2011.

14. a) Deposits from applicants and subscribers as on 31st March 1986 were Rs. 1503.59 Million as intimated provisionally by DOT. Corresponding assets showr under claims recoverable are being reduced by the amount of recovery of rebate on rental and by the amount of recovery of application deposit for which connections have been released to subscribers with effect from 1.4.1986. Balance still recoverable from DOT on this account is Rs. 558.45 Million.

b) The balance in the Subscribers' Deposit Accounts of Rs. 7206.33 Million (Rs. 7386.71 Million) and Interest Accrued and Due thereon of Rs.22.25 Million (Rs. 25.51 Million) is subject to reconciliation with the relevant subsidiary records.

c) The aggregate balance of sundry debtors as per the subsidiary records is short by Rs.17.69million (Rs.57.55 million) as compared to the balance in general ledger and under reconciliation. The resultant impact of the above on the account is not ascertainable.

d) In circuits provision of Debtors has been made on the basis of financial books which includes provision of spill over Debtors of Rs. 133.74 million including of earlier year of Rs.90.08 million.

15. a) Amount recoverable on current account from DOT is Rs.33207.87 Million (Rs. 32330.54 Million) and amount payable is Rs.528.11 Million (Rs.112265.01 Million). The net recoverable of Rs.32679.76 Million (Rs.(-) 79934.47 Million) is subject to reconciliation and confirmation.

b) The amount recoverablelrom BSNL is Rs.24365.92 Million (Rs.20318.25 Million) and amount payable is Rs. 12062.01 Million (Rs.4517.21 Million). The Net recoverable of Rs,12303.91 Million (Rs.15801.04 Million) is subject to reconciliation and confirmation.

16. Certain claims of BSNL on account of Signaling charges Rs.219.30 million, Transit tariff Rs.251.90 million, MP Billing Rs.60.10 million, Service Connections Rs.401.48 million, IUC Rs.101,40 million and IUC from Gujrat Circle Rs.11.14 million are being reviewed. Pending settlement of similar other claims from BSNL, no provision is considered necessary.

17. a) License Fees is calculated on the AGR accounted for on accrual basis in respect of both revenue and revenue sharing with other operators. Pending judgment from Supreme Court on appeal by DOT against TDSAT judgment, the claim of refund of License Fees on other income is not accounted for and shall be made in the year of supreme court judgment.

b) Liquidated damages recovered from M/s ITI Limited and convergent billing cases are accounted for in other income as per terms of agreement.

c) (i) In respect of Delhi Unit there is a difference of Rs.62.88 million in the cenvat credit receivable in books as compared to statutory balance for want of necessary detail from certain areas. The impact, if any, on the loss for the year cannot be ascertained at this stage.

(ii) S. Tax on Income/expenditure in respect,of transaction with BSNL has been accounted on accrual basis in financial books without corresponding entries in the cenvat records which are being done on actual settlement.

18 a) Out of total provision of Gratuity of Rs. 12107.42 Million up to 31.3.2011 (Rs. 10444.63 Million), an amount of Rs. 1943.73 Million and Rs. 665.40 Million is recoverable from DOT, in respect of Group C & D and Group B employees respectively, for the period prior to their absorption. As on 31.03.2011 Rs.8578.84 Million is available with the Gratuity Trust.

b) The total provision of Leave Encashment is Rs. 6943.12 Million up to 31.3.2011 (Rs. 5573.00 Million). Out of this, an amount of Rs. 433.74 Million and Rs. 653.68 Million is recoverable, from DOT in respect of Group B and Group C & D employees respectively for the period prior to their absorption in MTNL.

c) An amount of Rs. 12780.66 Million (Rs. 11793.88 Million) towards GPF contribution is recoverable from DOT as on 31.3.2011. The amount pertains to Group C& D and Group B employees absorbed in MTNL w.e.f. 01.11.98 and 01.10.2000, respectively.

d) The total provision of Pension is Rs. 66560.93 Million (Rs. 56972.43 Million) upto 31.3.2011. Out of this an amount of Rs. 7546.2 Million and Rs. 2201.02 Million is recoverable from DOT in respect of Group C&D and Group B employees for the period prior to their absorption.

e) The DOT has given commitment vide GOI Ministry of Communication & IT Deptt. Of Telecom vide letter No. 40-29/2002-Pen(T) dated 29th August, 2002 that it has been agreed in principal that the payment of pensionary benefits including the family pension to the government employees absorbed in MTNL and who have opted for government scheme of pension shall be paid by the government. The exact modalities in this regard are being worked out by Deptt. Of Pension and Pensioners welfare. Pending decisions on the modalities of liabilities payable to DOT towards pension contribution on MTNL, so as to have a prudent method, on conservative basis, MTNL has adopted the method of valuation as per AS-15 (Revised) through actuarial valuation for defined benefit plan of Central Govt. Pension Scheme and the provision is kept separately in the books under schedule 'M' as a basis of payment at any time to DOT on final decision of the issue. The above liability is subject to modalities to be finalized by DOT and may go upward/downward.The necessary adjustments will be made in the books on finalization.

19. The diminutions in value of investments in Subsidiaries & Joint Ventures are considered as temporary hence no provision is made.

20. The amount of receivables and payables (including NLD / ILD Roaming operators) is subject to confirmation and reconciliation. Pending such confirmation/ reconciliation, the impact on the account is not ascertainable at this stage.

21. In respect of Delhi Unit, Certain claims in respect of damaged/lost fixed assets and inventory has been lodged with Insurance Companies and accordingly gross block, accumulated depreciation and value of inventory have been withdrawn in the respective years pending settlement of the claim. The claims are still pending with insurance company. The final adjustment in respect of difference between amount claimed and assets withdrawn will be made in the year of settlement of claim.

22. In both units, Delhi Unit & Mumbai Unit, CDMA exchanges of 100K & 50K have been decommissioned during financial year 2008-09 by the management and necessary provision has been made for Rs. 1210.28 millions as loss of assets in accordance with accounting policy. The liability on this project amounting to Rs.925.98 millions (includes 13973820 US dollars) lying in the books for more than three years and not paid to vendor due to issue arising out of contract agreement, is not written back in view offending arbitration case filed by vendor.

23. There is no agreement between the Company and DOT for interest recoverable/Payable on current account. Accordingly, no provision has been made for interest payable/receivable on balances during the year except charging of interest on GPF claims receivable from DOT.

24. Vacant Land is valued at original value for the purpose of wealth tax provisions.

25. In case of Delhi Unit a sum of Rs.131.25 millions accounted for as income in financial year 2007-08 being ADCC recoverable from Project Development Company (PDC) towards development of Core knowledge park at Noida is still to be recovered and interest there on for the current period is not accounted for as the issue of funding of the project by MTNL is raised by the PDC and pending decision by corporate management and also as there is no explicit agreement for interest, no provision as such is made.

26. In respect of MTNL Delhi unit an amount of Rs.2850.00 million is accounted for by MTNL towards wet lease for infrastructure and other services provided by MTNL in respect of Commonwealth Games during the year out of which Rs.2420.00 million has been received during the year and Rs.430.00 million is subject to final settlement. Additional claim of Rs.410 million towards additional work executed, is not accounted for pending acceptance and final settlement.

27. (a) In respect of Mobile Services Delhi, A sum of Rs. 258.94 Million (Previous year Rs. 243.55 Million) payable to TCL for JLD charges for the period Oct-09 to March-10 has not been paid due to heavy spurt in ILD traffic towards M/S TCL. On technical analysis it was found that these calls were made to some dubious-and tiny destination. These destinations do not confirm to national numbering plan of the respective countries and are not approved destinations as per approved interconnect agreement. Further these calls have not got physically terminated to the destinations. The observations were shared with M/S TCL. M/S TCL has also been advised that the balance which relates to fraudulent calls is not payable and accordingly no provision has been made in the books of accounts. However the units have shown the above as contingent liability. The matter has been handed over to committee for investigation.

(b) A CBI inquiry is under way at Mumbai Mobile Unit for excess payment of franchise commission due to misinterpretation of circular regarding commission payment. The impact thereof is not ascertainable at this stage as the inquiry is still continuing.

28. In respect of accounting for billing of subscribers for Mobile services and collection made thereon, the GSM Mumbai unit has implemented computerized billing system and the financial entries for booking of income and debtors accounting have been incorporated in the books of accounts based on the output generated through computer system.

29. There is no reported Micro, Small and Medium enterprise as defined in the Micro.Small and Medium enterprise development Act, 2006, to whom the company owes dues. No interesthasbeen paid during the year on account of delayed payments as required under the MSMED Act, 2006.

30. Additional information required under Paragraphs 3(x)(a) and 4D(c) of Part II of Schedule VI to the Companies Act* 1956 is not ascertainable, since (i) consumption of stores is included under the normal heads of Capital Expenditure and/or Repairs & Maintenance, and (ii) the issue of imported and indigenous items are not separately priced/ identified.

V. Gratuity is payable to the employees on death or resignation or on retirement at the attainment of superannuation age. To provide for these eventualities we have use Mortality: 1994-96 LIC Ultimate table for mortality in service and LIC (1996-98) table for mortality in retirement.

VI. Mortality in service is assumed on the basis of LIC (1994-96). Ultimate and mortality in retirement is based on LIC(1996-98) table.

31. During the year, the Company has made an Insurance Policy for medical benefits in respect of its retired employees. The Insurance Policy is fully funded by the Company. This is in compliance with AS-15 (Revised).

32. Related Parties Disclosure under AS-18

a) List of Related Parties and Relationships

Party Relation

Department of Telecommunications Holding 56.25% shares of the Company

Millennium Telecom Limited Wholly owned Subsidiary

Mahanagar Telecom Mauritius Ltd. Wholly owned Subsidiary -

United Telecom Limited Joint Venture

MTNL STPI IT Services Ltd. Joint Venture

b) Key Management Personnel

Mr. Kuldip Singh Director (Tech.) & CMD

Mrs. Anita Soni Director (Finance)

Mr. S.P. Pachauri Director (HR)

Mr. A K Pathak Executive Director (Technical), CO

Mr. Manjit Singh Executive Director, Delhi

Mr. J Gopal (Part of the year) Executive Director, Mumbai

Mr. Peeyush Aggarwal (Part of the year) Executive Director, Mumbai

Mr. A K Bhargava (Part of the year) Executive Director, WS

33. Consolidated Financial Statements - AS - 21 & AS - 27

The financial statements of Millennium Telecom Limited & Mahanagar Telephone Mauritius Limited (wholly owned subsidiaries of the Company) and United Telecom Limited & MTNL STPI IT Service Limited (Joint Ventures) have been consolidated in accordance with the Accounting Standard - 21 and Accounting Standard - 27, respectively.

34. During the year no provision has been made for any loss on account of impairment of assets under Accounting Standard 28 as there is no indication of any impairment of assets of the Company.

35. Previous year figures have been regrouped / recast to confirm to current year's presentation. Amounts in brackets represent the previous year's figures.

36. Schedules "A" to "T" form an integral part of the Balance Sheet and the Profit and Loss Account.


Mar 31, 2010

2009-10 2008-09 (Rs. in Million) (Rs. in Million)

1. Contingent Liabilities

(a) Income Tax

Demands disputed and under appel 12161.97 10977.29

(b) Sales Tax, Service Tax, Excise duty, Municipal Tax Demands Disputed and 9429.22 1580.84 under Appeal

(c) Disputed Demand under Lease Act* -- 682.02

(d) i Interest to DDA on delayed Amount Amount payments/Pending Court Cases/ Indeterminate Indeterminate

Tax cases

ii Stamp duty payable on land and Amount Amount buildings acquired by the Company Presently Presently

Unascertainable Unascertainable

(e) Claims against the Company not acknowledged as Debts. 10372.83 6987.48

(f) Bank guarantee & Letter of Credit 950.89 941.88

(g) Directory dispute 2858.34 2858.34

(h) Interest demanded by DOT and disputed by company on account of delay in payment of Leave Salary and Pension Contribution 1738.10 1738.10

(i) Pending court cases against land acquisition Indeterminate Indeterminate

2. Estimated amount of contracts remaining to be executed on capital account in respect of Purchase order is Rs.9515.40 Millions (Previous year Rs. 4915.17 millions). In respect of contracts where the expenditure already incurred has exceeded the contract value and the contract remains incomplete, the additional expenditure required to complete the same cannot be quantified.

3. Other liabilities include credits on account of receipts including service tax from subscribers amounting to Rs.385.21 Millions (Rs.352.04 Millions), which could not be matched with corresponding debtors or identified as liability, as the case may be. Appropriate adjustments/ payments shall be made inclusive of service tax, when these credits are matched or reconciled. Therefore, it could not be adjusted against making provision for doubtful debts.

4. Change in Accounting Policy for the year 2009-10:

(i) Provision is made for disputed claims from subscribers pending more than 3 years excluding operators covered under the agreements related to IUC/Roaming/MOU. There is no impact on the accounts due to the change in the policy.

(ii) As per Revised AS-15, VRS expenditure deferred cannot be carried forward to accounting periods commencing on or after 1st April 2010. Hence Para 5 of the Accounting Policy of the last year in respect of Deferred Revenue Expenditure is deleted. Due to the change in the policy, an amount of Rs.340.31 Million has been additionally charged in the accounts. Accordingly the net losses include this amount and Misc. Expenditure in the Application of Funds in Balance Sheet is reduced to NIL due to this amount.

(iii) In respect of closed connection provision is made for outstanding for more than 3 years along with spill over amount less than 3 years. The impact on the accounts due to the change in the policy is under:- a. In basic service additional provision for Rs.18.11 Million has been made.

b. In circuits no provision is made as reconciliation is under process and as such impact on loss due to change is not ascertained.

(iv) Change in method of calculation of ISP license fee implemented for the financial year 2009-10 vide MTNL CO letter No. MTNL/RA/AGR/2009/Pt dated 29th March, 2010 is also extended for the previous years also. The same is approved in the ECM held on 12th June, 2010 and accordingly the license fees is reduced by Rs.105.53 millions. For the financial year 2009-10 the license fees is reduced by Rs.35.11 millions.

5. a) The company had claimed benefit under section 80 - IA of the Income Tax Act, 1961 for the financial year from 1996-97 to 2005-06. The provision of Income Tax for the financial year 1996-97 to 1998- 99 was made without considering the benefit u/s 80IA. For the F.Y. 1997-98 to 2001-02 and 2004- 05, the benefits under section 80IA of the Income Tax Act were allowed to the extent of 75% by ITAT.

b) A Contingency Reserve of Rs.6526.25 millions was created from the Profit & Loss Appropriation Account to meet the contingency that may arise out of disallowances of claim of benefit u/s 80IA of Income Tax Act,1961. The contingency reserve so created excludes an amount of Rs.4020.35 millions for which the provision was created from the years 1996-97 to 2000-01 and the same is still maintained in the books of accounts after considering the benefit as allowed by ITAT in the current year.

c) During the year an amount of Rs.2579.58 million has been written back from contingency reserve to Profit & Loss Appropriation Account on account of decrease in contingent reserve as a result of allowance of 75% of 80IA claim by ITAT.

d) In accordance with Accounting Standard 22, accounting for taxes on Income, the company has deferred tax assets amounting to Rs.10571.36 million including Rs.6350.64 million on account of unabsorbed depreciation and brought forward losses as on 31.3.2010 as against the deferred tax liability of Rs.3552.96 million as on 31.3.2009. However, in the current Telecom Industry Scenario, there is no virtual certainty of availability of sufficient future taxable income in the near future against which the above asset can be realized. Hence, the Deferred Tax asset has been accounted for only upto the extent of existing DTL Rs.3552.96 million. Balance amount of Rs.7018.40 millions for prospective DTA shall be created in the year in which the company will have virtual certainty of future taxable income as required by AS-22 issued by ICAI.

e) Based on expert opinion, the company has not been deducting tax deducted at source for IUC services rendered from BSNL. Besides liability provided on account of pension contribution expenditure on the basis of actuarial valuation is considered as an allowable expenditure based on expert opinion.

6. a) Provision for taxation for the current year comprises of Income Tax of Rs. Nil, Wealth Tax of Rs.1.82 Millions.

b) During the year Company received ITAT order for allowance of 75% of claims U/s 80IA against the claims of the company for the assessment year 1998-99 to 2002-03 and 2005-06. As a result of which refund of Rs 17676.5 million is expected from Income tax department. Out of this, Rs 7708.4 million are attributable towards interest income and accounted for in the current financial year pending appeal effects.

c) During the year, the company has suffered a business loss of Rs.26109.72 millions. The company intends to carry forward its business loss including unabsorbed depreciation/amortization to the tune of Rs.20945.49 million as per calculation made under Income Tax 1961.

7. (a) The supplemental agreement entered into between United India Periodicals Pvt. Ltd. / United Data Base (India) Pvt. Ltd/ Sterling Computers Ltd and the company for printing of telephone directories was struck down by the Honble High Court of Delhi on 30.9.92 and the said decision was upheld by the Honble Supreme Court of India on 12.1.93. A claim against the Company has been raised by Sterling Computers Ltd. for Rs. 258.2 Millions which being under dispute, has not been provided for. The company has filed its counter claims of Rs. 228.7 Millions before the Honble High Court against Sterling/ UDI/UIP and has also filed arbitration claims of Rs. 561.8 Millions plus interest @ 21% per annum against these parties under the original agreement. Pending finalization of this dispute, the company has raised and recorded as Claims Recoverable, a claim for Rs. 154.91 Millions (Rs. 154.91 Millions) on account of royalty, interest and billing charges and on payments made through Letter of Credit; Rs.130.47 Millions (Rs.130.47 Millions) recovered there against by the company from subscribers for the issue of directories, is carried under Current Liabilities. Further claims of the Nigam for interest and service charges aggregating Rs.143.67 Millions (Rs.143.67 Millions) have not been accounted for. Financial implication of the claim raised against the company, adjustment of the sums received against outstanding claims, any non-realization of claim and further claims recoverable shall be effected upon determination based on the outcome of the proceedings in the court of law.

MTNL has filed OMP No.151/1996 seeking enlargement of time under Section 28 of the Arbitration Act for the Arbitrator to publish the award. The case is still pending and will be listed along with OMP No.135/94 for final hearing. The petitioner M/s United India Periodical (Ltd.) filed OMP No.135/ 94 in the High Court of Delhi challenging the appointment of Arbitrator under Section 33 of the Arbitration Act 1940. The Petition is pending from 24.10.1994 in the High Court of Delhi. Now the petitioner has filed an application for amendment in the petition filed in the year 1994 with the prayer that the arbitration clause 20 of the original contract dated 14.3.1987 be determined by the Honble Court of the subsequent events. The petitioner has also took plea of res-judicata as the MTNL filed the Suit No.4628 of 1994 in Mumbai and the same is pending before the Bombay High Court. The case is now listed in the category of final matter and is on regular board of the Court for the both the aforesaid OMPs.

The suit filed by MTNL against M/s Sterling Computers and others is pending in the High Court of Mumbai in which claims to the tune of Rs.228.7 millions towards Royalty, Interest on Royalty amount upto 31.8.1994, amount paid against LC, Interest on amount of LC, L/D for non-performance and other charges etc. for Delhi and Mumbai both units. This suit is filed after non-performance of supplementary agreement dated 19.7.1991 & 26.9.1991 by M/s Sterling Computers Ltd. The case is still pending at Mumbai High Court.

(b) MTNL entered into contracts with M/s M & N Publications Limited for printing, publishing and supply of telephone directories for Delhi and Mumbai units for a period of 5 years starting from 1993. In view of the breaches of the terms and conditions of the contracts committed by the contractor in publishing first issue of the directories of both units and their failure to execute the remaining part of the contracts, both the contracts were terminated by MTNL on 22.07.1996. Income from royalty and other applicable recoveries, for first issue published by contractor, Rs. 181.2 Millions have been accounted for and received. As regards Delhi Unit, MTNL has claimed to the extent of Rs.2110 millions (approx.) plus interest thereon at various rates while M/s M&N Publications have counter claim of Rs.2860 millions (approx.) plus interest thereon. Sole Arbitrator has been appointed by both the parties. The effect of claims under the contract for remaining issues published by contractor will be accounted for in the year of issuing of award by the Sole Arbitrator.

8. Certain Lands and Buildings capitalized in the books, are pending registration/legal vesting in the name of the company and the landed properties acquired from DOT have not been transferred in the name of the company and in the case of leasehold lands, the documentation is still pending. In case of Mumbai Unit legal vesting of land and building of the value of Rs. 69.26 Millions acquired after 1st April, 1986 is under process.

9. The Mumbai Unit had applied for amnesty under the Maharashtra Kar Nivaran Yojana, 1999 in respect of the Sales Tax demands of Rs 8.10 Millions (Rs. 8.10 Millions). The application for amnesty towards demands aggregating Rs.2.09 Millions (Rs.2.09 Millions) has been accepted. The balance applications relating to demands of Rs.6.02 Millions (Rs.6.02 Millions) are under process and are not included under Contingent Liabilities.

10. a) Delhi Unit has accounted for the expenditure on account of telephone bills of service connections raised by BSNL towards MTNL for the period from 01.10.2000 to 30.09.2006 to the tune of Rs. 98.01 millions on the basis of actual reimbursement made for subsequent periods against the disputed claim of Rs.312.72 millions, since no details / justifications are received from BSNL in spite of repeated persuasion till date. The balance amount of Rs. 214.72 millions is shown as contingent liability.

b) During the year, the units have accounted for Rs.700.83 millions (Rs 1223.45 m) including service tax toward interconnect charges for usage of TAX for carriage of traffic on the rates prescribed by TRAI in IUC regulations in the absence of any inter connect agreement with MTNL and BSNL. BSNL is also charging the same and the claims raised by both parties are under reconciliation.

c) During the year an amount of Rs.403.17 millions (Rs. 2199.36 m) have been accounted for as Infrastructure Usage charges receivable from BSNL for using the various office building and spaces of MTNL and Rs.12.62 million (Rs 89.79 m) vice-versa.

d) In respect of Delhi Unit, claim receivables includes Rs.22.5 millions towards ADC charges receivable from certain operators accounted for on adhoc basis in the financial year 2007-08 and is subject to change on settlement/acceptance.

e) During the year an amount of Rs.86.12 millions (Rs. 364.18 m) has been accounted as receivable from BSNL on account of Property Tax, Electricity, water and fuel charges by both Delhi and Mumbai Units.

11. As per directions of the court one UASL operator has deposited Rs.3412.74 million against the claim of the same amount. The company has recognized revenue of Rs.2367.90 millions in the year 2004-05 and Rs.1044.84 millions in the year 2005-06. The petition filed by UASL Operator before Honble High Court, Delhi is dismissed as withdrawn with a liberty to the UASL operator to take steps in accordance with the Law. The matter is presently pending with the Honble Court.

12. The company had subscribed to 8.75% Cumulative Preference Shares of M/s. ITI Limited, amounting to Rs.1000 Millions during the year 2001-02. As per the terms of allotment, the above Preference Shares were proposed to be redeemed in 5 equal installments. Accordingly, five installments amounting to Rs.200 Millions each, aggregating to Rs.1000 Millions have become redeemable, which have not been redeemed by ITI Limited. As per letter No.U-59011-10/2002-FAC dated 31.07.2009 issued by DOT, the repayment schedule of the above cumulative Preference Shares was deferred to 2012-13 onwards in five equal installments. Moreover, no dividend income has been booked in the accounts for the same, as ITI Limited has not declared any dividend.

13. In respect of Mumbai Unit, the bank reconciliation statements as at 31st March, 2010 include unmatched/ unlinked credits/ debits given by the banks in the Mumbai Units bank accounts amounting to Rs.56.09 million (Rs.55.25 million) and Rs. 69.16 million.(Rs.63.23 million) respectively, which could not be properly accounted for in the absence of adequate particulars.

14. In respect of Mumbai MS Unit, sundry debtors as per billing system is Rs.697.78 millions (excluding service tax) (Rs 697.9 m). Sundry Debtors as per WFMS is RS.715.47 millions (excluding service tax) ( Rs 694.2 m). Difference is Rs 17.70 millions (Rs 3.7 m). Out of total sundry debtors of Rs.715.47 millions (Rs 694.2 m), an amount of Rs.84.17 millions (Rs 92.8 m) is secured against the deposit available as on 31.03.2010.

15. a) Deposits from applicants and subscribers as on 31st March 1986 were Rs.1503.59 Millions as intimated provisionally by DOT. Corresponding assets shown under claims recoverable are being reduced by the amount of recovery of rebate on rental and by the amount of recovery of application deposit for which connections have been released to subscribers with effect from 1.4.1986. Balance still recoverable from DOT on this account is Rs. 558.45 Millions.

b) The balance in the Subscribers Deposit Accounts of Rs.7386.71 Millions (Rs. 8036.07 Millions) and Interest Accrued and Due thereon of Rs.25.51 Millions (Rs. 26.54 Millions) is subject to reconciliation with the relevant subsidiary records.

c) The aggregate balance of sundry debtors as per the subsidiary records is short by Rs. 44.39 millions (Rs.57.55 millions) as compared to the balance in general ledger and under reconciliation. The resultant impact of the above on the account is not ascertainable.

16. a) Amount recoverable on current account from DOT is Rs.32330.54 Millions (Rs. 31543.80 Millions) and amount payable is Rs.112265.01 Millions (Rs.658.69 Millions). The net recoverable of Rs.(-) 79934.47 Millions (Rs. 30885.11 Millions) is subject to reconciliation and confirmation.

b) The amount recoverable from BSNL is Rs.20318.25 Millions (Rs.16785.67 Millions) and amount payable is Rs.4517.21 Millions (Rs. 2498.54 Millions). The Net recoverable of Rs.15801.04 Millions (Rs.14287.13 Millions) is subject to reconciliation and confirmation.

17. Certain claims of BSNL on account of Signaling charges Rs.219.30 millions, Transit tariff Rs.251.90 millions, MP Billing Rs.60.10 millions, Service Connections Rs.401.48, IUC Rs.101.40 millions and IUC from Gujarat Circle Rs.11.14 millions are being reviewed. Pending settlement of similar other claims from BSNL, no provision is considered necessary.

18. a) License Fees is calculated on the AGR accounted for on accrual basis in respect of both revenue and revenue sharing with other operators. Pending judgment from Supreme Court on appeal by DOT against TDSAT judgment, the claim of refund of License Fees on other income is not accounted for and shall be made in the year of supreme court judgment.

b) Liquidated Damages recovered from M/s ITI Ltd. and convergent billing cases are accounted for in other income is as per terms of agreement.

19. a) In accordance with DOT Guide lines dated 1.8.2008 on 3G spectrum and BWA and on finalization of the price on spectrum vide DOT letter No. F No P-11014/13/2008-PP dated 21st May, 2010 for 3G & DOT letter No. P-11014/13/2008-PP dated 12th June, 2010 on BWA Spectrum, the liability for Rs.110979.7 millions has been accounted by creating intangible assets on one time charges payable to DOT for 3G & BWA Spectrum in accordance with AS-26 and to be amortized for 20 years/15 years respectively on straight line basis. Accordingly, the amortized amount for the period from 08.08.2008 to 31.03.2010 is provided as under:

For 2008-09 For Both Delhi & Mumbai 3869.10 million

For 2009-10 -do- 6304.60 million

Though, a claim has been lodged with DOT vide DO No.MTNL/CO/GM(Tech.)/Spectrum allocation/09- 10/Vol.III dated 2nd July, 2010 for refund of Rs.110979.7 million towards 3G/BWA Spectrum which has been paid by MTNL to DOT in May/June, 2010. This claim is not accounted for in the books as the same is yet to be acknowledged by DOT.

b) Annual Spectrum charges of 1% on the incremental revenue due to 3G services after a period of 1 year is not accounted for pending receipt of method of calculation from DOT vide DOT Letter No.P-11014/16/2008-PP dated 11.09.2008.

20. a) Out of total provision of Gratuity of Rs. 10444.63 Millions up to 31.3.2010 (Rs. 8380.22 Millions), an amount of Rs. 1943.73 Millions and Rs. 665.40 Millions is recoverable from DOT, in respect of Group C & D and Group B employees respectively, for the period prior to their absorption. As on 31.03.2010 Rs. 7835.50 Millions is available with the Gratuity Trust.

b) The total provision of Leave Encashment is Rs. 5573.00 Millions up to 31.3.2010 (Rs. 4306.23 Millions). Out of this, an amount of Rs. 816.18 Millions and Rs. 274.53Millions is recoverable, from DOT in respect of Group B and Group C & D employees respectively for the period prior to their absorption in MTNL.

c) An amount of Rs. 11793.88 Millions (Rs. 11357.08 Millions) towards GPF contribution is recoverable from DOT as on 31.3.2010. The amount pertains to Group C& D and Group B employees absorbed in MTNL w.e.f. 01.11.98 and 01.10.2000, respectively.

d) The total provision of Pension is Rs. 56972.43 Millions (Rs. 33486.60 Millions) upto 31.3.2010. Out of this an amount of Rs. 7546.2 Millions and Rs. 2201.02 Millions is recoverable from DOT as principal in respect of Group C&D and Group B employees for the period prior to their absorption.

e) The DOT has given commitment vide GOI Ministry of Communication & IT, Deptt. Of Telecom vide letter No.40-29/2002-Pen(T) dated 29th August, 2002 that it has been agreed in principal that the payment of pensionary benefits including the family pension to the government employees absorbed in MTNL and who have opted for government scheme of pension shall be paid by the government. The exact modalities in this regard are being worked out by Deptt. Of Pension and Pensioners welfare. Pending decision on the modalities of liabilities payable to DOT towards pension contribution on MTNL, so as to have a prudent method, on conservative basis, MTNL has adopted the method of valuation as per AS-15 (Revised) through actuarial valuation for defined benefit plan of Central Govt. Pension Scheme and the provision for Rs.56972.43 millions as on 31.03.2010 is kept separately in the books under Schedule M pending final decision of the issue. The above liability is subject to modalities to be finalized by DOT and may vary. The necessary adjustment will be made in the books on finalization.

21. The diminutions in value of investments in Subsidiaries & Joint Ventures are considered as temporary hence no provision is made.

22. The amount of receivables and payables (including NLD / ILD Roaming operators) is subject to confirmation and reconciliation. Pending such confirmation/ reconciliation, the impact on the account is not ascertainable at this stage.

23. In respect of Delhi Unit, Certain claims in respect of damaged/lost fixed assets and inventory has been lodged with Insurance Companies and accordingly gross block, accumulated depreciation and value of inventory have been withdrawn in the respective years pending settlement of the claim. The claims are still pending with insurance company. The final adjustment in respect of difference between amount claimed and assets withdrawn will be made in the year of settlement of claim.

24. In both units, Delhi Unit & Mumbai Unit, CDMA exchanges of 100K & 50K have been decommissioned during financial year 2008-09 by the management and necessary provision has been made for Rs.1210.28 millions as loss of assets in accordance with accounting policy. The liability on this project amounting to Rs.925.98 millions (includes $ 13973820) lying in the books for more than three years and not paid to vendor due to issue arising out of contract agreement, is not written back in view of pending arbitration case filed by vendor.

25. There is no agreement between the Company and DOT for interest recoverable/Payable on current account. Accordingly, no provision has been made for interest payable/receivable on balances during the year except charging of interest on GPF claims receivable from DOT.

26. Vacant Land is valued at original value for the purpose of wealth tax provisions.

27. A sum of Rs.131.25 millions accounted for as income in financial year 2007-08 being ADCC recoverable from Project Development Company (PDC) towards development of Core knowledge park at Noida is still to be recovered and interest there on for the current period is not accounted for as the issue of funding of the project by MTNL is raised by the PDC and pending decision by corporate management and also as there is no explicit agreement for interest no provision as such is made.

28. MTNL Delhi unit has received a sum of Rs.1000.0 Million wet lease towards telecom infrastructure of common wealth games-2010 project (CWG-2010) which has been booked as advance from customer. The expenditure being incurred against this project is being booked as Work-in-progress. The final adjustment will be done on completion of the project.

29. In respect of MS Delhi Unit, IUC Income and Expenditure from August 2009 to March 2010 has been accounted for on estimation basis based on average of actual from April 2009 to July 2009 due to non- processing of data due to technical problems.

30. In respect of MS Delhi, a sum of Rs. 243.55 million payable to TCL for ILD charges for the period Oct- 09 to March-10 has not been paid due to heavy spurt in ILD traffic towards M/S TCL. On technical analysis it was found that these calls were made to some dubious and tiny destination. These destinations do not confirm to national numbering plan of the respective countries and are not approved destinations as per approved interconnect agreement. Further these calls has not got physically terminated to the destinations The observations were shared with M/S TCL. M/S TCL has also been advised that the balance which relates to fraudulent calls is not payable and accordingly no provision has been made in the books of accounts. However the above has been shown as part of contingent liability.

31. In respect of accounting for billing of subscribers for Mobile services and collection made thereon, the GSM Mumbai unit has implemented computerized billing system and the financial entries for booking of income and debtors accounting have been incorporated in the books of accounts based on the output generated through computer system.

32.There is no reported Micro, Small and Medium enterprise as defined in the Micro,Small and Medium enterprise development Act, 2006, to whom the company owes dues. No interest has been paid during the year on account of delayed payments as required under the MSMED Act, 2006.

33. Additional information required under Paragraphs 3(x)(a) and 4D(c) of Part II of Schedule VI to the Companies Act 1956 is not ascertainable, since (i) consumption of stores is included under the normal heads of Capital Expenditure and/or Repairs & Maintenance, and (ii) the issue of imported and indigenous items are not separately priced/ identified.

34. During the year, the Company has made an Insurance Policy for medical benefits in respect of its retired employees. The Insurance Policy is fully funded by the Company. This is in compliance with AS- 15 (Revised).

35. Related Parties Disclosure under AS-18 a) List of Related Parties and Relationships Party Relation Department of Telecommunications Holding 56.25% shares of the Company Millennium Telecom Limited Wholly owned Subsidiary Mahanagar Telecom Mauritius Ltd. Wholly owned Subsidiary United Telecom Limited Joint Venture MTNL STPI IT Services Ltd. Joint Venture

b) Key Management Personnel Mr. Kuldip Singh Director (Tech.) & CMD Mrs. Anita Soni Director (Finance) Mr. S.P. Pachauri Director (HR) Mr. A K Pathak (Part of the year) Executive Director (Technical), CO Mr. Manjit Singh (Part of the year) Executive Director, Delhi Mr. S M Talwar (Part of the year) Executive Director, Delhi Mr. J Gopal (Part of the year) Executive Director , Mumbai

36. Consolidated Financial Statements - AS - 21 & AS - 27

The financial statements of Millennium Telecom Limited & Mahanagar Telephone Mauritius Limited (wholly owned subsidiaries of the Company) and United Telecom Limited & MTNL STPI IT Service Limited (Joint Ventures) have been consolidated in accordance with the Accounting Standard - 21 and Accounting Standard - 27, respectively in a separate consolidated financial statement.

37. During the year no provision has been made for any loss on account of impairment of assets under Accounting Standard 28 as there is no indication of any impairment of assets of the Company.

38. Previous year figures have been regrouped / recast to confirm to current years presentation. Amounts in brackets represent the previous years figures.

39. Schedules "A" to "T" form an integral part of the Balance Sheet and the Profit and Loss Account.

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