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Notes to Accounts of Mirza International Ltd.

Mar 31, 2015

Note 1 : Employee benefits :

The Company is providing the following benefits to their employees :

a) Gratuity

b) Provident Fund

c) Leave encashment

Note 2 : CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR)

(Rs. in Lacs)

Particulars As at As at 31 March,2015 31 March,2014

A BILLS DISCOUNTED 19124 13093

B IMPORT DUTY PAYABLE 58 882

In case of non-fulfillment of export obligation under EPCG Scheme (not yet due)

C BANK GUARANTEES / LETTER OF CREDITS 282 1092

D Two cases of employees are pending at Indeter Indeter Industrial Tribunal II, Lucknow minate minate

One case of employee is pending at Indeter Indeter Labour Court, Lucknow minate minate

One case of employee is pending at D.L.C. Indeter Indeter office, Lucknow minate minate

One case of employee is pending at Labour Indeter Indeter Court, Noida minate minate

E Deficiency in stamp duty demanded by state revenue authorities for purchase of land at Hapur was Rs. 44 lakhs. Out of this the Company has deposited Rs. 14.67 Lacs as per Interim order of Hon'ble Allahabad High Court. The court 44 44 remanded the case to the Collector Stamps, Ghaziabad with the instruction to re-assess the case. The case is now pending with Asst. Commissioner Stamps, Ghaziabad

F TAXES

(I) ENTRY TAX - Total liability Rs. 28.13 lacs out of which paid under protest Rs. 14.22 balance lying unpaid Rs. 13.91 lacs 28 28

(ii) income tax -

(a) Total liability in various Assessment 582 598 years Rs. 581.85 lacs which has been paid.

(b) Total liability of penalty pertaining 6 to A.Y 2009-10.

(c) Total liability of TDS pertaining to 57 A.Y. 2012-13.

(Ill) SERVICE TAX - Total liability of F.Y 2004-05, 2005-06, F.Y 2007-08 & 2009-10 Rs. 34.33 lacs out of which Rs. 14.52 34 17 lacs already paid and Rs. 19.82 lacs is lying unpaid.

(iv) branch taxes

AHMEDABAD BRANCH : F.Y. 2010-11 Rs.32.68 lacs. 33 Company has preferred appeal against the said Demand.

KOLKATA BRANCH : CST Demand of Rs. 2.48 lacs 2 against which revision appeal has been filed.

KERALA BRANCH : VAT Demand of Rs. 4.91 lacs against which 30% amount of Rs. 1.47 lacs has 5 been paid and for balance Bank Guarantee has been provided. Against which the company has preferred an appeal.

G COMMITMENT

A capital expenditure (Net of fund already 584 2000 deployed)

B UNCLAIMED DIVIDEND 33 28

NOTE 3: Income TAX

A) The Company has recognized and accounted for cumulative net deferred tax liability in accordance with Accounting Standard (AS-22) issued by the Institute of Chartered Accountants of India, "Accounting for Taxes on Income" in respect of net aggregate timing differences as on 31st March, 2015.

B) There were Income Tax demands aggregating to Rs. 581.85 lakhs pertaining to various assessment years, which arose due to Direct Taxes ( Amendment ) Act. 2006, these demands have been adjusted by the department against the refunds due to the Company, pertaining to various assessment years. The department / Company went into Appeals before the Hon'ble Income Tax Appellate Tribunal (ITAT). Hon'ble iTAT has remanded the case back to Assessing officer in view of Hon'ble Supreme Court judgment in Topman Exports which nullifies the demands against the Company. In view of Hon'ble Supreme Court judgment, Company has an stay case in its favor and is expecting to nullify the demand and to get the total amount refunded. However Appeal order effect is yet to be given.

NOTE 4 : forward CONTRACTS

Following are the outstanding forward exchange contracts entered Into by the Company

Forward contracts EURO INR 31.33 lakhs (42.24 lakhs) Sell Hedging

Forward contracts GBP INR 107.40 lakhs (99.61 lakhs) Sell Hedging

Forward contracts USD INR 81.69 lakhs (94.18 lakhs) Sell Hedging


Mar 31, 2014

Note 1 : CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR)

(Rs. in Lacs)

Particulars As at 31 March 2014 As at 31 March 2013

A BILLS DISCOUNTED 13093 14656

B IMPORT DUTY PAYABLE 882 350

In case of non-fulfi llment of export obligation under EPCG Scheme (not yet due)

C BANK GUARANTEES / LETTER OF CREDITS 1092 1153

D Two cases of employees are pending at Industrial Tribunal Indeterminate Indeterminate II, Lucknow

One case of employee is pending at Labour Court, Lucknow Indeterminate Indeterminate

One case of employee is pending at D.L.C. office, Lucknow Indeterminate Indeterminate

One case of employee is pending at Labour Court, Noida Indeterminate Indeterminate

One case of employee is pending at A.L.C. offi ce, Unnao Indeterminate Indeterminate

E Deficiency in stamp duty demanded by state revenue authorities for purchase of land at Hapur was Rs. 44 lakhs. Out of this the Company has deposited Rs. 14.67 Lacs as per Interim order of Hon''ble Allahabad High Court. The court 44 44 remanded the case to the Collector Stamps, Ghaziabad with the instruction to re-assess the case. The case is now pending with Asst. Commissioner Stamps, Ghaziabad

F TAXES

(I) ENTRY TAX - Total liability 28.13 lacs out of which paid under protest Rs. 14.22 balance lying unpaid Rs. 13.91 28 20 lacs

(II) INCOME TAX - Total liability in various Assessment years 598.23 lacs out of which Rs. 581.85 lacs is paid and 598 604 balance Rs. 16.38 lacs is still lying unpaid.

(III) SERVICE TAX - Total liability of F.Y. 2004-05, 2005-06 & F. Y. 2007-08 Rs. 17.29 lacs out of which Rs. 14.52 lacs 17 17 already paid and Rs. 2.77 lacs is lying unpaid.

G COMMITMENT

A CAPITAL EXPENDITURE (Net of fund already deployed) 2000 1920

B UNCLAIMED DIVIDEND 28 28

NOTE 2: INCOME TAX

A) The Company has recognized and accounted for cumulative net deferred tax liability in accordance with Accounting Standard (AS-22) issued by the Institute of Chartered Accountants of India, "Accounting for Taxes on Income" in respect of net aggregate timing differences as on 31st March, 2014.

B) There were Income Tax demands aggregating to Rs. 581.85 lakhs pertaining to various assessment years, which arose due to Direct Taxes ( Amendment ) Act. 2006, these demands have been adjusted by the department against the refunds due to the company, pertaining to various assessment years. The department / company went into Appeals before the Hon''ble Income Tax Appellate Tribunal (ITAT). Hon''ble ITAT has remanded the case back to Assessing offi cer in view of Hon''ble Supreme Court judgment in Topman Exports which nullifi es the demands against the company. In view of Hon''ble Supreme Court judgment, Company has an stay case in its favor and is expecting to nullify the demand and to get the total amount refunded. However Appeal order effect is yet to be given. Further Two appeals related to A.Y. 2005-06 and A.Y. 2009-10 involving tax liability of Rs. 10.43 lacs and Rs. 5.95 lacs are pending before hon''ble ITAT and CIT (A) respectively

NOTE 3 : FORWARD CONTRACTS

Following are the outstanding forward exchange contracts entered into by the Company Forward contracts EURO INR 42.24 lakhs (47.16 lakhs) Sell Hedging Forward contracts GBP INR 99.61 lakhs (103.07 lakhs) Sell Hedging Forward contracts USD INR 94.18 lakhs (43.94 lakhs) Sell Hedging


Mar 31, 2013

Note 1.1 : Employee benefts :

The Company is providing the following benefts to their employees :

a) Gratuity

b) Provident Fund

c) Leave encashment

Actuarial valuation of gratuity has been done with the following assumptions.

NOTE 2: Income Tax

A) The Company has recognized and accounted for cumulative net deferred tax liability in accordance with Accounting Standard (AS-22) issued by the Institute of Chartered Accountants of India, "Accounting for Taxes on Income" in respect of net aggregate timing differences as on 31st March, 2013.

B) There were Income Tax demands aggregating to Rs. 581.85 lakhs pertaining to various assessment years, which arose due to Direct Taxes (Amendment) Act, 2006. These demands have been adjusted by the department against the refunds due to the company, pertaining to various assessment years. The department / company went into Appeals before the Hon''ble Income Tax Appellate Tribunal (ITAT). Hon''ble ITAT has remanded the case back to Assessing offcer in view of Hon''ble Supreme Court judgement in Topman Exports which nullifes the demands against the company. However Appeal order effect is yet to be given. Further, another demand of Rs. 614.67 lakhs relating to assessment year 2008-09 is pending before appellate authorities of the department. Out of Rs. 614.67 lakhs, Rs. 11.06 lakhs has been adjusted by the department against the refunds due to the company pertaining to various assessment years.

NOTE 3 : FORWARD CONTRACTS

Following are the outstanding forward exchange contracts entered into by the Company Forward contracts EURO INR 47.16 lakhs (38.52 lakhs) Sell Hedging. Forward contracts GBP INR 103.07 lakhs (120.45 lakhs) Sell Hedging. Forward contracts USD INR 43.94 lakhs (22.20 lakhs) Sell Hedging.


Mar 31, 2012

Note 1 : CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR)

(Rs.in Lacs)

Particulars 2012 2011

A BILLS DISCOUNTED 10614 10708

B IMPORT DUTY PAYBLE 103 293

In case of non' fulfillment of export obligation under EPCG Scheme(not yet due)

C BANK GUARANANTEES/LETTER OF CREDITS 25 140

D Two cases of employees are pending at Industrial Tribunal II,Lucknow Indeterminate Indeterminate

One case of employee is pending at Labour Court,Noida E Deficiency in stamp duty demanded by state revenue authorities

for purchase of land at Hapur. Out of this the Company has 15 15

deposited Rs 14.67 Lacs as per Interim order of Hon'ble Allahabad High Court. The court remanded the case to the Collector Stamps,

Ghaziabad with the instruction to pass fresh order for releasing Rs. 14.66 Lacs deposited by the Company. The case is now pending with Asst. Commissioner Stamps, Ghaziabad F COUNTER GUARANTEE 339 232

Given by the Company to its directors against their guarantee given to bank G DEMANDS RAISED

(I) ENTRY TAX,COMMERCIAL TAX DEPARTMENT 41 41

(II) INCOME TAX, ITAT LUCKNOW 604 644

(III) TRADE TAX,COMMERCIAL TAX DEPARTMENT 25 25

II. COMMITMENT

A CAPITAL EXPENDITURE (Net of fund already deployed) 3506 686

B UNCLAIMED DIVIDEND 27 44

Notes :

(i) The Company is organized into two main business segments, namely:

Tannery Division ' Manufacturing Finished Leather from Raw Hides & Wet Blue.

Shoe Division ' Manufacturing Finished Leather Shoes.

Segments have been identified and reported considering the distinct nature of products and differing risks and returns accruing there from, the organization structure, and the internal financial reporting systems.

(ii) Segment Revenue in each of the above business segments primarily includes domestic and export sales, export incentives and other miscellaneous income. It also includes inter Segment transfers priced at cost plus a predetermined rate of profit.

(iii) The Segment Revenue in the geographical segments considered for disclosure are as follows:

(a) Revenue within India includes sales to customers located within India and earnings in India.

(b) Revenue outside India includes sales to customers located outside India and earnings outside India.

(iv) Segment Revenue, Results, Assets and Liabilities include the respective amounts identifiable to each of the segments and amounts allocated on a reasonable basis.

Note 2 : INCOME TAX

A The Company has recognized and accounted for cumulative net deferred tax liability in accordance with Accounting Standard (AS' 22) issued by the Institute of Chartered Accountants of India, "Accounting for Taxes on Income" in respect of net aggregate timing differences as on 31st March, 2012 .

B There was outstanding Income Tax demand of Rs. 581.85 lakhs pertaining to various assessment years, which arose due to Direct Taxes (Amendment) Act. 2005. Appeals of the cases related to Assessment year 1999' 2000, 2002' 03, 2003' 04 & 2004' 05 have been allowed by the Hon'ble CIT (Appeals) and demands of Rs. 412.79 lakhs are dropped against the Company and due refund orders are passed by the department. A demand of Rs. 604.20 Lakhs relating to Assessment year 2008' 09 is pending before appellate authorities of the department.

Note 3 : FORWARD CONTRACTS

Following are the outstanding forward exchange contracts entered into by the Company Forward contracts EURO INR 38.52 lakhs (54.54 lakhs) Sell Hedging Forward contracts GBP INR 120.45 lakhs (96.74 lakhs) Sell Hedging Forward contracts USD INR 22.20 lakhs (NIL) Sell Hedging

NOTE 4 : 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 Company has also reclassified the previous year figures in accordance with the requirements applicable in the current year.


Mar 31, 2010

I. Contingent Liabilities

a) Bills discounted with the Companys bankers- Rs. 7760 Lacs (Rs.7681 Lacs).

b) Import duty payable in case of non-fulfillment of export obligation under EPCG Scheme (not yet due) - Rs. 98 Lacs (Rs. 3 Lacs).

c) Bank guarantees / LCs issued by the Companys bankers outstanding at the balance sheet date - Rs .110 Lacs (Rs. 7 Lacs).

d) Labour cases of 158 employees are pending in various courts - Amount indeterminate. However 5 (3) cases pending at industrial Tribunal - II Lucknow amount indeterminate. One case pending at labour court Kanpur - Amount indeterminate.

e) Deficiency in stamp duty demanded by state revenue authorities for purchase of land at Hapur - Rs. 44.05 Lacs. Out of this the company has deposited Rs 14.67 Lacs as per Interim order of Honble Allahabad High Court. The court remanded the case to the collector stamps, Ghaziabad with the instruction to pass fresh order for releasing Rs. 14.67 Lacs deposited by the company. The case is now pending with Asst. Commissioner stamps, Ghaziabad.

f) Counter guarantee given by the Company to its directors against their guarantee given to bank - Rs.227 Crores (197 Crores).

g) Demands raised by the authorities contested at various levels:- i) Entry tax - Rs. 65.45 Lacs (Rs. 37.55 Lacs)

ii) Income tax - Rs. 1118.60 (Rs. 1082.24 Lacs) (Detail at Note M)

h) Related Party Disclosures

Related Party Disclosures, as required by AS, 18- "Related Party Disclosures", issued by Institute of Chartered Accountants of India are given below:

1. Relationships:

(i) Associate Company Mirza (UK) Ltd.

(ii) Key Management personnel Mr. Irshad Mirza (Chairman), Mr. Rashid Mirza (Managing Director), Mr. Shahid & Relatives Mirza, Mr. Tauseef Mirza, Mr Tasneef Mirza, Mr N.P. Upadhyay (Whole Time Directors), Mr. Shuja Mirza, (Vice President Marketing), Mr. Faraz Mirza (Vice President- Production)

iii) Related Companies Euro Footwear Ltd, ShoemaxEngg. Ltd, Achee Shoes Pvt. Ltd., Emgee Projects Pvt. Ltd. Mirza Holding Pvt. Ltd., Mirza Agrotech Pvt. Ltd., Gemini Products Limited, Red Tape International Pvt. Ltd., Shoemac Leather Tech Engineers Ltd., Mayfair Leather Exports Ltd.

iv) Related Parties/Firms Mrs Jamil Ara Begum, Mrs Sabiha Hussain, Mirza Projects, Genesis International Mars International, Genesis Developers, Genesis River View Resorts, LLP.

i) No provision has been made for interest receivable on allotment money in arrears.

k) Income Tax

The Company has recognised and accounted for cumulative net deferred tax liability in accordance with Accounting Standard (AS-22) issued by the Institute of Chartered Accountants of India, "Accounting for Taxes on Income" in respect of net aggregate timing differences as on 31st March, 2010 .

k) The companys challenge to the constitutional validity of the provisions of Direct Tax laws Amendment Act 2006 is still pending before the Honble Allahabad High Court. The demands raised by the authorities under the provisions of the said Act aggre- gate Rs. 1108.85 Lakhs. The Honble Court has restrained the authorities from recovering the demand. Similar orders have been passed by other High Courts in the country.The Central Government has applied to the Honble Supreme Court to transfer all cases involving similar challenges before itself. The matter is pending with the Honble Supreme Court. In the meanwhile the company has also appealed against each assessment order before the appropriate appellate authority.

l) Exchange Fluctuation Difference of Rs.602.92 Lacs (Rs. 2496.60 Lacs) consists of Loss on cancellation of Forward Con- tracts (net) Rs 782.30 Lacs (Rs. 2095.26 Lacs ), Loss due to Exchange Fluctuation Rs. Nil (Rs. 343.56 Lacs) and Profit on Exchange Fluctuation on Export/ Import/ Others Rs.179.38 Lacs. (Rs. 57.78 Lacs).

m) The company does not owe any dues outstanding for more than the period specified in Micro Small & Medium Enterprises Development Act, 2006 as at 31st March 2010, to any Micro and Small & Medium Enterprises. This information is based on data available with the company.

n) Following are the outstanding forward exchange contracts entered into by the Company

Forward contracts USD INR 35.12 lakhs Sell Hedging

Forward contracts GBP USD 6.50 lakhs Sell Hedging

 
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