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Accounting Policies of Milkfood Ltd. Company

Mar 31, 2015

1.1. Basis of Preparation of Accounts

The accounts have been prepared in accordance with historical cost convention, applicable accounting standards issued by the Institute of Chartered Accountants of India and relevant provisions of the Companies Act, 2013 following accrual method of accounting.

All assets and Liabilities have been classified as current or non current considering the operating cycle of 12 months.

1.2. Tangible Fixed Assets

Fixed assets are stated at cost. All direct expenses incurred for bringing the assets to their present location are debited to the respective assets. In regard to new projects expenditure incurred till the date of commencement of commercial productions are charged to the respective assets i.e. Building, Plant & Machinery proportionately. Replacement of various part of fixed assets/substantial repair/renovation are also capitalized considering the benefit of enduring nature.

1.3. Depreciation on Tangible Fixed Assets

Depreciation has been charged on Straight Line Method in accordance with Schedule II of the Companies Act 2013, The management has reassessed the remaining useful life of Plant & Machinery with effect from 1st April 2014. As a result of above, depreciation of Rs.26.64 Lac has been charged to Statement of Profit & Loss Account and Rs.3.36 Lac has been adjusted with opening retained earnings (i.r.o. assets of which useful life is exhausted.) for twelve months ended 31st March 2015. In respect of Plant & Machinery, the company is consistently following the policy of charging depreciation over 20 years, notwithstanding certification by the Govt. approved valuer (Chartered Engineer) of the useful life of Plant & Machinery of more than 35 years. This is in pursuance of proviso to sub clause (I) of clause 3 of schedule II of the Companies Act 2013. Similarly for addition of Plant & Machinery during the year company has estimated the useful life of 20 years (15 years specified in Schedule II) based upon the certificate of suppliers / manufacturers of Plant & Machinery. Additions made during the year have been capitalized at the year end and accordingly depreciation has been charged.

On Stores Items Capitalized: Estimated useful life of the asset.

On Assets Held for Disposal: On SLM as per rates in schedule II of Company Act 2013 and in case net realized value is lower than the written down value then depreciation is charged to confirm the carrying value to net realized value.

1.4 Intangible Assets

In accordance with AS-26 - expenses incurred on development/defining the manufacturing process of any product to meet the required standards is recognized as Intangible Asset and is amortized over a period of 10 years

1.5 Impairment of Assets:-

Assessment of indication of impairment of an assets is made at the year end and impairment loss, if any, is recognized.

1.6. Investments

Long Term Investments are stated at cost, less provision if any for diminution in the value of such investments, other than temporary.

1.7 Inventories

Inventories (including whey powder - by product) are valued on lower of cost or net realizable value. In pursuance of AS-2 indirect production overhead (estimated by the Management) have been allocated for ascertainment of cost.

1.8 Retirement Benefits

Company follows AS-15 (revised) as detailed below:-

(a) Short-term benefits are recognized as expense at the undiscounted amount in the Statement of Profit & Loss of the year in which the related service is rendered.

(b) Leave encashment are carried forward on year to year basis and facility is granted to employees only in the year of determination of service.

(c) Company provides bonus to eligible employees as per Bonus Act 1965 and accordingly liability is provided on actual cost at the end of the year.

(d) The Company has an obligation towards gratuity a defined benefit retirement plan covering all employees including the Directors in the wholetime employment of company. The plan provides for a lumpsum payment to employees at retirement/determination of service on the basis of 15 days terminal salary for each completed year of service subject to maximum amount of Rs.10 Lac. During the year company has made provision of gratuity and leave encashment of Rs.215 Lac as per AS-15.

(e) Provident Fund:

The eligible employees of the company are entitled to receive benefits under the Provident Fund, a defined contribution plan in which both employees and the company make monthly contributions at a specified percentage of the covered employee's salary. The contributions as specified under the law are paid to the respective Regional Provident Fund Commissioner and the Central Provident Fund under the State Pension Scheme.

1.9 Revenue Recognition

(a) Sales are recognized at the point of despatch to customers and are net of sales return. Export sales are recognized on the basis of date of bill of lading.

(b) Export entitlements i.e. duty free scrip and duty draw back are accounted for on the basis of export of goods on FOB value determined for custom purpose.

c) In pursuance of guidance note issued by ICAI on accounting for self generated certified emission reductions (CERS) the same has to be recognized when UNFCCC certifies and credit the same to the generating entity. Company is entitled for 69692 CERS p.a w.e.f. 14 February 2012 till 2022 .Company has recognized the CER's 128919 units as inventory in terms of Guidance Note of ICAI and valued the same as per AS-2. Net realizable value has been certified by the consultant. In respect of VCS, company had recognized the income in the earlier years on the basis of consultant certificate. VCS in hand as the close of the year are 97000 units which have been valued on consultant's advice for potential realization at valuation at an amount not less than at what they are stated in the Balance Sheet.

1.10 Deferred Tax

The tax expense consists of current tax and deferred tax. Provision for the current tax is based on tax liability computed in accordance with relevant provisions of the Income Tax Act. Provisions for deferred tax are made for all timing differences arising between taxable incomes and accounting income at Income Tax rates that have been enacted or substantially enacted as of the balance sheet date. Deferred Tax Assets are recognised and carried forward only if there is convincing evidence that they will be realised in future against future taxable income. The carrying amounts of Deferred Tax Asset are reviewed for the appropriateness of their respective carrying values at each balance sheet date. For computing the Deferred tax liability/assets, benefit of brought forward losses has been taken on the basis of returned income (loss) instead of assessed income (loss) with regards to matters preferred in appeal (s). Deferred tax liability for the year ended 31.03.2015 is Rs.360.71 Lac (Previous Year Rs.322 Lac). During the year deferred tax asset of Rs.91.92 Lac has been recognized in respect of losses on disposal of investment to be carried forward for adjustment in near future regarding accrual of Capital gain as certified by the Management.

1.11 Borrowing Costs

Interest and other cost that are directly attributable to the acquisition, construction or production of a qualifying asset (including trial run) and for product development (under AS-26) within the meaning of Accounting Standard- 16 are capitalized as part of the cost of that asset till the assets are ready for intended use or for producing on commercial scale/sale. Other borrowing costs are recognized as an expense in the period in which they are incurred. During the year interest of Rs.38 Lac has been capitalized in Plant & Machinery in accordance with AS-16 as certified by the Management.

1.12 Foreign Currency Transactions

Foreign Currency Transactions involving export sales are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on the customs rate on the date of dispatch of goods. The difference between the rates recorded and the rates on the date of actual realization is transferred to difference in exchange fluctuation account .At the year end, the balances are converted at the year end rate and difference if any between the book balance and converted amount are transferred to the exchange fluctuation account. The premium or discount arising at the inception of a forward exchange contract is amortized as expenses / income over the life of the contract. Any profit or loss arising on cancellation or renewal of such a forward contract is recognized as income / expenses for the period.

(B) ADDITIONAL NOTES TO ACCOUNTS

i. Contingent liabilities:

Claims not acknowledged as debts Rs.95 Lac (Previous year Rs.152 Lac) and guarantee / obligations of Rs.400 Lac.(Previous year Nil).

ii. Estimated amount of contracts remaining to be executed on capital account is Rs.5 Lac and not provided for (Net of Advances) (Previous year 23 lac).

iii. Expenditure in foreign currency :

Particulars For the year ended For the year ended 31 March, 2015 31 March, 2014 (Rs. in lacs) (Rs. in lacs)

Fees & Subscription 0 0

Travelling 1 3

TOTAL 1 3


Mar 31, 2014

1.1. Basis of Preparation of Accounts

The accounts have been prepared in accordance with historical cost convention, applicable accounting standards issued by the Institute of Chartered Accountants of India and relevant provisions of the Companies Act, 1956 following accrual method of accounting.

All Assets and Liabilities have been classified as current or non current considering the operating cycle of 12 months.

1.2. Tangible Fixed Assets

Fixed assets are stated at cost. All direct expenses incurred for bringing the assets to their present location are debited to the respective assets. In regard to new projects expenditure incurred till the date of commencement of commercial productions are charged to the respective assets i.e. Building, Plant & Machinery proportionately. Replacement of various part of fixed assets/substantial repair/renovation are also capitalized considering the benefit of enduring nature.

1.3. Depreciation on Tangible Fixed Assets

On Fixed Asset: On written down value as per prescribed rates in Schedule XIV of Companies Act 1956.

On Stores Items Capitalized: Estimated useful life of the asset.

On Assets Held for Disposal: On written down value as per rates in schedule XIV of Company Act and in case net realized value is lower than the written down value then depreciation is charged to confirm the carrying value to net realized value.

During the year company has written back the depreciation of Rs.300 Lac in respect of Plant and Machinery on the belief that it had charged excess depreciation in earlier years considering the useful life of assets on certain reasonable assumptions regarding additions/deletions and rates of depreciation charged as per the provisions of the Companies Act, 1956.

1.4 Intangible Assets

In accordance with AS-26 - expenses incurred on development/defining the manufacturing process of any product to meet the required standards is recognized as Intangible Asset and is amortized over a period of 10 years

1.5 Impairment of Assets:-

Assessment of indication of impairment of an assets is made at the year end and impairment loss, if any, is recognized.

1.6. Investments

Long Term Investments are stated at cost, less provision if any for diminution in the value of such investments, other than temporary.

1.7 Inventories

Inventories (including whey powder-by product) are valued on lower of cost or net realizable value. In pursuance of AS-2 indirect production overhead (estimated by the Management ) have been allocated for ascertainment of cost.

1.8 Retirement Benefits

Company follows AS-15 (revised) as detailed below:-

(a) Short-term benefits are recognized as expense at the undiscounted amount in the Statement of Profit & Loss of the year in which the related service is rendered.

(b) Leave encashment are carried forward on year to year basis and facility is granted to employees only in the year of determination of service.

(c) Company provides bonus to eligible employees as per Bonus Act 1965 and accordingly liability is provided on actual cost at the end of the year.

(d) The Company has an obligation towards gratuity a defined benefit retirement plan covering all employees including the Directors in the wholetime employment of company. The plan provides for a lumpsum payment to employees at retirement/determination of service on the basis of 15 days terminal salary for each completed year of service subject to maximum amount of Rs.10 lacs except for the top management of the company. During the year company has made provision of gratuity and leave encashment of Rs.173 Lac as per AS-15 and charged the same as exceptional items.

(e) Provident Fund: The eligible employees of the company are entitled to receive benefits under the Provident Fund, a defined contribution plan in which both employees and the company make monthly contributions at a specified percentage of the covered employee''s salary. The contributions as specified under the law are paid to the respective Regional Provident Fund Commissioner and the Central Provident Fund under the State Pension Scheme.

1.9 Revenue Recognition

(a) Sales are recognized at the point of despatch to customers and are net of sales return. Export sales are recognized on the basis of date of bill of lading.

(b) Export entitlements i.e. duty free scrip and duty draw back are accounted for on the basis of export of goods on FOB value determined for custom purpose.

c) In pursuance of guidance note issued by ICAI on accounting for self generated certified emission reductions (CERS) the same has to be recognized when UNFCCC certifies and credit the same to the generating entity. Company is entitled for 69692 CERS p.a w.e.f. 14 February 2012 till 2022 .Company has not recognized the entitlement as assets because the same is yet to be credited in its account by the UNFCCC. In respect of VCS, company had recognized the income in the earlier years on the basis of consultant certificate. VCS in hand as the close of the year are 97000 units which have been valued on consultant''s advice for potential realization at valuation at an amount not less than at what they are stated in the Balance Sheet.

1.10 Deferred Tax

The tax expense consists of current tax and deferred tax. Provision for the current tax is based on tax liability computed in accordance with relevant provisions of the Income Tax Act. Provisions for deferred tax are made for all timing differences arising between taxable incomes and accounting income at Income Tax rates that have been enacted or substantially enacted as of the balance sheet date. Deferred Tax Assets are recognised and carried forward only if there is convincing evidence that they will be realised in future against future taxable income. The carrying amounts of Deferred Tax Asset are reviewed for the appropriateness of their respective carrying values at each balance sheet date. For computing the Deferred tax liability/assets, benefit of brought forward losses has been taken on the basis of returned income (loss) instead of assessed income (loss) with regards to matters preferred in appeal (s).

1.11 Borrowing Costs

Interest and other cost that are directly attributable to the acquisition, construction or production of a qualifying asset (including trial run) and for product development (under AS-26) within the meaning of Accounting Standard- 16 are capitalized as part of the cost of that asset till the assets are ready for intended use or for producing on commercial scale/sale. Other borrowing costs are recognized as an expense in the period in which they are incurred.

1.12 Foreign Currency Transactions

Foreign Currency Transactions involving export sales are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on the customs rate on the date of dispatch of goods. The difference between the rates recorded and the rates on the date of actual realization is transferred to difference in exchange fluctuation account .At the year end, the balances are converted at the year end rate and difference if any between the book balance and converted amount are transferred to the exchange fluctuation account. The premium or discount arising at the inception of a forward exchange contract is amortized as expenses / income over the life of the contract. Any profit or loss arising on cancellation or renewal of such a forward contract is recognized as income / expenses for the period.


Mar 31, 2012

1.1 Basis of Preparation of Accounts

The accounts have been prepared in accordance with historical cost convention, applicable accounting standards issued by the Institute of Chartered Accountants of India and relevant provisions of the Companies Act, 1956 following accrual method of accounting except for gratuity and leave encashment which are being accounted for on payment basis.

All Assets and Liabilities have been classified as current or non current considering the operating cycle of 12 months.

1.2. Tangible Fixed Assets

Fixed assets are stated at cost. All direct expenses incurred for bringing the assets to their present location are debited to the respective assets. In regard to new projects expenditure incurred till the date of commencement of commercial productions are charged to the respective assets i.e. Building, Plant & Machinery proportionately. Replacement of various part of fixed assets/ substantial repair/renovation are also capitalized considering the benefit of enduring nature.

1.3. Depreciation on Tangible Fixed Assets

On Fixed Asset: On written down value as per prescribed rates in Schedule XIV of Companies Act 1956.

On Stores Items Capitalized: Estimated useful life of the asset.

On Assets Held for Disposal: Only in case the net realizable value of Assets is lower than the carrying amount.

1.4 Intangible Assets

In accordance with AS-26 - expenses incurred on development/defining the manufacturing process of any product to meet the required standards is recognized as Intangible Asset and is amortized over a period of 10 years.

1.5 Impairment of Assets:-

Assessment of indication of impairment of an assets is made at the year end and impairment loss, if any, is recognized.

1.6. Investments

Long Term Investments are stated at cost, less provision if any for diminution in the value of such investments, other than temporary.

1.7 Inventories

Inventories are valued on lower of weighted average cost or net realizable value. Valuation of intermediary products (Whey Powder) is estimated on the basis of net realizable value of the final product.

1.8 Retirement Benefits

Company follows AS-15 (revised) as detailed below:-

(a) Short-term benefits are recognized as expense at the undiscounted amount in the Statement of Profit & Loss of the year in which the related service is rendered.

(b) Leave encashments are not carried forward on year to year basis and facility is granted to employees only in the year of determination of service. Therefore no provision of leave encashment is made on year to year basis.

(c) Company provides bonus to eligible employees as per Bonus Act 1965 and accordingly liability is provided on actual cost at the end of the year.

(d) The Company has an obligation towards gratuity a defined benefit retirement plan covering all employees including the Directors in the wholetime employment of company. The plan provides for a lumpsum payment to employees at retirement/determination of service on the basis of 15 days terminal salary for each completed year of service subject to maximum amount of Rs.10.00 lakh.

(e) Provident Fund:

The eligible employees of the company are entitled to receive benefits under the Provident Fund, a defined contribution plan in which both employees and the company make monthly contributions at a specified percentage of the covered employee's salary. The contributions as specified under the law are paid to the respective Regional Provident Fund Commissioner and the Central Provident Fund under the State Pension Scheme.

1.9 Revenue Recognition

(a) Sales are recognized at the point of despatch to customers and are net of sales return. Export sales are recognized on the basis of date of bill of lading.

(b) Export entitlements i.e. duty free scrips are accounted for on the basis of export of goods on FOB value determined for custom purpose.

(c) Entitlements under Clean development mechanism (CDM) & voluntary Carbon standards (VCS) (2007) are accounted for income at the time of final registration with the approval authority of host country.

1.10 Deferred Tax

The tax expense consists of current tax and deferred tax. Provision for the current tax is based on tax liability computed in accordance with relevant provisions of the Income Tax Act. Provisions for deferred tax are made for all timing differences arising between taxable incomes and accounting income at Income Tax rates that have been enacted or substantially enacted as of the balance sheet date. Deferred Tax Assets are recognised and carried forward only if there is convincing evidence that they will be realised in future against future taxable income. The carrying amounts of Deferred Tax Asset are reviewed for the appropriateness of their respective carrying values at each balance sheet date.

1.11 Borrowing Costs

Interest and other cost that are directly attributable to the acquisition, construction or production of a qualifying asset (including trial run) and for product development (under AS-26) within the meaning of Accounting Standard-16 are capitalized as part of the cost of that asset till the assets are ready for intended use or for producing on commercial scale/sale. Other borrowing costs are recognized as an expense in the period in which they are incurred.

1.12 Foreign Currency Transactions

Foreign Currency Transactions involving export sales are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on estimated rate on the date of dispatch of goods. The difference between the rates recorded and the rates on the date of actual realization is transferred to difference in exchange fluctuation account. At the year end, the balances are converted at the year end rate and difference if any between the book balance and converted amount are transferred to the exchange fluctuation account.


Mar 31, 2011

1. Basis of Preparation of Accounts

The accounts have been prepared in accordance with historical cost convention, applicable accounting standards issued by the Institute of Chartered Accountants of India and relevant provisions of the Companies Act, 1956 following accrual method of accounting except for gratuity and leave encashment which are being accounted for on payment basis.

2. Fixed Assets

Fixed assets are stated at cost. All direct expenses incurred for bringing the assets to their present location are debited to the respective assets. In regard to new projects expenditure incurred till the date of commencement of commercial productions are charged to the respective assets i.e. Building, Plant & Machinery proportionately. Replacement of various part of fixed assets are also capitalized considering the benefit of enduring nature.

3. Depreciation on Fixed Assets

On Fixed Assets : On written down value as per prescribed rates in Schedule XIV of Companies Act 1956.

On Stores Items Capitalized: Estimated useful life of the asset.

On Assets Held for Disposal: Only in case the net realizable value of Assets is lower than the carrying amount.

During the year Company has not charged depreciation in respect of Plant and Machinery and furniture and fixtures of Patiala Unit prior to financial year 2005-06 as these Assets had reached its residual value in earlier years as prescribed under Companies Act, 1956.

4. Investments

Long Term Investments are stated at cost, less provision if any for diminution in the value of such investments, other than temporary.

5. Inventories

Inventories are valued on lower of weighted average cost or net realizable value. Valuation of intermediary products (Whey Powder) is estimated on the basis of net realizable value of the final product.

6. Retirement Benefits (Revised)

Company follows AS-15 (revised) as detailed below:-

(1) Short-term benefits are recognized as expense at the undiscounted amount in the Profit & Loss Account of the year in which the related service is rendered.

(2) Leave encashments are not carried forward on year to year basis and facility is granted to employees only in the year of determination of service. Therefore no provision of leave encashment is made on year to year basis.

(3) Company provides bonus to eligible employees as per Bonus Act 1965 and accordingly liability is provided on actual cost at the end of the year.

(4) The Company has an obligation towards gratuity a defined benefit retirement plan covering all employees including the Directors in the wholetime employment of company. The plan provides for a lumpsum payment to employees at retirement/ determination of service on the basis of 15 days terminal salary for each completed year of service subject to maximum amount of Rs.10.00 lakh.

(5) Provident Fund:

The eligible employees of the company are entitled to receive benefits under the Provident Fund, a defined contribution plan in which both employees and the company make monthly contributions at a specified percentage of the covered employee's salary. The contributions as specified under the law are paid to the respective Regional Provident Fund Commissioner and the Central Provident Fund under the State Pension Scheme.

7 Revenue Recognition

(i) Sales are recognized at the point of despatch to customers and are net of sales return. Export sales are recognized on the basis of date of bill of lading.

(ii) Export entitlements i.e. duty free scrips are accounted for on the basis of export of goods on FOB value determined for custom purpose.

(iii) In respect of entitlements under clear development mechanism (CDM) of Kyoto Protocol, Income is accounted on the basis of estimated valuation made by the Consultant appointed by the Company for the final registration with UNFCCC. Initial expenditure incurred for Registration etc., are charged over a period during which benefit is likely to accrue. During the year a sum of Rs.4.21 Lacs have been charged to Profit & Loss Account.

8. Deferred Tax

The tax expense consists of current tax and deferred tax. Provision for the current tax is based on tax liability computed in accordance with relevant provisions of the Income Tax Act. Provisions for deferred tax are made for all timing differences arising between taxable incomes and accounting income at Income Tax rates that have been enacted or substantially enacted as of the balance sheet date. Deferred Tax Assets are recognised and carried forward only if there is convincing evidence that they will be realised in future against future taxable income. The carrying amounts of Deferred Tax Asset are reviewed for the appropriateness of their respective carrying values at each balance sheet date (also refer Note 16 of Schedule 18 B).

9. Borrowing Costs

Interest and other cost that are directly attributable to the acquisition, construction or production of a qualifying asset (including trial run) and for product development (under AS-26) within the meaning of Accounting Standard-16 are capitalized as part of the cost of that asset till the assets are ready for intended use or for producing on commercial scale/sale. Other borrowing costs are recognized as an expense in the period in which they are incurred. However, no borrowing cost has been capitalized during the year.

10. Foreign Currency Transactions

Foreign Currency Transactions involving export sales are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on estimated rate on the date of dispatch of goods. The difference between the rates recorded and the rates on the date of actual realization is transferred to difference in exchange fluctuation account. At the year end, the balances are converted at the year end rate and difference if any between the book balance and converted amount are transferred to the exchange fluctuation account.

11. Intangible Assets

In accordance with AS-26 - expenses incurred on development/defining the manufacturing process of any product to meet the required standards is recognized as Intangible Asset and is amortized over a period of 10 years. The amount amortized during the year is Rs.59.67 Lakhs (Previous Year Rs.59.67 Lakhs).

12. Managerial Remuneration:

Managerial remuneration of Rs.81.13 Lakhs (Previous Year Rs.69.74 Lacs), in the absence of profits under section 198 and 349 of the Companies Act 1956, is based on legal opinion that limits prescribed in Schedule XIII are on consolidated entitlements.


Mar 31, 2010

1. Basis of Preparation of Accounts

The accounts have been prepared in accordance with historical cost convention, applicable accounting standards issued by the Institute of Chartered Accountants of India and relevant provisions of the Companies Act, 1956 following accrual method of accounting except for gratuity and leave encashment which are being accounted for on payment basis.

2. Fixed Assets

Fixed assets are stated at cost. All direct expenses incurred for bringing the assets to their present location are debited to the respective assets. In regard to new projects expenditure incurred till the date of commencement of commercial productions are charged to the respective assets i.e. Building, Plant & Machinery proportionately. Replacement of various parts of fixed assets are . also capitalized considering the benefit of enduring nature.

3. Depreciation on Fixed Assets

Depreciation on fixed assets is provided on the straight-line method at the rates and manner as specified in schedule XIV of the Companies Act, 1956. Depreciation in respect of stores capitalized in plant and machinery is charged on the basis of estimated useful life of the respective assets following written down method. In respect of Assets held for disposal for discontinued operations, depreciation is provided if the net realizable value is less than the carrying amount.

4. Investments

Long Term Investments are stated at cost, less provision if any for diminution in the value of such investments, other than temporary.

5. Inventories

Inventories are valued at lower of cost or net realisable value except in case of Casein which is valued at net realizable value determined on the basis of prevalent international market prices. Cost is determined on a weighted average basis. In case of finished goods, Fixed, Variable and Administrative overheads are loaded on absorption costing basis. Net realizable value is determined by taking average of market prices of goods sold subsequent to the date of balance sheet.

6. Retirement Benefits (Revised)

Company follows AS-15 (revised) as detailed below:-

(1) Short-term benefits are recognized as expense at the undiscounted amount in the Profit & Loss Account of the year in which the related service is rendered.

(2) Leave encashments are not carried forward on year to year basis and facility is granted to employees only in the year of determination of service. Therefore no provision of leave encashment is made on year to year basis.

(3) Company provides bonus to eligible employees as per Bonus Act, 1965 and accordingly liability is provided on actual cost at the end of the year.

(4) The Company has an obligation towards gratuity a defined benefit retirement plan covering all employees including the Directors in the wholetime employment of company. The plan provides for a lumpsum payment to employees at retirement/ determination of service on the basis of 15 days terminal salary for each completed year of service subject to maximum amount of Rs. 3.50 lakh. Company accounts for gratuity in the books on actual payment basis. Vide Government of India Notification published in the Official Gazette the limit of Rs. 3.50 lakhs has been increased to Rs. 10.00 Lakhs.

(5) Provident Fund:

The eligible employees of the company are entitled to receive benefits under the Provident Fund, a defined contribution plan in which both employees and the company make monthly contributions at a specified percentage of the covered employees salary. The contributions as specified under the law are paid to the respective Regional Provident Fund Commissioner and the Central Provident Fund under the State Pension Scheme.

7 Revenue Recognition

(i) Sales are recognized at the point of despatch to customers and are net of sales return. Export sales are recognized on the basis of date of bill of lading.

(ii) Export entitlements i.e. duty free scrips are accounted for on the basis of export of goods on FOB value determined for custom purpose.

(iii) In respect of entitlements under clear development mechanism (CDM) of Kyoto Protocol Income is accounted on the basis of estimated valuation made by the Consultant appointed by the Company for the final registration with UNFCCC. The expenditure incurred representing payments made for Registration are charged over a period of 2 years during which benefit is likely to accrue.

8. Deferred Tax

The tax expense consists of current tax and deferred tax. Provision for the current tax is based on tax liability computed in accordance with relevant provisions of the Income Tax Act. Provisions for deferred tax are made for all timing differences arising between taxable incomes and accounting income at Income Tax rates that have been enacted or substantially enacted as of the balance sheet date. Deferred Tax Assets are recognised and carried forward only if there is convincing evidence that they will be realised in future against future taxable income. The carrying amounts of Deferred Tax Asset are reviewed for the appropriateness of their respective carrying values at each balance sheet date (also refer Note 17 of Schedule 18 B).

9. Borrowing Costs

Interest and other cost that are directly attributable to the acquisition, construction or production of a qualifying asset (including trial run) and for product development (under AS-26) within the meaning of Accounting Standard-16 are capitalized as part of the cost of that asset till the assets are ready for intended use or for producing on commercial scale/sale. Other borrowing costs are recognized as an expense in the period in which they are incurred.

10. Foreign Currency Transactions

Foreign Currency Transactions involving export sales are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on estimated rate on the date of despatch of goods. The difference between the rates recorded and the rates on the date of actual realization is transferred to difference in exchange fluctuation account .At the year end, the balances are converted at the year end rate and difference if any between the book balance and converted amount are transferred to the exchange fluctuation account.

11. Intangible Assets

In accordance with AS-26 - expenses incurred on development/defining the manufacturing process of any product to meet the required standards is recognized as Intangible Asset and is amortized over a period of 10 years. The amount amortised during the year is Rs. 59.67 lakhs (Previous Year Rs. 4.30 lakhs).

12. Managerial Remuneration:

Company has paid remuneration of Rs. 69.74 lakhs to its Managerial Personnel. Company is of the view and has taken legal opinion that in view of inadequacy of profits u/s 198 read with section 349 of Companies Act, 1956 remuneration paid during the year is within the prescribed limit of Section II of part II of Schedule XIII of Companies Act, 1956 computed on yearly basis of combined entitlements of Managerial Personnel during the year.

 
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