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M/s Hindustan Aeronautics Limited
Report on the audit of Standalone Financial Statements
We have audited the accompanying Standalone Financial Statements of HINDUSTAN AERONAUTICS LIMITED ("the Company"), which comprise the Balance Sheet as at March 31, 2019 and the Statement of Profit and Loss (including Other Comprehensive Income), Statement of Changes in Equity and the Statement of Cash Flows for the year ended on that date and Notes to the Standalone Financial Statements, including a summary of the Significant Accounting Policies and other explanatory information (here in after referred to as "the standalone financial statements" ) in which are incorporated the returns of 38 Divisions of the Company audited by other Auditors.
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Financial Statements give the information required by the Companies Act, 2013 ("Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2019, the Profit (Including Other Comprehensive Income), the changes in Equity, and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the Standalone Financial Statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditors Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the Standalone Financial Statements under the provisions of the Act and the Rules there under, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the Standalone Financial Statements.
Emphasis of Matter
Deferred Tax Assets on Provisions for warranty, Replacements Doubtful debts etc., amounting to Rs.114360 Lakhs as on March 31, 2019, (Rs.105871 Lakhs March 31 2018) and Rs 8489 Lakhs for the year ended 31st March 2019 and Rs.12175 Lakhs for the year ended March 31 2018 are not recognized as the temporary differences are not likely to reverse in the foreseeable future. The issue is being referred to the Expert Advisory Committee of the ICAI and based on the opinion the financial statement will be restated by company in accordance with Section 131 of the Companies Act 2013.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Standalone Financial Statements of the current period. These matters were addressed in the context of our audit of Standalone Financial Statements as a whole, and in forming our opinion thereon and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.
|Key Audit Matters||Response to Key Audit Matters & Conclusion|
|As described in Accounting Policies No 13 and 14, Note no 49 (1b)to the standalone financial statements, the company has adopted Ind AS 115, Revenue from Contracts with customers (Ind AS 115) which is the new revenue accounting standard.||Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows:|
|The application and transition to this accounting standard is complex and is an area of focus in the audit.|| Evaluated the cumulative effect of adjustments as at 1 April 2018 for compliance with the new revenue standard: and|
| Evaluated the appropriateness of the disclosures provided under the new revenue standard and assessed the completeness and mathematical accuracy of the relevant disclosures.|
|The revenue standard establishes a comprehensive framework for determining whether, how much and when revenue is recognized. This involves certain key judgements relating to identification of distinct performance obligations, determination of transaction price of identified performance obligation, the appropriateness of the basis used to measure revenue recognized over a period. Additionally, the standard mandates robust disclosures in respect of revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date.|| Evaluated the design of internal controls relating to implementation of the new revenue accounting standard. Selected a sample of continuing and new contracts, and|
| tested the operating effectiveness of the internal control, relating to identification of the distinct performance obligations and determination of transaction price. We carried out a combination of procedures involving enquiry and observation, reperformance and inspection of evidence in respect of operation of these controls.|
|The Company adopted Ind AS 115 and applied the available exemption provided therein, to not restate the comparative periods.|| Selected a sample of continuing and new contracts and performed the following procedures:|
| Read, analyzed and identified the distinct performance obligations in these contracts.|
| Compared these performance obligations with that of identified and recorded by the group.|
| Considered the terms of the contracts to determine the transaction price including any variable consideration to verify the transaction price used to compute revenue and to test the basis of estimation of the variable revenue.|
| Sample of revenues disaggregated by type and service offerings was tested with the performance obligations specified in the underlying contracts.|
|Uncertainty In Tax Treatments|
|Pursuant to MCA notification dated 30.03.2019 amending the Accounting Standard Ind AS 12 Income Tax the company reviewed the disputed income tax demand of Rs 221247 Lakhs, hitherto, disclosed under contingent liabilities.||Our audit procedures include the following substantive procedures:|
| Obtained understanding of key uncertain tax positions; and|
|This involves significant management judgment to determine the possible outcome of the uncertain tax position, consequently having an impact on related accounting and disclosures in the standalone financial statements. Refer Note 49 Paragraphs 41A & 41B to the standalone financial statements.|| We along with our internal tax experts - Read and analyzed select key correspondences including appeal papers and orders, external opinions and also held discussions with the Companys tax advocate appropriate senior management and evaluated managements underlying key assumptions in estimating the tax provisions; and|
|Assessed managements estimate of the possible outcome of the disputed cases.|
|Recalculated the accounting estimates and disclosures made in accordance with the Accounting Standards Ind As 12 and IndAS8|
|Impairment of Trade Receivables|
|In respect of receivables from Government the company does not make any impairment provision based on past experience.||Our audit procedures include evaluation of provisions made for impairment in earlier years. We also made test checks of invoice wise collection details provided made in respect of in the two preceding financial years and we concluded the management assumption is reasonable.|
|The amount involved being significant balance and management judgement we consider this as a Key Audit Matter.|
|Recognition and Impairment of Intangible assets|
|A significant degree of judgement is required to determine the Intangibles to be recognized and intangibles to be impaired. The company has substantial intangibles assets both under use and in progress. The recognition /impairment assessment involves technical and management.||Our audit procedures involved the test check of verification of internal controls and incurrence of expenditure on intangible assets. We also reviewed the report of the Technical committee constituted to review the Intangibles Assets development expenditure who have given a recommendation of the Intangible assets to be recognized and assets to be impaired in the Financial year.|
|In respect of intangible Assets which are under development and whose life is infinite the same was reviewed by internal technical team as at the end of the reporting period and necessary impairment, if any, is recognized.||Based on the audit procedures as above we find the recognition and impairment provision have been made accordingly.|
|Provision for Wage Revision|
|The provision for wage revision under negotiation for workmen is made on estimated basis. Refer Note 49 Paragraph 43F to the Standalone Financial Statements.||We have reviewed the basis of assumptions and the management estimates for calculating the provision based on the ongoing negotiations as well as the past revisions and found it to be reasonable.|
|Provision for Performance Related Pay|
|The provision for performance related pay is made based on Department of Public enterprises guidelines (DPE) yet to be approved by Board of directors.||We have reviewed the circular issued by DPE and verified the computations to satisfy that the methodology as prescribed in the circular has been followed and the provision made is reasonable.|
|Deferred Tax Assets on Provisions|
|Deferred Tax Assets on Provisions for warranty, Replacements Doubtful debts etc., amounting to Rs.114,360 Lakhs as on March 31, 2019, ( Rs.105,871 Lakhs March 31 2018) and Rs 8,489 Lakhs for the year ended 31st March 2019 and Rs.12,175 Lakhs for the year ended March 31, 2018 are not recognized as the temporary differences are not likely to reverse in the foreseeable future. The issue is being referred to the Expert||We have verified the Deferred Tax Asset computations as the past recognition practice. As the matter is subject to interpretation, the matter is referred to Expert Advisory Committee of the ICAI.|
|Advisory Committee of the ICAI and based on the opinion the financial statements will be restated by company in accordance with Section 131 of the Companies Act 2013.||While the company is consistent in its application, the Deferred Tax asset is not likely to reverse in the foreseeable future, we consider this may have to be recognized as it is a temporary difference.|
|The management has assured to refer the matter to Expert Advisory Committee of the ICAI and based on the opinion necessary effect will be given.|
Management Responsibility for the Standalone Financial Statements
The Companys Board of Directors is responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these Standalone Financial Statements that give a true and fair view of the Financial Position, Financial Performance (including Other Comprehensive Income), Changes in Equity and Cash Flows of the Company in accordance with Ind AS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate implementation and maintenance of accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the Standalone Financial Statements, management is responsible for assessing the Companys ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors is also responsible for overseeing the Companys financial reporting process.
Auditors Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the Standalone Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Standalone Financial Statements. As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit.
Identify and assess the risks of material misstatement of the Standalone Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate Internal Financial Controls system in place and the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Companys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the Standalone Financial Statements, including the disclosures, and whether the Standalone Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the Standalone Financial Statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the Standalone Financial Statements.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings including any significant deficiencies in Internal Control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
We did not audit the Financial Statements/ financial information of 38 Divisions of the Company included in the standalone financial statements, of the company, whose financial statements / financial information reflect the total assets of Rs 45,65,085 lakhs as on 31st March,2019 and the total revenue of Rs.19,62,583 lakhs for the year ended on that date.
The standalone financial statements/ financial information of these Divisions have been audited by the Divisional auditors, whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these Divisions, are based solely on the report of such Divisional auditors. The standalone financial statements also takes into account the particulars and information made available to us and also the changes carried out at the Corporate level based on the observation of the Divisional auditors and the Comptroller and Auditor General of India who have reviewed the audited standalone financial statements of the Division under Section 143(6) of the Act. Our opinion is not modified in respect of these matters.
ANNEXURE "A" TO THE INDEPENDENT AUDITORS REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTS OF HINDUSTAN AERONAUTICS LIMITED.
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act").
We have audited the Internal Financial Controls over Financial Reporting of HINDUSTAN AERONAUTICS LIMITED("the Company") as of March 31, 2019 in conjunction with our audit of the Standalone Financial Statements of the Company for the year ended on that date.
Managements Responsibility for Internal Financial Controls
The Companys Management is responsible for establishing and maintaining Internal Financial Controls based on the Internal Control over Financial Reporting criteria established by the Company, considering the essential components of Internal Control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting, issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information, as required under the Companies Act, 2013.
Our responsibility is to express an opinion on the Companys Internal Financial Controls over Financial Reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note") and the Standards on Auditing, issued by ICAI and deemed to be prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of Internal Financial Controls, both applicable to an audit of Internal Financial Controls and both issued by ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate Internal Financial Controls over Financial Reporting was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the Internal Financial Controls System over Financial Reporting and their operating effectiveness. Our audit of Internal Financial Controls over Financial Reporting included obtaining an understanding of Internal Financial Controls over Financial Reporting, assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the AuditorsRs judgement, including the assessment of the risks of material misstatement of the Financial Statements, whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Companys Internal Financial Controls System over Financial Reporting.
Meaning of Internal Financial Controls over Financial Reporting
A companys Internal Financial Control over Financial Reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys Internal Financial Control over Financial Reporting includes those policies and procedures that: (i) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorisations of Management and Directors of the Company; and (iii) Provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of the Companys assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of Internal Financial Controls over Financial Reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the Internal Financial Controls over Financial Reporting to future periods are subject to the risk that the Internal Financial Control over Financial Reporting may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company has, in all material respects, an adequate Internal Financial Controls System over Financial Reporting and such Internal Financial Controls over Financial Reporting were operating effectively as at March 31, 2019, based on the Internal Control over Financial Reporting criteria established by the Company, considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by ICAI.
ANNEXURE "B" TO THE INDEPENDENT AUDITORS REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTS OF HINDUSTAN AERONAUTICS LIMITED.
The Annexure referred to in Paragraph 2 under the heading Report on Other Legal and Regulatory RequirementsRs of our Report of even date:
(i) (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets;
(b) These fixed assets have been physically verified by the management in accordance with its phased programme designed to cover the assets of all locations/units by physical verification over a period of one to five years, which in our opinion is reasonable having regard to the size of the company and nature of the assets.
(c) The title deeds of immovable properties are held in the name of the Company except as stated Annexure D as per Note 49 Clause 14.1,14.2,14.3,14.4 and 14.5 (ii) The Management has conducted physical verification of inventory at reasonable intervals and no material discrepancies were noticed.
(iii) The Company has not granted any loans, secured or unsecured to companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under Section 189 of the Companies Act 2013.
(iv) In terms of Circular No. GSR 463(E) dated 05th June 2015 issued by Ministry of Corporate Affairs, Government of India, the Company being a Government Company engaged in Defence production is exempt from Section 185 and 186 of Companies Act 2013.
(v) The Company has not accepted any deposits from the public.
(vi) We have broadly reviewed the books of accounts relating to materials, labor and other items of cost maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 148(1) of the Act and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however made a detailed examination of the records with a view to determine whether they are accurate or complete.
(vii) According to the information and explanations given to us in respect of Statutory dues:
(a) The Company is regular in depositing undisputed statutory dues, including Provident Fund, EmployeesRs State Insurance, Income Tax, Sales Tax, Service Tax, Duty of Customs, Duty of Excise, Value Added Tax, Cess,Goods and Service Tax and any other Statutory Dues to the appropriate authorities and there were no undisputed amounts payable which were in arrears as at 31st March 2019 for a period of more than six months from the date they became payable.
(b) Details of dues of Income Tax or Sales Tax or Service Tax or Duty of Customs or Duty of Excise or Value Added Tax, Cess and Goods and Service Tax have not been deposited as on 31st March 2019 on account of disputes are given below:
|SALES TAX/VAT/CST *|
|Assessment Year||Amount (Rs. In Lakhs)||Appeal by||Forum where dispute is pending|
|1986-87 To 2001-02||19,375||The Company||1st Appellate Authority|
|2004-15 & 2008-09||7,523||The Company||Additional Commissioner Appeal|
|2012-14 & 2015-16||1,84,351||The Company||Bombay High Court|
|2012-13||10,142||Asst. Commissioner LTU||CST TRIBUNAL|
|2011-12||8,367||Asst. Commissioner LTU||CST TRIBUNAL|
|2005-06||138||The Company||CCT. J&K|
|2004-05||936||The Company||Deputy Commissioner (Assessments)|
|2000-01||9||The Company||Dy. com. of Sales Tax Nasik|
|2014-18||50,032||The Company||HIGH COURT|
|2003-04, 2008-09 &||30,333||The Company||High Court|
|2005-06 To 2011-12||5,42,444||The Company||IInd Appellate Authority Mumbai|
|2013-14||14||The Company||Ist Appellate Authority Nashik|
|2010-11||349||The Company||Joint Commissioner Sale Tax|
|2015-16||4,076||The Company||Jt. Commissioner(A), Commercial Tax, Kanpur|
|2002-05 & 1999||11,465||The Company||Maharashtra Sales Tax Tribunal, Mumbai|
|2004-05||270||The Company||Sr. Deputy Commissioner of Sales Tax Nasik|
|2002-03 & 2009-10||167||The Company||STAT|
|1996 To 2015||39,003||The Company||Tribunal|
|2005 To 2009||1,750||The Company||WB commercial Taxes Appellate and|
|Revisional Board, Kolkata|
|Finance Act,1994||3- Service Tax $|
|Assessment Year||Amount (Rs. in Lakhs)||Appeal By||Forum where dispute is pending|
|2004-05 to 2008-09||425||The Company||Central Excise and service Tax Appellate|
|Tribunal, New Delhi|
|2005-06 to 2009-10||385||The Company||CESTAT|
|2010-14 & 2015-16||881||The Company||CESTAT|
|April 2009 to March 2013||450||The Company||CESTAT|
|2011-12 to 2014-15||12507||The Company||CESTAT Allahabad|
|2002 To 2011||1020||The Company||CESTAT Bangalore|
|Apr 2009 to March 2011||74||The Company||CESTAT Bangalore|
|Apr 2011 to June 2017||1483||The Company||CESTAT Bangalore|
|Apr 2011 to March 2014||639||The Company||CESTAT Bangalore|
|Jul 2007 to Jul 2008||1168||The Company||CESTAT Bangalore|
|Oct 2007 to March 2009||120||The Company||CESTAT Bangalore|
|Oct 2009 to March 2011||84||The Company||CESTAT Bangalore|
|2007-08 to 2011 -12||2647||The Company||CESTAT EZB, Kolkata|
|2012 To 2015||557||The Company||CESTAT EZB, Kolkata|
|2006-07 To 2017-18||54385||The Company||CESTAT, Mumbai|
|2010-11||57||The Company||Commissioner (Appeals)|
|Mar 2012 to March 2014||182||The Company||Commissioner of Appeals|
|2015-16||138||The Company||Commissioner of CGST & Central Excise|
|and Customs, Bhubaneswar|
|Service Tax||5096||The Company||Pending with Tribunal|
|2007-08 & 2010-11||11235||The Company||Service Tax Department|
|2011-14 & 2017 & 18||4644||The Company||Service Tax Department|
|2006 To 2008||5292||Service Tax Dept||Supreme Court|
|2005-06 & 2009-10||343||3The Company||Tribunal|
|Sl. No.||Assessment Year/ Period relating to CUSTOMS DUTY #||Amount||Appeal By||Forum where dispute is pending|
|(Rs. in Lakhs)|
|1||2012-13||13,215||COMPANY||CCE (Appeals), Bangalore|
|Sl. No.||Assessment Year/ Period relating to||Amount||Appeal By||Forum where dispute is pending|
|(Rs. in Lakhs)|
|1||Income Tax **|
|2||2005-06, 2006-07 and 2010-11*||25,527||Department and company||High Court|
|3||2007-08, 2011-12, 2012-13, 2013-14, 2014-15, 2015-16*||1,79,533||The Company||Income Tax Appellate Tribunal|
* Sales Tax paid against disputed tax Rs. 195.03 Lakhs $ Service Tax paid against disputed tax Rs. 151.31 Lakhs # Customs Duty paid against disputed tax Rs. 3127.20 Lakhs ** Income Tax paid against disputed Tax Rs. 174,200 Lakhs
(viii) The Company has not defaulted in repayment of loans or borrowing to a financial institution, bank, Government or dues to debenture holders.
(ix) The Company has not raised any moneys by way of initial public offer or further public offer (including debt instruments) during the year.
(x) A fraud involving misappropriation of funds by the Company official in collusion with six contractors has been noticed by the management and referred to Vigilance department for further investigations. The Vigilance department based on the investigations has lodged FIR with Central Bureau of Investigations (CBI) Bhubaneswar. An amount of Rs.1876 lakhs has been provisionally assessed as fraudulent payments made to contractors during the period from December 2013 to September 2018, and reported in the FIR with CBI. Adjustment of expenses relating to capital and other accounts includes the above mentioned amount. The matter is under investigation by CBI. As explained to us no fraud has been committed by the Company.
(xi) The provisions of Section 197 are not applicable to a Government Company (in terms of MCA Notification no. GSR 463(E) dated 05th June 2015) as the managerial remuneration is paid as per the appointment letter from Government of India.
(xii) The Company is not a Nidhi Company and hence complying with the provisions of the Nidhi Rules, 2014 does not arise.
(xiii) All transactions with the related parties are in compliance with Sections 177 and 188 of the Companies Act, 2013, where applicable and the details have been disclosed in the Financial Statements, etc., as required by the applicable Accounting Standards. (xiv) The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review.
(xv) The Company has not entered into any non-cash transactions with Directors or persons connected with him. (xvi) The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934.
ANNEXURE C TO THE INDEPENDENT AUDITORS REPORT
Directions indicating the areas to be examined by the Auditors during the course of audit of annual accounts of Hindustan Aeronautics Limited for the year 2018-19 issued by the Comptroller & Auditor General of India under Section 143(5) of the Companies Act, 2013.
|Sl. No.||Areas Examined||Observation/Finding|
|1.||Whether the company has system in place to process all the accounting transactions through IT systemRs. If yes, the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications, if any, may be stated.||Yes. The Company has ERP System in place and the accounting entries are generated in the System as and when transaction are made. The ERP system is not linked to Internet and the modules in the ERP system are not interlinked. In view of the same some Journal Entries are required to be made to account for certain adjustment / correction derived basically from the System and then fed in to the system through required accounting process with a maker and Checker concept to ensure the integrity of the System.|
|2||Whether there is any restructuring of an existing loan or cases of waiver/write off of debts/loans/interest etc. made by a lender to the company due to the companys inability to repay the loanRs. If yes, the financial impact may be stated.||Not applicable|
|3||Whether funds received/receivable for specific schemes from Central/State agencies were properly accounted for/ utilized as per its term and conditionsRs. List the cases of deviation.||The Company has received a sum of Rs. 13229 lakhs from Ministry of Defence (MOD), Government of India (GOI), towards investments by the Company in M/s Multirole Transport Aircraft Ltd (MTAL). Out of the above, the Company has till date invested a sum of Rs. 11347 lakhs (PY Rs. 11347 lakhs). The balance of Rs. 1882 lakhs (PY Rs. 1882 lakhs) is shown other Current liabilities. Interest @ 6.85 % has been provided on the unutilized portion under other financial liabilities.|
|For MAHARAJ N R SURESH AND CO.|
|Firm Regn. No. 001931S|
|N R Suresh|
|Membership No. 021661|
|Date: May 27, 2019||Chartered Accountants|