ITC Ltd

to the Members of ITC Limited

1. We have audited the attached Balance Sheet of ITC Limited ("the Company")as at 31st March, 2012, and also the Statement of Profit and Loss and the Cash FlowStatement of the Company for the year ended on that date, both annexed thereto. Thesefinancial statements are the responsibility of the Company’s Management. Ourresponsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally acceptedin India. Those Standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatements. Anaudit includes examining, on a test basis, evidence supporting the amounts and thedisclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by the Management, as well as evaluatingthe overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 (CARO) issued bythe Central Government of India in terms of Section 227(4A) of the Companies Act, 1956, wegive in the Annexure a statement on the matters specified in paragraphs 4 and 5 of thesaid Order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we reportas follows:

(a) we have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes of our audit;

(b) in our opinion, proper books of account as required by law have been kept by theCompany so far as appears from our examination of those books;

(c) the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statementdealt with by this report are in agreement with the books of account;

(d) in our opinion, the Balance Sheet, the Statement of Profit and Loss and the CashFlow Statement dealt with by this report are in compliance with the Accounting Standardsreferred to in Section 211(3C) of the Companies Act, 1956;

(e) in our opinion and to the best of our information and according to the explanationsgiven to us, the said accounts give the information required by the Companies Act, 1956,in the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:

i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31stMarch, 2012;

ii) in the case of the Statement of Profit and Loss, of the profit for the year endedon that date; and

iii) in the case of the Cash Flow Statement, of the cash flows for the year ended onthat date.

5. On the basis of the written representations received from the Directors as on 31stMarch, 2012 and taken on record by the Board of Directors, we report that none of thedirectors is disqualified as on 31st March, 2012 from being appointed as a director interms of Section 274(1)(g) of the Companies Act, 1956.

ANNEXURE TO THE AUDITORS’ REPORT

[Referred to in paragraph (3) thereof]

In our opinion and according to the information and explanations given to us, thenature of the Company’s business/activities during the year are such that clauses(iii), (v), (x), (xii), (xiii), (xv), (xviii), (xix) and (xx) of Companies (Auditor’sReport) Order, 2003, are not applicable to the Company. In respect of the other clauses,we report as under :

(i) In respect of its fixed assets :

(a) The Company has maintained proper records showing full particulars, includingquantitative details and situation of the fixed assets.

(b) The fixed assets were physically verified during the year by the Management inaccordance with a regular programme of verification which, in our opinion, provides forphysical verification of all the fixed assets at reasonable intervals. According to theinformation and explanations given to us, no material discrepancies were noticed on suchverification.

(c) During the year, in our opinion, a substantial part of fixed assets has not beendisposed off by the Company.

(ii) In respect of its inventory :

(a) As explained to us, the inventories excepting material lying with third parties(which have substantially been confirmed) were physically verified during the year by theManagement at reasonable intervals.

(b) In our opinion and according to the information and explanations given to us, theprocedures of physical verification of inventory followed by the Management werereasonable and adequate in relation to the size of the Company and the nature of itsbusiness.

(c) On the basis of our examination of records of inventory, in our opinion, theCompany has maintained proper records of inventory and the discrepancies noticed onphysical verification between the physical stocks and the book records were not materialin relation to the operations of the Company.

(iii) In our opinion and according to the information and explanations given to us,there are adequate internal control systems commensurate with the size of the Company andthe nature of its business for the purchase of inventory, fixed assets and for the sale ofgoods and services. Further, on the basis of our examination and according to theinformation and explanations given to us, we have neither come across nor have we beeninformed of any instance of major weaknesses in the aforesaid internal control systems.

(iv) In our opinion and according to the information and explanations given to us, theCompany has complied with the provisions of Sections 58A and 58AA or any other relevantprovisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules,1975 with regard to the deposits accepted from the public. According to the informationand explanations given to us, no Order has been passed by the Company Law Board or theNational Company Law Tribunal or the Reserve Bank of India or any Court or any otherTribunal on the Company.

(v) In our opinion, the Company has an internal audit system commensurate with the sizeof the Company and the nature of its business.

(vi) We have broadly reviewed the cost records maintained by the Company, includingpursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the CentralGovernment under Section 209(1)(d) of the Companies Act, 1956, and are of the opinion thatprima facie the prescribed cost records have been maintained and are being made up. Wehave, however, not made a detailed examination of the cost records with a view todetermine whether they are accurate or complete.

(vii) (a) According to the information and explanations given to us and according tothe books and records as produced and examined by us, in our opinion, the Company isregular in depositing undisputed statutory dues including provident fund, investoreducation and protection fund, employees’ state insurance, income tax, sales tax,wealth tax, service tax, customs duty, excise duty, cess and other material statutory duesas applicable with the appropriate authorities.

(b) As at 31st March, 2012, according to the records of the Company and the informationand explanations given to us, the following are the particulars of dues on account ofincome tax, sales tax, wealth tax, service tax, customs duty, excise duty and cess mattersthat have not been deposited on account of any dispute :

Out of the total disputed dues aggregating Rs. 234.32 Crores as above, Rs. 193.67Crores has been stayed for recovery by the relevant authorities.

(viii) According to the information and explanations given to us, the Company has notdefaulted in repayment of dues to any financial institution, bank or to debenture holdersduring the year.

(ix) In our opinion and according to the information and explanations given to us, theCompany is not a dealer or trader in securities. The Company has maintained proper recordsof transactions and contracts in respect of shares, securities, debentures and otherinvestments and timely entries have been made therein. All shares, securities, debenturesand other investments have been held by the Company in its own name.

(x) In our opinion and according to the information and explanations given to us, theterm loans have been applied for the purposes for which they were obtained.

(xi) In our opinion and according to the information and explanations given to us andon an overall examination of the Balance Sheet, we report that funds raised on short-termbasis have not been used during the year for long-term investment.

(xii) To the best of our knowledge and according to the information and explanationsgiven to us, no fraud by the Company and no significant fraud on the Company has beennoticed or reported during the year.