CURRENT LIABILITIES AND PROVISIONS Examples of some of the notes to accounts relating to current liabilities and provisions are given below : 1. Sundry Creditors includes Rs. ____________ being the amount of (a) difference in rate of interest, (b) disputed claims and (c) amounts retained by the Company with regard to the transaction with foreign suppliers. 2. The amount of Rs. __________ represents proceeds of some drafts on ___________ Delhi received by the company and deposited in its account with the Bank of India Kanpur. In the absence of any information as to from whom the drafts were received by the company and the purposes, the company has credited the amount to `Suspense Account'. In the absence of any information available to us in this regard, we are not in a position to state whether the amount is properly included in the item of `Sundry Creditors'. 3. Included under the head Sundry Creditors are balance in the accounts of certain parties which are subject to reconciliation. Owing to industiral unrest, the relevant particulars from all the parties could no be obtained in time. On receipt of the particulars, necessary adjustments, if any, would be carried out. 4. Difference in trial balance of Rs. _________ for the year ________ has been caried forward, under the head Current Liabilities Schedule _____ to be scrutinised and adjusted in subsequent period. 5. Sundry Creditors include Rs. _________ payable to the Directors of the Company for salarie and travelling expenses. 6. Sundry Creditors include Rs. _________ lacks (Previous year Rs. ______ lacs) being estimated liability for excise duty. 7. Amount due to directors in their current account is included in Sundry Creditors. 8. Sundry Creditors inlcude Security Deposits Rs. ________ Lacs (previous year Rs. ___________ Lacs), bank overdraft from Scheduled Banks Rs. ________ Lacs (Previous Year Rs. _______ Lacs), Rs. _______ Lacs), Rs. ____________ Lacs (Previous Year Rs. Lacs) due to small scale & ancillary undertaking to the extent such parties have been identified by the management from available information and Uncliamed Dividend of Rs. _______ Lacs (previous Year Rs. NIL). 9. Sundry creditors include an amount due to subsidiary company Rs. _____ (Last Year Rs. _______) 10. Other liabilities under the Schedule of Current Liabilities and Provision include Rs. ( Previous Year Rs. _______ ) being an unspent balance of grants received in respect of preparation of feasibility reports, setting up of various industrial complexes/estates, promotional and development Schemes. 11. Other Liabilities inlcude Rs. )________ (2000_____ Rs. ________) being temporary overdrawn balance in current account with scheduled banks. 12. Other liabilities include Excise Duty refunds, provisions for excise duty, octroi and power charges etc., in respect of demands placed by the concerned authorities which are disputed and not admitted by the company a nd that pending with different departmentals and appellate authorities. 13. Other liabilities include Rs. ______ lacs (2000_____ Rs. _______ lacs) payable to Directors. 14. Acceptances include Rs. ____________ (2000_______ Rs. ________) due to industrial Development Bank of India Ltd. 15. Pending receipt of final bank statement of Rs. _________ received from banks on account of call money has been booked under Sundry Creditors. 16. A sum of Rs. ___________ (Rs._________) relating to liabilities due to various contractors has been provided for on estimated basis without relevant bills having ben received. The said amount has been included in Rs. ________ (Rs.__________) shown in Schedule _______ under Sundry Creditors-Goods, Machinery etc. 17. As at the year-end, the Company has issued cheques for Rs. _________/- (Previous year Rs. ___________) for which thee are no balance or over- draft facilities with bankers. The cheques, when presented will be honoured by automatically transfering monies from the Short Term Deposit Accounts with the same bankers, as per standing insructions. This been exhibited as "Credit Balance in Current Account" under the head Current Liabilities" shown in the Balance Sheet. 18. The liabilities outstanding for more than 3 years relating to the completed works have been written back because the same are not considered payable. Unclaimed dividend ================== 1. Unclaimed/Uncashed dividends of Rs. ________ lacks upto 2000_____ have not yet been transferred to Government pending disposal of writ petition filed in 2000____ in this regard. 2. Unpaid dividend payable to non-resident shareholders amounting to Rs. ++++_______ for the year 2000________ have not been deposited in a separate bank account, pending receipt of approval from Reserve Bank of India. However, the above amount has since been deposited in a separae bank account. 3. Unpaid dividend amount to Rs. ____________ has not been transferred to General Revenue Account of the Central Government as required u/s. 205 A (5) of the Companies Act, 1956. The management is of the opinion that the same was not required to be so transferred as the matter is subjudice. 4. Unpaid dividend over 3 years is being deposited with the Central Govt. 5. According to the legal opinion obtaind by the Company the amount remaining in Unclaimed Dividend Account need not be transferred to a separae Unpaid Dividend Account with a Scheduled Bank except to the extent of Rs. __________ for which appropriate instruction have been given to Bank within the due date (Previous Year Rs. ____________) In adition a sum of Rs. ____________ being Unclaimed Dividend has been transferred to a current account with a Scheduled Bank. 6. Unclaimed dividends represent dividend warrants relatingto years upto _________ 2000____ remaining uncashed of Rs. _______ lacks for which a separate bank account, base on legal opinion, has not been opened there ore, for remittance to the credit of Government threfrom and the Company had filed a Writ petition beofre the High Court of Madras, in this regard. 7. The dividend for the year ended ________ was transferred to the credit of a separate A/c with Canara Bank, Shadara Branch. The dividends are payable at par at several collection centres wherethe shareholders are situated. The balance in this account as shown in the Balance Shet is Rs. __________. This account will be reconciled on receipt of complete details from the Bank. 8. Dividend of Rs. ____________ on 13.5% Cumulative Redeemable preference share has accrued but not due and has not been provided in the books. 9. Arrears of dividends on Cumulative Preference shares upto the year ended 31st March, 2000______ amount to Rs. ____________ (Previous year Rs. ________). 10. There were inadvertent slight delay in transferring unpiad dividend to the general Revenue Account ofthe Central Government. 11. A Sum of Rs. __________ lying in the Unpaid Dividend Account has since been ransferred to the General Revenue Account of the Central Government, a few months after the due date, owing to delay in reconciliation. Provision for Income-tax ======================== 1. Regarding non-provisions of the income tax liability, the management of the company state that they are contesting the case before the income tax authorities and so no provision has been made. 2. No provision for taxation for the current year been made in the absence of any taxable income under the Income tax Act, 1961. 3. No provision for income tax has been made in the accounts as there is no taxable income for the current year after setting off unabsorbed losses and allowances brought forward from previous year. 4. No provision has been made for taxation on the earnings of the year as it is expected that the Company will not be liable to pay taxes in view of the unabsorbed investment and depreciation allowances admissible under the Income-tax Act, 1961. 5. No provision for income tax has been made in view of the unabsorbed depreciation, unabsorbed development rebate and deficiency under Section 80J brought forward from previous years as per Income Tax Return. 6. In the opinion of Directors, the provision for Income-tax is sufficient to meet Income-tax demands. Shortfall, if any,will be met, if necessary, out of reserves. 7. Interest demand paid amounting of Rs. _____________ on late payment of Income-tax on royalty has not been provided, since the Company has preferred an appeal, which has been shown under Income-tax payments. 8. The Income Tax Liability has been provided for as per returns filed. The additional liability, if any, shall be provided for as and when assessments are completed. 9. With regard to the comments of the auditors on non-provision of tax liability on payments to Foreign Technicians our observation are that exemption has been obtained from Government of India under Section 19(6)(vi) of the Income-tax Act, wherever applicable, and returns of income have been filed in respect of these technicians with income-tax authorities. The tax assessment has not yet been taken up and are expected to be taken up and completed soon. 10. Provision for income-tax has not been made in he accounts in terms of Section 115JA of the income-tax Act, 1961. 11. The Company's Profit for the year, together with those for the subsequent period to March, 2000_____ will be assessable to income-tax as one composite income. No provision has been made for income-tax estimated at Rs. ___________ on the profits for the year, pending determination of the composite income for the period, July, 2000______ to March 31, 2000_____. 12. The completion of Income-tax assessment for the accounting year ended ___________ has resulted in an additional tax demand of Rs. __________ mainly on acount of certain apparent mistakes in the assessment order and other disallowances which are being contested on appeal and in the opinion of the Company no provision for the present demand is, therefor, considered necessary. 13. Against the demand of Rs. _______ raised by the Income Tax authorities for the financial year __________ Rs. ___________/- has been paid as advance under protest and no provision for this liability has been made as the Company has preferred appeal against this assessment. Provision for Gratuity ====================== 1. Provisions is made for accrued liability for Gratuity in respect of employees who leave the service of the Corporation during any year. No provision, however, is made in respect of present value for future payments. 2. No provision has been made for accruing liability upto ___________ for gratuity to employees. Gratuity payable will be acounted as and when payments are made and as such the liability as at ____________ has not been ascertained. 3. No provision has been made in the accounts against the liability in respect of future payments of gratuity to employes as no employee has yet put in the qualifying serivce for entitlement to this benefit. Provision for Sales-tax Liability ================================= 1. Sales tax authorities while completing assessment for assessment year ___________ have raisd a demand for Rs. ____________ plus interest and Rs. _________ for penalty against which the comapny has gone in appeal and for which no provision has been made in the accounts, Sales tax assessments after assessment year ______ are pending. No provision has been made for any liability which may arise as a result of completion of these assessments. 2. The sale tax assessment of the company are finalised upto _______. The company does not expect any additional liability in respect of pending assessments. 3. The Sale Tax department has determined a sales tax liabilities of Rs. ___________ lakhs for the period from __________. The claim of the department for the period thereafter up to _______ may be estimated at Rs. ______ lakhs making an aggregate claim of Rs. ________ lakhs up to the side date. The Company has disputed the liability as it is eligible for exemption from Sales tax under the U.P. Goverment Order No. _________ dated being a new unit. You directors do not consider it necessary, at present, to make any provisions for the liability in this regard. 4. Consequent to the decision of the Delhi High Court that the Excise Duty paid is part of the turnover and the sale tax is to be paid by the Company on the Excise Duty component, the liability up to ________ amounts to Rs. ___________. The Compnay has filed an appeal with the Supreme Court which is still pending. In the event that it is finally held that the Company has to pay this amount, this will be recovered from the parties to whom the sales were made, and accordingly no provision has bee made in the accounts for the disputed liability. 5. Sales tax is paid on the basis of returns filed. No provision is made for liability, if any, as the same cannot be ascertained. Assessments have been completed up to __________. Provision for excise and custom duty ==================================== 1. Following its consistent policy, the company accounts for excise duty on manufctured goods at the time of clearance from the factory rather than at the point of manufacture. Such excise duty liability as at ____________ is estimated at Rs. ___________. However, this accounting policy has no effect on the current year's profits of the company. 2. No provisions has been made for Rs. ________ lakhs being liability for the year ___________ in respect of Excise Duty on Chips as the same is in dispute. 3. The Company has received various show cause-cum-demand and show cause notices from excise authorities asking it to explain why certain amounts mentioned in these notices should not be paid by the company. As these notice are in the nature of explanations required, the company does not cosider these to constitute a liability of any kind. 4. Certain Excise Duty demands aggregating Rs. ___________ (Previous Year Rs. ______________) hae been raised on the Company which have not been provided for in the accounts. A revision application filed with the Secretary, Ministry of Finance, Government of India for vacating the demand is still pending. 5. As reported last year, no provision for claim for excise duty of Rs. _________ lakhs for the peirod ________ is made in the accounts as the matter is in dispute and pending before the Bombay High Court. or the purpose of computing the income tax liability of the current year brought forward loss which is mainly due to the above claim has been taken into consideration and no provision for taxation is made in the accounts. 6. Unlike the practice in the earlier year of accounting, excise duty refund on cash basis, it is accounted on the accrual principle this year on the basis of claims made pursuant to favourable CEGAT decision and Appellate Collector of Customs decision on import in Company's own case as well as decisions of Appellate Collector of Excise in other cases on the same facts as in the Company's case. Central Excise Department has appealed to Supreme Court and CEGAT against respective decisions. Had the earlier practice been followed, loss would have been higher by _______. This includes amount of Rs. _______ in respect of period upto _______. 7. Custom duty ( including interest ) payable on goods lying in customs bonded warehouse will be charged in the year of clearance of goods and estimated at Rs. ________. 8. No provision has been made in these accounts for any amount remaining unrecovered in rspect of a custom duty claim of Rs. ________, previous year Rs. ________ (included under loans and advances, considered good) for loss of goods due to a fire-breakout in the custom godown in _________. The Company' appeal for recovery of the above amount was rejected by the Central Board of Revenue. Writ the Delhi High Court, Directors are of the opinion that the above claim is fully recoverable. 9. Show Cause Notice has been received from the customs Authorities for recovery of Duty of Rs. ___________. In the opinion of the Company the claim by the Government is not sustainable. Provision for Bonus and ESI liabilities ======================================= 1. No provision has been made for the bonus liability for the current year in view of the past practice to charge bonus in the year of actual payment. The amount of bonus charged in the current year relating to previous years is Rs. _______. 2. The Company has been advised that the Payment of Bonus Act, 1965, and the Pament of Gratuity Act, 1972, are not applicable. 3. Rs. ___________ (Previous Year Rs. __________) being the demand raised by the ESI Authorities in respect of workers employed by Building Contractors in connection with the construction work carried out by them at mills premises as the said demand has been contested and not accepted by the Company. In view of this, no provision for any liability in this regard has been made in the annexed accounts. 4. An applicability of the Employees State Insurance Act to the company is contested. The Employees State Insurance Court which head the company's petition has dismissed the Company's claim. The company has filed appeal against such decision of the Court. The quantum of liability if any that may arise on this account is not ascertainable and no provision has been made in the account of the company. 5. Claims by ESI Corporation for arrears towards coverage of certain employee against which the Company has filed writ petition which is pending in Delhi High Court. The exact amount of liability is not ascertainable and thus, not provided in the accounts. 6. Upto and including the previous year Bonus to Staff was accounted on Cash basis. However, from the current year provision for bonus to staf has been made in the accounts, amounting to Rs. ________. 7. The provision for pament of Bonus to employees has been made upto Rs. ______________ for the year ater adjusting the excess provision of Rs. _______ made in previous year. 8. An adhoc provision for Bonus of Rs. ____________ lacs has been made in the accounts as the Company contends that provisions of the Payment of Bonus Act, 1965 do not apply to all its activities. Provision for electricity, and telephone charges ================================================ 1. The Kanpur Electricity Supply Administration (KESA) made a claim of Rs. ____________ on account of old arrears in respect of supply of electricity to J.K. Central Sub-section. Inspite of repeated requests details of the said alleged arrears have not been furnished by KESA. Hence no provision/adjustment has been made in the books of account in respect of the said amount in dispute. 2. Penal Interest and guarantee Fee has not been provided as the Company expects refund of the same fro mthe respective departments. 3. Mahanagar telehphone Nigam Limited raised a claim of Rs. _____________ against the Company alleged to be in respect of some old telephone bills which were already paid by the Company. The claim was, therefore, rejected by the Company and is in dispute. However, a sum of Rs. __________ has been depsoited with the Mahangar pursuant to the Order of the Delhi High Court and the same has been shown under the head "Loans and Advances". Provision for interest ====================== 1. The clarification regarding waiver of penal interest on delayed payment of Interest to Government of India is still awaited an no provision for penal interest has therefore been made in the accounts. 2. No provision has been made in Accounts in respect of interest payable to the Holding Company for the years ended __________ and _________ in respect of borrowings made for the ______________. Project as the said Company has agreed not to charge such interest. Accordingly, the Company has not charged any interest in this respect from ____________ Limitd for the period from _________ to _______. Proposed dividend ================= Current Year Previous Period Rs. Rs. ------------ --------- 1.(a) Dividend proposed for the year comprise of : (i) On Equity Shares @ ____% (Previous period @ ____%) ____________ ____________ (ii) On ____% Income tax free Cumulative Preference Shars (Gross ___%) in terms of Regulation (3)(1)(b) of the Preference Shares (Regulation of Dividend) Act, 1960 ____________ ____________ (a) Participating @ ___% plus ____% additional ____________ ____________ (Previous period ____% plus ____% additional) (b) Non-participating @ ____% (Previous period ____%) (iii) On ____% Redeemable Cumulative Preference Shares @ ____% (Previous period ____% ____________ ____________ (b) Provision as made above on equity shres excludes Pro-rata dividend on __________ Equity shares of Rs. ______/- each lying in Shares Suspense Account which would be provided/paid as and when these are issued to non-resident shareholder as bonus/right shares on receipt of requisite approval of the appropriate authority. 2. The proposed dividend of Rs. _______ includes dividend of Rs. ________ on ___________ Equity shares allotted after the close of the financial year. The directors propose to make further allotments before the ensuing annual general meeting and these additional shares will also rank for dividend for the year ended __________. As the quantum of the latter dividend is presently not ascertainable, it is proposed to pay it from the Profit and Loss Account balance and no separate provision has been made. Miscelaneous provisions ======================= 1. No provision for liability for municipal taxes on part of office premises have been made, as no bill is received. 2. No provision has been made for difference in prices in respect of material received on loan basis which have been accounted in the books at the prices at whichthey were received,the adustment if any shall be made at the time of returning the loan. 3. No provisions has been made in the accounts in respect of technical fees payable to technicians for preparing the project report as the same will be paid on installation of plant. 4. There are certain indeterminate demands for further bonus and other claims by employees, for past years. Some of these are pending before Industrial Tribunal / High Court. The Company contends that no liability exists in this regard. 5. The liability due to increase in the rate of electricty charges by D.V.B amonting to Rs. __________ has not been provided in the books of accounts since the company has disputed the liability and is filing an appeal in Supreme Court. However Rs. ____________ have been paid under protest and are included under the head "Loans and Advances". *******