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

Transcription

1 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 of India and the Company, all assets and liabilities in respect of business carried on by DTS and DTO were transferred to the Company with effect from 01 October 2000 at a provisional value of Rs. 6,300,000 lacs and up to the current financial year BSNL has identified net assets of Rs. 6,329,439 lacs (P.Y. Rs. 6,331,857 lacs) against it. During the current financial year, the management based on physical verification of fixed assets and inventory and reconciliation of various heads of assets and liabilities in the subsidiary and general ledgers which has resulted in increase/decrease in the following assets and liabilities which were taken over as on 01 October 2000 amounting to net reduction in the assets of Rs. (2,418) lacs [P.Y. (4,703) lacs] : Up to 31 March 2012 Additions/ (Deletions) during the year Up to 31 March 2013 Assets Fixed assets 5,411,323 (2,252) 5,409,071 Capital work-in-progress 502,628 (1) 502,627 Inventory 187,985 (135) 187,850 Sundry debtors 683, ,196 Advance to contractors 39,448-39,448 Deposit with electricity boards /others 2,184-2,184 Total-A 6,826,764 (2,388) 6,824,376 Liabilities Customer deposits 393, ,704 Earnest money deposits 12,122-12,122 Security deposits from contractors /suppliers 29,005-29,005 Working expense liability as on 01 October , ,513 Contractors bills payable as on 01 October ,593-16,593 Total-B 494, ,937 Net Assets taken over by the Company (A-B) 6,331,857 (2,418) 6,329,439 Previous Year 6,336,560 (4,703) 6,331,857 The net assets and the contingent liabilities transferred to the Company as on 01 October 2000 are subject to confirmation by DoT as regard to their ownership and the value The capital structure for BSNL concurred by the Ministry of Finance and conveyed by the Department of Telecommunications vide their U.O. No. 1-2/2000-B (Pt.) dated 13 December 2001 has been treated as consideration for transferring the above stated assets and liabilities is as follows: As at 01 October 2000 (as on ) Additions/ (Deletions) during the year ended 31 March 2013 Total structure as at 01 October 2000 (as on 31 March 2013) Equity 5,00,000-5,00,000 9% Non-cumulative preference shares 7,50,000-7,50, year government loan (Interest at prevalent government lending rate) 7,50,000-7,50,000 Loan from MTNL # 3,05,600-3,05,600 Capital reserves* 40,26,257 (2,418) 40,23,839 Total 63,31,857 (2,418) 63,29,439 # the entire amount has already been repaid. * Represents the difference between the total value of the assets taken over and the long term identified liabilities & the capital structure, as on 01 October 2000 as communicated by DoT. 23

2 Notes to the financial statements for the year ended 28.3 In pursuance of clause 13 of Agreement of Transfer executed between the Government of India and BSNL dated 30 September 2000 all costs, charges and expenses including stamp duties, registration charges, transfer duties, any other taxes, levies, duties or charges relating to or in connection with completion of transfer of assets and liabilities shall be borne by the Government of India. 29. LICENSE FEE AND SPECTRUM CHARGES 29.1 During the year there was no change of formula in distribution of the revenue between various components and thus the same formula adopted during is followed this year also, as per the following percentage:- Service Basic CMTS NLD ILD Leased circuits 30% - 70% - Basic services 70.72% % 11.7% CMTS services % 21.26% 3.24% The NLD/ILD portion of POI revenue has been taken on actual basis During the year the DoT vide letter no /2010-AS-I(Vol. II) (Pt.) Dated , has changed the License fee from 10% to 9% for A category circles, from 6% to 7% for C category circles and from 6% to 7% for ISP,VSAT,NLD & ILD. There is no change in the B category circles. This was effective from 01 July EMPLOYEE COST 30.1 The Company has made pension contribution as per applicable rates to DoT on the basis of pay scales for absorbed employees and for other employees working on deemed deputation as per the CDA pay scales in accordance with Financial Rule 116 of the Government of India. The liability on account of pension payable to all such employees will be that of Government of India as communicated by the Secretary, DoT vide their DO No. 1-45/2003-B dated 15 March However, in the year DoT vide their letter No. 1-45/2003-B dated 15 June 2006 has intimated that annual pension liability of the Government in respect of employees of DoT / DTS / DTO who retired prior to 01 October 2000 and those who have worked / are working in BSNL on deemed deputation and for those who are absorbed in BSNL shall not exceed 60% of the annual receipts to Government from the item (a) Dividend income from MTNL/BSNL, (b) License fee from MTNL/BSNL, (c) Corporate Tax/Excise Duty/Service Tax paid by BSNL. Any amount exceeding the receipts on account of 3 items mentioned above shall be borne by MTNL/BSNL. BSNL has taken up the matter with the Government stating that its liability is restricted to pension contribution as per the rates prescribed in Financial Rules During the year, the Company has recognised the following amounts in the Statement of Profit and Loss : a) Defined Contribution Plans Contribution to defined contribution plan i.e. Employer s contribution to provident fund and pension contribution to Government of India for the year is charged to Statement Profit & Loss. These amounts are shown as under: Employer's Contribution to provident fund 15,932 14,003 Pension Contribution to Government of India 91, ,965 b) Defined Benefit Plans Gratuity The Employees Gratuity Fund Scheme administered by BSNL Employees Gratuity Fund Trust through two fund managers namely Life Insurance Corporation of India and SBI Life Insurance Company Limited, is a defined benefit plan. The present value of obligation is determined on actuarial valuation done by LIC using Projected Unit Credit Method to arrive the final obligation. 24

3 Notes to the financial statements for the year ended i) Defined benefits / expenses for Gratuity recognised for the year 31 March 2012 Current service cost 3,388 3,120 Interest cost 2,289 1,703 Expected return on Plan Assets (-) 2,443 (-) 1,314 Total actuarial (gain)/loss 908 2,655 Past service cost - - Curtailment and Settlement cost/(credit) - - Net Cost 4,142 6,164 ii) The assumptions used to determine the benefit obligations are as follows: Discount rate 8% 8% Expected rate of Increase in compensation levels 7% 7% Expected average remaining working lives of employees (years) Mortality table LIC ( ) Ultimate LIC ( ) Ultimate iii) Reconciliation of opening and closing balances of defined benefit obligations for Gratuity Present value of obligations as at beginning of year 28,617 21,289 Interest cost 2,289 1,703 Current service cost 3,388 3,120 Benefits paid (-) 74 (-) 150 Actuarial (gain)/loss on obligations 908 2,655 Present value of obligations as at end of year 35,128 28,617 iv) Reconciliation of opening and closing balances of fair value of plan assets for gratuity Fair value of plan assets at beginning of year 19,543 18,379 Contributions during the year 6,029 - Expected return on plan assets 2,443 1,314 Benefits paid (-) 74 (-) 150 Actuarial gain / (loss) on Plan assets - - Fair value of plan assets at the end of year 27,941 19,543 v) Reconciliation of fair value of assets and obligations for Gratuity Fair value of plan assets at the end of year 27,941 19,543 Present value of obligations as at end of year 35,128 28,617 Unfunded amount recognized in Balance Sheet 7,187 9,074 25

4 Notes to the financial statements for the year ended vi) Gratuity Fund Investment details (Fund manager wise, to the extent funded) Life Insurance Corporation of India 24,676 16,547 SBI Life Insurance 3,265 2,996 Total 27, Leave Encashment: Leave encashment is also a defined benefit plan. The liability towards leave encashment has been determined through actuarial valuation as per Accounting Standard 15 (revised 2005) Employee Benefits using Projected Unit Credit Method. i) Defined benefits / expenses for Leave Encashment recognised for the year Current service cost 10,019 7,789 Interest cost 53,179 49,743 Expected return on Plan Assets (-) 56,159 (-) 51,211 Total actuarial (gain)/loss 2,151 (14,576) Past service cost - - Curtailment and Settlement Cost/(Credit) - - Net Cost 9,190 (8,255) ii) The assumptions used to determine the benefit obligations are as follows: Discount rate 8% 8% Expected rate of increase in compensation levels 7% 7% Expected average remaining working lives of employees (years) Withdrawal rate 1% to 3% depending on age Mortality table LIC ( ) Ultimate % to 3% depending on age LIC ( ) Ultimate iii) Reconciliation of opening and closing balances of defined benefit obligations for Leave Encashment. Present value of obligations as at beginning of year 664, ,785 Interest cost 53,179 49,743 Current service cost 10,019 7,789 Benefits paid - - Actuarial (gain)/loss on obligations (balancing figure) 2,151 (14576) Present value of obligations as at end of year 730, ,741 26

5 Notes to the financial statements for the year ended iv) Reconciliation of opening and closing balances of fair value of plan assets for Leave Encashment. Fair value of plan assets at beginning of year 581, ,141 Contributions during the year - - Expected return on plan assets 56,159 51,211 Benefits paid - - Actuarial gain / (loss) on plan assets - - Fair value of plan assets at the end of year 637, ,352 v) Reconciliation of fair value of assets and obligations for Leave Encashment. Fair value of plan assets at the end of year 637, ,352 Present value of obligations as at end of year 730, ,741 Unfunded amount recognised in Balance Sheet 92,579 83,389 vi) Leave Encashment Fund Investment details (Fund manager wise, to the extent funded). Life Insurance Corporation of India (100%) 637, ,352 Total (100%) 637, , FIXED ASSETS / DEPRECIATION / CAPITAL WORK IN PROGRESS 31.1 Fixed Assets taken over from DoT as on 01 October 2000 are based on physical verification conducted by the management. The value of fixed assets taken over including capital work-in-progress has been determined by the management using the original cost of the asset (wherever available) or alternatively the value arrived at by applying Strategic Business Plan ( SBP ) rates, which is based on technical assessment, as reduced by the depreciation up to 30 September 2000 on Straight Line Basis at the rates prescribed by DoT. Capital assets acquired by the company after 01 October 2000 is valued at the cost including all direct charges incurred up to the time of installation or put to use. The transfer values, as indicated above, in respect of assets transferred from DoT on 01 October 2000 have been treated as its original cost and depreciation has been provided on written down value method at the rates prescribed in Schedule XIV of the Companies Act, 1956 without reassessing the remaining useful life of such assets as on that date. Depreciation has been provided at the rates as stated above for all the assets acquired after 01 October 2000 except in the case of Subscribers Installations which are depreciated over the useful life of 5 years on written down value method. Depreciation has been calculated by the circles, as per the policies of the Company Land at several locations has been taken over at a nominal value say Re. 1, wherever original cost is not available. As at thirty two circles (P.Y. thirty six circles) have identified the leasehold land. In the absence of the information relating to such acquisition in other cases, no adjustment has been made for amortizing the cost of such unidentified lease hold land over the lease period. The lease period of a few leasehold lands on which buildings are constructed, have not been renewed / or the renewals are under dispute. No provision has been made for the 'surrender value / written down value of the building' in the hope that the leases would be ultimately renewed Pending transfer of the immovable property in the name of the Company, documents in respect of some land & buildings acquired during the period are under legal process/execution. Further in respect of assets taken over from DoT, formalities for vesting the assets in favour of the Company wherever necessary/applicable are under process. Further some of the assets acquired by the Company are yet to be registered in the name of the Company. 27

6 Notes to the financial statements for the year ended 31.4 The Company, as per instructions issued by the Ministry of Communications & IT through letters having number P-11014/13/2008-PP dated nil and number P-11014/13/2008-PP dated 12 June 2010, has provided Rs. 1,018,658 lacs and Rs. 831,380 lacs as one time charge for 3G spectrum and BWA spectrum respectively in the financial year , which was earmarked for the Company on 08 August Above-mentioned amount has been paid to the Government of India during the financial year As per terms and conditions of NIA the right to use above-mentioned spectrum is for 20 years from the date of awards of right to commercially use the allocated spectrum block. Accordingly the Company is amortizing the one time spectrum fee over the period of twenty years as per straight-line method Certain assets that have been completed and put to use, have not been capitalized in thirteen circles (P.Y. seventeen circles) pursuant to the policy of capitalizing only after completion certificates have been obtained and till then these are still shown as capital work-in-progress. The amount ascertained in respect of nine circles (P.Y. five circles) is Rs. 33,292 lacs (P.Y. Rs 3,977 lacs). To that extent, these have not been depreciated on account of the fact that the total expenditure on such capital works is still to be classified under the proper heads Establishment and administration expenses incurred in units where project work is also undertaken, are allocated to capital and revenue based either on man-month allocated or proportionate basis In one circle (P.Y. one circle), there is difference between the CWIP subsidiary ledger and general control ledger. 32. DoT BALANCES Net amount of Rs. 123,777 lacs (P. Y. Rs. 134,431 lacs) recoverable on current account from DoT is subject to confirmation, reconciliation and consequential adjustment. There is no agreement between the Company and DoT for interest recoverable / payable on outstanding amounts of DoT on current account. Hence no accrual for interest has been made on the amount payable to / recoverable from DoT. 33. INTER/INTRA CIRCLE REMITTANCE The management is in the process of reconciling the various differences between the subsidiary records and the corresponding control accounts and the balance of Rs. 102,458 lacs (P.Y. Rs. 123,615 lacs) in Inter/Intra- Circle Remittances account. The cumulative impact of such differences between control accounts and subsidiary ledger and the un-reconciled balance in Inter/Intra Circle Remittance account on the affected accounts of income, expenditure, assets and liabilities is currently not ascertainable. 34. EARNINGS PER SHARE Description Unit F.Y F.Y Loss after tax (788,444) (885,070) *Less: Preference dividend including tax - - Balance for Equity Shareholders (788,444) (885,070) Number of Equity shares outstanding (in number) 5,000,000,000 5,000,000,000 Face value of shares (in Rs.) Basic/Diluted earnings per share (in Rs.) (15.77) (17.70) * No provision for dividend on preference share capital has been made due to loss. 28

7 Notes to the financial statements for the year ended 35. SEGMENT REPORTING 29

8 Notes to the financial statements for the year ended 36. RELATED PARTY DISCLOSURE 36.1 Key Management Personnel Designation Name of Incumbent Remarks CMD Shri R K Upadhyay From 30 April 2011 (A/N) Director (F) Shri R.K. Upadhyay From 30 April 2011 to 25 April 2012 Shri K.C.G.K. Pillai From 25 April 2012 (A/N) Director (Consumer Mobility) Shri R. K. Agarwal From 11 April 2008 Director (HRD) Shri R.K. Upadhyay From 05 March 2012 to 18 June 2012 Shri. A.N. Rai From 19 June 2012 Director (Consumer Fixed Shri Rajesh Wadhwa From 01 August 2008 to 31 May 2012 Access) Shri N. K Gupta From 01 June 2012 (F/N) Director (Enterprise) Shri A.N.Rai From 19 September 2011 Govt. Director Shri S.R.Rao From 13 April 2011 to 29 May 2012 Govt. Director Shri Shahbaz Ali From 14 February 2012 Govt. Director Ms. Rita Amitabh Teaotia From 04 September 2012 Non-official part-time Director Shri Ashish Guha From 21 May 2010 Non-official part-time Director Prof. N. Balakrishnan From 17 July 2012 Non-official part-time Director Shri. Ajai Vikram Singh From 17 July Disclosure of transactions between the Company and related parties and the status of outstanding balances. Name of the Party Key Management Personnel Description of transactions 30 Remuneration paid Payment of salary and allowances Perquisites 5 4 Sitting fees 2 1 Total Advance given: Opening balance Extended during the year Total Repayment of advance Outstanding advance The Company being a wholly State owned enterprise, hence disclosure as regards related party relationship with other State controlled enterprises and transactions with such enterprises has not been made in accordance with Accounting Standard-18 Related party disclosures. 37. AUDITOR S REMUNERATION (STATUTORY/BRANCH AUDITORS) Note: Fees exclusive of Service Tax & Cess wherever applicable Statutory Auditor Branch Auditor Statutory Auditor Branch Auditor Statutory audit fee Certification charges Reimbursement of expenses Total Other services Tax audit fee

9 Notes to the financial statements for the year ended 38. 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 Fresh Provision Provision Closing balance as at provision utilized written back balance as at 01 April made during during the during the 31 March 2012 the year year year (403) (92) (98) - (397) ,741 65, ,090 (629,574) (42,956) - (7,789) (664,741) 9,074 4,142 6,029-7,187 (6,044) (3,044) (14) - (9,074) 1, ,256 (623) (631) (60) (2) (1,192) Total 675,404 69,696 6, ,923 (636,644) (46,723) (172) (7,791) (675,404) Note: Figures in bracket denotes previous year figures. 39. 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: 39.1 Value of Imports on CIF Basis: * Raw material 2,401 - Components & spares parts - - Capital goods 57, Total 60, * One circle has not ascertained the value of import on CIF basis The expenditure in foreign currency: Expenses on services 7,307 24,264 Travelling Others 9,086 3,889 Total 16,412 28, Consumption of imported and indigenous stores & spares parts (to the extent identified): % % Imported 12, , Indigenous 22, , Total 35, ,

10 Notes to the financial statements for the year ended 39.4 Earnings in foreign currency: Training fee Income from services 8,423 9,747 Others Total 9,043 10, LEASE The Company has taken vehicles for senior executives under operating leases, which expire between April 2014 to July 2017 (P.Y. October 2012 to December 2016). The gross rental expenses, excluding service tax, for such vehicles are Rs. 92 lacs (P.Y. Rs. 101 lacs). The committed lease rentals in the future are: 31 March March 2012 Not later than one year (excluding service tax) Later than one year and not later than five years (excluding service tax) Total OTHERS 41.1 In the absence of any agreement between BSNL and MTNL generally no income and expenditure have been recognised on account of use of jointly occupied buildings and other infrastructure owned by either party. 42. CONTINGENT LIABILITIES AND COMMITMENTS: 42.1 Contingent Liabilities (i) Claims not acknowledged as debts are as follows: As at As at No. of Cases Amount No. of Cases Amount TR Billing Enhanced Sales Tax in lieu of C/D 39 2, ,430 Forms On account of service tax disputed 94 17, ,076 Sales tax disputed 59 16, ,812 Customs duty disputed Central Excise claims 17 3, ,064 Licence fee and spectrum charges* 1 691, Others , ,478 Total , ,975 * Demand raised by DoT on account of one time spectrum charges for GSM spectrum held by BSNL. Since the matter is subjudice and the amount is not crystallised this amount has been shown as contingent liabilities. (ii) Claims pending in court related to Land acquisition, TR billing, Service tax, Central Excise & Sales tax, Arbitration cases and others. As at As at No. of cases 16,520 20,463 Amount 273,354 1,706,195 32

11 Notes to the financial statements for the year ended (iii) Demands raised by the Income Tax Departments not acknowledged as debt are as follows: Assessment Year (Refer Note 1) (Refer Note 2) Forum where pending Writ at Hon'ble Delhi High Court against re-assessment u/s 147 Appeal pending at penalty Order u/s 271(1)(c) Appeal pending at Assessment u/s Appeal pending at Assessment u/s (Refer Note 3) Appeal pending at Assessment u/s 263 / Appeal pending at Assessment u/s (Refer Note 4) (Refer Note 5) (Refer Note 6) (Refer Note 7) (Refer Note 8) Appeal pending at penalty Order u/s 271(1)(c) Appeal pending at Assessment u/s Appeal pending at Assessment u/s Appeal filed at Assessment u/s Appeal filed at ITAT against Assessment u/s Appeal filed at CIT (A) against Assessment u/s As at 31 March 2013 Amount 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 Filed before 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 being filed in Assessment u/s 59,429 Appeal filed at CIT(A) against Assessment u/s As at 31 March 2012 Amount 81,899 27, ,943 36,110 9,684 31, ,316 92,606 97,095 70,891 59,429 3, Total 8,23, ,947 33

12 Notes to the financial statements for the year ended Notes: 1. The Income Tax (I.T) Department had re-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 lacs 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. The initiation of re-assessment proceedings were challenged in Delhi High Court by BSNL through writ petitions 550/2007 and 7707/2007. Hon ble High Court passed the judgments on both the writ petitions on 09 May 2013 setting aside the re-assessment proceedings. Thus, demand for is likely to be wiped off unless I.T Department appeals against the judgment in Apex Court. Response from I.T Department to High Court Orders dated 09 May 2013 has not been received by BSNL so far. 2. The appeal filed against the penalty order u/s 271(1)(c) of the I.T. Act, 1961 passed for the AY was decided by CIT(A) in favour of BSNL vide his order dated 03 December I.T Department has filed appeal in the order of CIT(A). 3. Assessment order u/s 263/ dated 25 September 2009 has been passed for A.Y , whereby deduction u/s 80-IA amounting to Rs. 452,830 lacs was disallowed. An additional demand of Rs.100,856 lacs 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 30 April 2010.As per appeal effect u/s 250/263/ dated 30 June 2010 for effecting order of CIT (A) dated 30 April 2010, the additional demand of Rs.100,856 lacs has been reduced to 9,684 lacs. 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 lacs has been disposed of by CIT(A) vide their order dated 14 March Substantial relief has been allowed to the company as mentioned below : S.No. Additions under Normal Provisions/ Section 115JB Penalty(100%) (Rs in lacs) 1 Depreciation Normal 82,994 2 Write off other than Bad Debts Normal - 3 Disallowance of claims Normal 25,838 of deductions u/s 80-IA 4 Provision of bad & Doubtful debts Section 115JB 5,630 Total 114,462 Further, Second appeal has been filed by both BSNL and Income Tax Department with Hon ble order of CIT(A) vide Appeal No 2196/DEL-2012 and 2799/DEL-2012 respectively. 5. For A.Y , an additional demand of Rs. 51,890 lacs was raised against the company vide Assessment Order u/s dated 27 December The additional demand for A.Y has further been increased from Rs. 51,890 lacs to Rs. 92,606 lacs vide Assessment Order u/s 154/ dated 24 September The appeal filed against this assessment has been decided partly in favour of BSNL by CIT(A) vide their order dated 28 March The Company has filed appeal before the Order of CIT(A). 34

13 Notes to the financial statements for the year ended 6. For A.Y , an additional demand of Rs 35,218 lacs was raised against the company vide Assessment Order u/s dated 14 December The additional demand for A.Y has further been increased from Rs 35,218 lacs to Rs. 97,095 lacs vide Assessment Order u/s 154/ dated 10 August The appeal filed against this Assessment has been decided partly in favour of BSNL by CIT(A) vide their Order dated 29 March The company has filed appeal before the order of CIT(A). 7. For A.Y , an additional demand of Rs. 100,202 lacs was raised vide Assessment Order dated 23 December Vide Rectification Order u/s 154/ dated 30 January 2012, the additional demand raised vide Assessment Order u/s dated 23 December 2010 has been reduced from Rs 100,202 lacs to Rs. 70,891 lacs. First Appeal filed before CIT(A) against Assessment u/s 143 has been disposed off by CIT(A) vide their Order dated 16 February 2012 and Order u/s 154 dated 12 March Second Appeal has been filed with abovementioned Orders of CIT (A). 8. During the year additional demand of Rs. 59,429 lacs had been raised vide Assessment order dated 02 November 2011 for the A.Y This amount has already been paid by BSNL/adjusted by way of Refund of other assessment years. The company filed appeal before CIT(A) against the Assessment Order which was decided vide appellate order dated 24 September The additional demand was reduced from Rs. 59,429 lacs to Rs. 29,750 lacs. Hence a relief of Rs. 29,679 lacs has been obtained by the company by appeal effect of Order dated 24 September 2012 passed by CIT(A)-V, New Delhi. A refund of Rs. 31,163 lacs has been granted to company (Including interest u/s 244A amounting to Rs. 1,484 lacs) which has been adjusted against the Outstanding demand of A.Y Income Tax Department has filed an appeal in Appellate Order. BSNL also filed the appeal. 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. 11. The Advance Income tax (net of provision for tax of Rs. 717,196 lacs (P.Y. Rs. 717,196 lacs)) which has been shown under long term loans & advances is Rs. 616,951 lacs (P.Y. Rs 577,682 lacs). As per records, an amount of Rs. 596,535 lacs (P.Y. 565,372 lacs) has been adjusted by Income Tax Department against the additional demand of Rs. 823,018 lacs (P.Y. 819,947 lacs) 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 margin Without cash margin *With cash margin *Without cash margin No. of cases Amount 427 5, ,336 * One circle has not ascertained the details of bank guarantee. (v) In case of four circles the amount of contingent liability has not been ascertained. 35

14 Notes to the financial statements for the year ended (vi) As per Office Memorandum dated 19 November 2009, pension contribution was payable on the actual pay drawn as on 01 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 from 01 December 2011 the management has decided to pay the pension contribution as per office memorandum dated 19 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 19 April 2012 of Director(A/cs-I)IA, DoT. The actual difference between these two methods of Pension Contribution payment upto is Rs. 30,844 lacs 42.2 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. 231,039 lacs (P.Y. 192,656 lacs). (ii) In thirteen 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, except one circle. 43. 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. 45. (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 (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. 46. The Company s one of the circles in the state of Uttarakhand has tangible assets (net) and current assets aggregating to Rs 70,713 lacs as at. Subsequent to the Balance Sheet, there was a climatic catastrophe which has caused damage to assets of Uttarakhand circle. The company is in the process of identifying the quantum of loss. Till the complete assessment is over it is not felt necessary to make any provisions 47. Figures of the previous year have been regrouped or reclassified wherever necessary to conform to the current years grouping and classification. for Walker, Chandiok & Co Chartered Accountants FRN N Atul Seksaria Partner M.No: For and on behalf of Bharat Sanchar Nigam Limited R.K. Upadhyay Chairman and Managing Director K.C.G.K Pillai Director (Finance) Rajeev Singh General Manager (Corporate Accounts) Place : New Delhi Date : 30 August 2013 H.C. Pant Company Secretary and Sr. General Manager (Legal) 36

15 Notes to the financial statements for the year ended 37