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anks and financial institutions on behalf of Group
Companies.
b) Claims against the Group not acknowledged as debt :
(Excluding cases where the possibility of any outflow
in settlement is remote):
Particulars As at
(Rs '000)
As at
March 31, 2010 March 31, 2009
(i) Taxes, Duties and Other demands
(under adjudication / appeal / dispute)
- Sales Tax (see 3 ( c ) below) 1,347,862 405,526
- Service Tax (see 3 ( d ) below) 2,095,343 684,937
- Income Tax (see 3 ( e ) below) 5,756,856 2,005,446
- Customs Duty (see 3 ( g ) below) 2,447,080 2,289,442
- Stamp Duty 574,861 594,685
- Entry Tax (see 3 ( h ) below) 3,032,331 1,556,436
- Municipal Taxes 1,734 3,327
- Access Charges (see 3 ( f ) below) 1,283,087 2,210,023
- DoT demands 712,095 580,933
- Other miscellaneous demands 109,366 66,034
(ii) Claims under legal cases including
arbitration matters 498,754 582,524
17,859,369 10,979,313
Unless otherwise stated below, the management believes that,
based on legal advice, the outcome of these contingencies will be
favorable and that a loss is not probable.
c) Sales tax
The claims for sales tax as of March 31, 2010 comprised
the cases relating to:
i. the appropriateness of the declarations made by the
Group under the relevant sales tax legislations which
was primarily procedural in nature;
ii. the applicable sales tax on disposals of certain
property and equipment items;
iii. lease circuit / broad band connectivity services;
iv. the applicability of sales tax on sale of SIM cards,
recharge coupons, SIM replacements, VAS and
Handsets and Modem rentals; and
v. In the State of J&K, the Company has disputed the levy
of General Sales Tax on its telecom services and
towards which the Company has received a stay from
the Hon'ble J&K High Court. The demands received to
date have been disclosed under contingent liabilities.
The Company, believes, that there would be no
liability that would arise from this matter.
d) Service tax
The service tax demands as of March 31, 2010 relate to:
i. roaming revenues charged from other operators;
ii. subscriber receivables written off; and
iii. cenvat claimed on tower and related material.
e) Income tax demand under appeal
Income tax demands under appeal mainly included the
appeals filed by the Group before various appellate
authorities against the disallowance of certain expenses
being claimed under tax by income tax authorities.
The management believes that, based on legal advice, it is
probable that its tax positions will be sustained and,
accordingly, recognition of a reserve for those tax
positions will not be appropriate.
f) Access charges
Interconnect charges are based on the Interconnect Usage
Charges (IUC) agreements between the operators
although the IUC rates are governed by the IUC guidelines
issued by TRAI. BSNL has raised a demand requiring the
Group to pay the interconnect charges at the rates contrary
to the guidelines issued by TRAI. The Group filed a petition
against that demand with the Telecom Disputes Settlement
and Appellate Tribunal (‘TDSAT’) which passed a status quo
order, stating that only the admitted amounts based on the
guidelines would need to be paid by the Group.
The management believes that, based on legal advice, the
outcome of these contingencies will be favorable and that
a loss is not probable. Accordingly, no amounts have been
accrued although some have been paid under protest.
g) Customs duty
The custom authorities, in some states, demanded Rs
2,289,442 thousand as of March 31, 2010 (March 31,
2009 - Rs 2,289,442 thousand) for the imports of special
software on the ground that this would form part of the
hardware along with which the same has been imported.
The view of the Group is that such imports should not be
subject to any custom duty as it would be an operating
software exempt from any custom duty. The management
is of the view that the probability of the claims being
successful is remote.
The custom authorities in Bangladesh, has demanded Rs
157,638 thousand as of March 31, 2010 for dispute in the
valuation for levying the custom duty. The management is
of the view that the probability of the claims being
successful is remote.
h) Entry tax
In certain states an entry tax is levied on receipt of material
from outside the state. This position has been challenged
by the Group in the respective states, on the grounds that
the specific entry tax is ultra vires the constitution.
Classification issues have been raised whereby, in view of
the Group, the material proposed to be taxed not covered
under the specific category. The amount under dispute as
of March 31, 2010 was Rs 3,032,331 thousand (March 31,
2009 - Rs 1,556,436 thousand) included in Note 3 (b)
above.
i) DoT Demands
i) The Group has not been able to meet its roll out