BHARAT SANCHAR NIGAM LIMITED NOTES FORMING PART OF THE FINANCIAL STATEMENTS ( )

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1 35. RELATED PARTY DISCLOSURE 35.1 Key Management Personnel Designation Name Remarks CMD Shri S.C.Misra From to Shri R K Upadhyay From (A/N) Director (F) Shri S. C. Misra From to Shri R.K. Upadhyay From (A/N) Director (Consumer Mobility) Shri R. K. Agarwal From Director (HRD) Shri A. K. Garg From to Shri A. N. Rai From to Shri R.K. Upadhyay From Director (Consumer Fixed Access) Shri Rajesh Wadhwa From Director (Enterprise) Shri R.K. Agarwal From to Shri R.K. Upadhyay From to Shri A.N.Rai From Govt. Director Shri R.N.Jha From to Govt. Director Shri S.R.Rao From Govt. Director Shri M.P.Tangirala From to Govt. Director Shri Shahbaz Ali From Non-official part-time Director Shri Sanjiv Gupta From to Non-official part-time Director Shri Ashish Guha From Disclosure of transactions between the Company and related parties and the status of outstanding balances as on 31 st March 2012 Name of the Party Description of Transactions of Transaction during the F.Y of Transaction during the F.Y (Rs. In Lakh) Payment of salary and allowances Advance given: (Rs. In Lakh) Key Management Personnel Opening balance Extended During the year Total Repayment of Advance Outstanding Advance The Company being a wholly State owned enterprise, no disclosure as regards related party relationship with other State controlled enterprises and transactions with such enterprises has been made. 36. MANAGERIAL REMUNERATION Remuneration to the Chairman-Cum-Managing Director & other Directors : (Rs. In Lakh) (Rs. In Lakh) Salaries & Allowances Perquisites EPF Contribution Sitting Fees Total

2 37. ADVANCE TO DIRECTORS (Rs. In Lakh) (Rs. In Lakh) due at the end of the year (TA Advance) Maximum amount due during the year AUDITOR S REMUNERATION (STATUTORY/BRANCH AUDITORS) Particulars (Rs. in Lakh) Statutory Branch Auditor Auditor Note: Fees exclusive of Service Tax & Cess wherever applicable. 39. AS 29 DISCLOSURE REQUIREMENT The disclosure relating to provisions in terms of AS 29, to the extent available, are as under: Name of Provisions Wealth Tax Dividend Tax on Dividend Phased out assets Leave Encashment Gratuity Contingencies Opening Balance as at Fresh Provision made during the year 32 Provision utilized during the year (Rs. in Lakh) Statutory Branch Auditor Auditor Statutory Audit Fee As advisor or in any other capacity: Certification Charges Management Services Reimbursement of Expenses Tax Audit fee Provision written back during the year (Rs. in lakh) Closing balance as at (415) (98) (110) - (403) 629,574 42,956-7, ,741 (550,500) (84,513) (5,439) - (629,574) 6,044 3, ,074 (6,687) (6,044) (6,687) - (6,044) ,192 (801) (207) (112) (273) (623) Total 636,644 46, , ,404 (558,403) (90,862) (12,348) (273) (636,644) Note: Figures in bracket denotes previous year figures. 40. OTHER SCHEDULE-VI REQUIREMENTS Information required as per Note 5(viii) of General Instructions for preparation of Statement of Profit and Loss, Part II of Revised Schedule VI of Companies Act, 1956, to the extent available, are as under: 40.1 Value of Imports on CIF Basis: Raw Material - - Components & Spares Parts - - Capital Goods ,956 Total ,956

3 40.2 The expenditure in foreign currency: Expenses on Services 24,264 2,688 Travelling Others 3,889 11,280 Total 28,190 14, Consumption of imported and indigenous stores & spares parts (to the extent identified): (Rs. in lakh) % (Rs. in lakh) % Imported 3, , Indigenous 18, , Total 22, , Earnings in Foreign currency: Training Fee Income from Services 9,747 2,824 Others Total 10,764 2, LEASE The company has taken vehicles for Senior Executives under Operating Lease, which expires between Oct to Dec ( P.Y. May 2009 to January 2015). The gross rental expenses, excluding service tax, for such vehicles are Rs. 101 Lakh (P.Y. Rs. 106 Lakh). The committed lease rentals in the future are: (Rs. In Lakh) (Rs. In Lakh) Not later than one year (excluding service tax) Later than one year and not later than five years (excluding service tax) Total OTHERS 42.1 In the absence of any agreement between BSNL and MTNL generally no income and expenditure have been recognized on account of use of jointly occupied buildings and other infrastructure owned by either party. 43. CONTINGENT LIABILITIES AND COMMITMENTS: 43.1 Contingent Liabilities (i) Claims not acknowledged as debts are as follows: Particulars As at As at No. of Cases No. of Cases TR Billing Enhanced Sales Tax in lieu of C/D Forms 18 2, ,838 On account of service tax disputed 94 18, ,430 Sales tax disputed 45 7, ,211 Customs duty disputed Central Excise claims 24 1, ,884 Others , ,448 Total , ,868 33

4 (ii) Claims pending in court related to Land Acquisition, TR Billing, Service Tax, Central Excise & Sales tax, Arbitration cases and others. Particulars As at As at No. of cases 20,463 19,508 (Rs. in lakh) 1,706,195 1,027,166 (iii) Demands raised by the Income Tax Departments not acknowledged as debt are as follows: Assessment Year As at As at (Refer Note-1) (Refer Note-2) Forum where pending Writ pending at Hon ble Delhi High court against re-assessment u/s 147 Appeal pending at CIT (A) against penalty order u/s 271(1)(c) Appeal pending at ITAT Appeal pending at ITAT (Refer Note-3) Appeal pending at ITAT 263 / Appeal pending at ITAT (Refer Note -4) (Ref Note - 5) (Refer Note 6) (Refer Note No.7) (Refer Note Appeal filed before ITAT against penalty order u/s 271(1)(c) Appeal pending at ITAT Appeal pending at ITAT Appeal being filed at Assessment u/s 143 (3) Appeal filed at CIT(A) against Assessment u/s 143 (3) 34 (Rs. In lakh) Forum where pending 81,899 Writ pending at Hon ble Delhi High court against re-assessment u/s ,307 Appeal pending at CIT (A) against penalty order u/s 271(1)(c) 197,943 Appeal pending at assessment u/s 36,110 Appeal pending at assessment u/s 9,684 Appeal pending at assessment u/s 263/ 31,667 Appeal pending at assessment u/s 115,316 Appeal pending at CIT (A) against penalty order u/s 271(1)(c) 92,606 Appeal pending at assessment u/s 97,095 Appeal pending at assessment u/s 70,891 Appeal pending at CIT (A) against Assessment u/s 143 (3) (Rs. In lakh) 81,899 27, ,943 36,110 9,684 31, ,316 92,606 97, ,202 59, No.8) Total 819, ,829 Note: 1. The Income Tax Department has initiated re-assessment proceedings against the Company for the A.Y and A.Y The main contention of the department is that the amount shown in the balance sheet of the respective years under the head Reserve amounting to Rs. 3,316,000 lakh is to be treated as financial relief/grant/subsidy hence is to be reduced from the actual cost of fixed assets. Consequently the depreciation charged would be lower than what has been claimed by the Company. The re-assessment proceedings will be having cascading effect on all the subsequent assessment years also.

5 2. The appeal filed against the Penalty Order u/s 271(1)(c) of the I.T. Act, 1961 passed for the A.Y and the demand of Rs. 27,307 lakh is pending before CIT (A). 3. Assessment Order u/s 263/ dated has been passed for the A.Y , whereby deduction u/s 80-IA amounting to Rs. 452,830 lakh was disallowed. An additional demand of Rs. 100,856 lakh has been raised against the company. The Appeal filed against this Assessment has been decided partly by CIT (A) in favour of BSNL vide their Order dated As per Appeal effect u/s 250/263/ dated for effecting Order of CIT (A) dated , the additional demand of Rs. 100,856 lakh has been reduced to 9,684 lakh. Further Appeal has been filed with Hon ble the order of CIT(A). 4. The appeal filed against the penalty for A.Y under Section 271(1)(c) imposed to the extent of Rs.115,316 lakh has been disposed of by CIT (A) vide their order dated Substantial relief has been allowed to the company as mentioned below. Further Appeal is being filed with Hon ble the order of CIT (A). S.No. Particulars Additions under Normal Provisions/Section 115JB Penalty(100%) (Rs.) 1 Depreciation Normal 8,299,361,961/- 2 Write off other than Bad Debts Normal 36,592/- 3 Disallowance of claims of deductions Normal 2,583,833,018/- u/s 80-IA 4 Provision of bad & Doubtful debts Section 115JB 563,000,000/- Total Rs. 11,446,231,571/- 5. For A.Y , an additional demand of Rs. 51,890 lakh was raised against the company vide Assessment Order u/s dated The additional demand for A.Y has further been increased from Rs. 51,890 lakh to Rs. 92,606 lakh vide Assessment Order u/s 154/ dated The Appeal filed against this Assessment has been decided partly in favour of BSNL by CIT (A) vide their Order dated The Company has filed appeal before the Order of CIT(A). 6. For A.Y , an additional demand of Rs. 35,218 lakh was raised against the company vide Assessment Order u/s dated The additional demand for A.Y has further been increased from Rs. 35,218 lakh to Rs. 97,095 lakh vide Assessment Order u/s 154/ dated The Appeal filed against this Assessment has been decided partly in favour of BSNL by CIT (A) vide their Order dated The Company has filed appeal before the Order of CIT(A). 7. For AY , an additional demand of Rs. 100,202 lakh was raised vide Assessment Order dated Vide Rectification Order u/s 154/ dated , the additional demand raised vide Assessment Order u/s dated has been reduced from Rs. 100,202 lakh to Rs. 70,891 lakh. First Appeal filed before CIT(A) 143 has been disposed of by CIT(A) vide their Order dated and Order u/s 154 dated Second Appeal is being filed with abovementioned Orders of CIT (A). 8. During the year additional demand of Rs. 59,429 lakh has been raised vide Assessment Order dated for the A.Y The Company has filed appeal before CIT (A) against the Assessment Order. 9. Penalty proceedings u/s 271(1)(c) of the I.T. Act 1961 which was initiated against the Company for A.Y , A.Y , A.Y , A.Y , A.Y and has been kept in abeyance. The additional demand, if any has not been quantified. 10. Additional interest u/s 234B and 220, if any, arising out of above-mentioned Income Tax proceedings has not been quantified since demand has not been finally crystallized against the Company. 35

6 11. shown are nearest to rupees in lakh. 12. The Advance Income Tax (net of provision for Tax of Rs. 717,196 lakh) which has been shown under other current assets, is Rs. 577,682 lakh. As per records, an amount of Rs. 565,372 lakh (P.Y. 507,726 lakh) has been adjusted by Income Tax Department against the additional demand of Rs. 819,947 lakh (P.Y. 789,829 lakh) mentioned above which is contested by the Company at appropriate forums. (iv) Liability on account of bank guarantees given by the Company. Item As at As at *With cash *Without cash *With cash *Without cash No. of cases , ,326 (*) One circle has not ascertained the details of bank guarantee (v) In case of few circles, the amount of contingent liability has not been ascertained. (vi) As per Office Memorandum dated 19th November, 2009, Pension Contribution was payable on the actual pay drawn as on 1st January 2007 (being the date of implementation of second pay commission for IDA). Whereas BSNL was paying pension contribution on maximum of the scale as advised by DOT. However during the current year, from 1st December 2011 the management has decided to pay the pension contribution as per office memorandum dated 19th November, For those who are retiring within six months, pension contribution is paid on maximum of the pay scale as per letter no 7-45/2008-TA-I, Dated of Director(A/cs-I)IA, DoT. The actual difference between these two methods of Pension Contribution payment upto 31 st March 2012 is Rs. 10,282 Lakhs 43.2 Commitments a) Capital Commitments (i) The estimated amounts of contracts remaining to be executed on capital account and not provided for in relation to execution of works and purchase of equipments are Rs. 192,656 lakh. (ii) In case of few circles, the estimated amount of contract remaining to be executed on capital account has not been ascertained. b) Other Commitments (i) The amount of other commitments is unascertained 44. CURRENT TAX The provision for Income Tax for the current year has not been made since the company is not having any taxable income either under normal provision of Income Tax Act, 1961 or special provision u/s 115JB (MAT) of the Income Tax Act, BSNL is executing various projects for various Government departments on reimbursement basis. 46. (a) Information required relating to consumption of stores & spare parts under Schedule VI of the Companies Act, 1956 is not ascertainable for the year ended 31 st March 2012 (P.Y. : unascertainable), since consumption of stores is included under the normal heads of repairs & maintenance. (b) Information required under Schedule VI of the Companies Act, 1956 in respect of opening stock, closing stock and sales of finished goods have not been shown as the production of goods by the Company is for captive consumption. 36

7 47. Figures of the previous year have been regrouped or reclassified wherever necessary to conform to the current years grouping and classification. As per our report of even date For Sharma Goel & Co. Chartered Accountants FRN N For and on behalf of Bharat Sanchar Nigam Limited R.K. Upadhyay Chairman and Managing Director Amar Mittal Partner M. No: K.C.G.K Pillai Director (Finance) Rajeev Singh General Manager (Corporate Accounts) Place : New Delhi Date : 28th August 2012 H.C.Pant Company Secretary and Sr. General Manager (Legal) 37

BHARAT SANCHAR NIGAM LIMITED Notes to the financial statements for the year ended 31 March 2013

BHARAT SANCHAR NIGAM LIMITED Notes to the financial statements for the year ended 31 March 2013 Notes to the financial statements for the year ended 28. ASSETS AND LIABILITIES TAKEN OVER FROM DoT 28.1 In pursuance of the Memorandum of Understanding dated 30 September 2000 executed between Government