Annual Report 2010-2011 - Gammon India

(b) In respect of the road projects undertaken by the Company, in furtherance to the recommendation of the Dispute Resolution Board (DRB),
the Company has been awarded claims by the Arbitration Tribunal for an aggregate amount of ` 94.54 Crores. The Company contends that
such awards have reached finality for the determination of the amounts of such claims and are reasonably confident of recovery of such
claims although the client has moved the court to set aside the awards.
Considering the fact that the Company has received favorable awards from the DRB and the arbitration tribunal, the Management is
reasonably certain that the claims will get favorable verdict from the courts.
(c) The Company has taken 15 acres of land on lease basis for the period of 30 years renewable for each period of 30 years at a time without
any additional cost to the Company. The land is to be used for development of reality facilities such as Retail Mall, Commercial Offices and
Hotel etc. Therefore the cost of leased land and expenditure during development stage has been debited to Profit & Loss Account and the
total expenditure is carried forward as closing working progress expenditure as on 31.03.2011 and shown under the head Current Assets.
(d) In pursuance of development agreement (as amended from time to time) entered into between Government of Madhya Pradesh & Madhya
Pradesh Housing Board and the Company for the acquisition of 15 acres of land in South TT Nagar, Bhopal for ` 335.30 Crores (Previous
year ` 338 Crores) on lease hold basis, the Company has paid an advance of ` 335.30 Crores (Previous year ` 202.08 Crores). The advance
of ` 335.30 Crores (Previous year ` 202.08 Crores) has been shown as advance against lease agreement since final lease agreement has not
yet been finalized and executed.
18. Breakup of Gross Increase/Decrease in works in progress for the year:
A NNUAL R EPORT I 2010/11
(` in Crores)
Particulars Current Year Previous Year
Closing Work In progress 4,131.57 6,025.91
Opening Work In progress (5,369.12) (5,507.15)
Net Increase/(Decrease) (1,237.56) 518.76
19. Capital Grant
As per terms of the concession agreement between MNEL and NHAI, MNEL is entitled to receive capital grant from NHAI of ` 51 Crores during
the construction period. During the year, MNEL has received capital grant amounting to ` 16.43 Crores (Previous year ` 33.24 Crores). Total
capital grant received from NHAI as on 31st March, 2011 is ` 49.67 Crores (Previous year ` 33.24 Crores). Capital Grant has been shown as Capital
Reserve under Reserves and Surplus Account.
20. TAXATION:
The break up of Deferred Tax liability and Assets are as follows:
Particulars Year ended
(` in Crores)
31st Year ended
March, 2011 31st Deferred Tax liability
March, 2010
– On Account of Depreciation 216.96 220.21
– On Account of Foreign Translation Reserve 4.75 8.78
– On Account of Lease 9.47 10.43
– On Account of Gratuity/Leave Encashment Provision 0.60 0.75
– Others
Deferred Tax Assets
15.61 19.88
– On Account of Gratuity/Leave Encashment Provision 6.73 5.11
– On Account of Interest on NCD — 0.27
– On Account Delay in payment of TDS — —
– On Account of Risk and Contingencies 20.58 17.80
– On Account of Tax Losses 44.93 41.49
– Other Disallowances 10.67 28.99
– On account of Preliminary Expenses fully W/off 0.06 0.06
Net Deferred Tax Liability 159.09 166.35
Deferred Tax Asset Represented in Balance Sheet 76.51 81.45
Deferred Tax Liability Represented in Balance Sheet 235.60 247.80
AEL, REL, CBICL and MNEL, are eligible for a 10-year tax holiday under Section 80 IA of the Income Tax Act, 1961. As a result, timing differences
arising and reversing during the tax holiday period are not recognized by the respective companies.
21. Significant Accounting Policies followed by the Company are attached with the Standalone Financial Statements. Due to inherent diversities in
the legal and regulatory environment governing accounting principles, the accounting policies would be better understood when referred from
the individual Financial Statements. However, the following are instances of diverse accounting policies followed by the subsidiaries, which may
materially vary with these Consolidated Financial Statements.
a. Inventory of certain overseas JV’s and Subsidiaries are valued at weighted average method as against FIFO method followed by the Company
and the other subsidiaries. The inventory of the JV’s and Subsidiaries constitutes 6.89% (previous year 9.08%) of the total inventory.
b. In case of SAE the Work-in-progress has been recorded on the basis of the criterion of the completion or the status of progress; the revenues
and the job margin are recognized according to the progress of the productive activity as against the method of computing the percentage
of work completed is determined by the expenditure incurred on the job till each review date to total expenditure of the job.
141