REC- 1-51.p65 - Rural Electrification Corporation Ltd.

98
CONSOLIDATED
21. Disclosure in respect of Intangible Assets as required in AS-
26 “Intangible Assets”:a.
Amortisation Rate 20%;
100% in case of cost of asset is Rs 5,000 or less
b. Amortisation Method Straight Line
Reconciliation Statement (Rs. in Lacs)
S. Particulars Year ended Year ended
No. 31.03.2010 31.03.2009
i) Gross Carrying Amount 433.56 4.86
ii) Accumulated depreciation 39.16 2.59
iii) Gross carrying amount-
Opening Balance 5.19 3.54
iv) Less: - Accumulated
Depreciation 2.63 1.98
v) Carrying amount 2.56 1.56
vi) Additions during the period 428.37 1.31
vii) Less: Amortization
during the year 36.53 0.60
viii) Carrying amount as on
Balance sheet Date 394.40 2.27
22. The Corporation has been providing for deferred tax assets /
liabilities in terms of Accounting Standard No. 22 on
Accounting for Taxes on Income.
(A) Components of deferred tax liability/ (assets) as on
31.03.2010 are given as under:-
Particulars Year ended
(Rs. In lacs)
Year ended
Deferred Tax Assets (+)
31.03.2010 31.03.2009
Provision for Earn
Leave Encashment 623.54 482.37
Provision for Sick Leave 251.12 198.29
Provision for Post Retirement
Medical Benefits (deduction not
claimed pertaining to
period prior to 2006-07)
263.28 263.28
Provision for fall in investments 8.21 44.76
Provision for Others 0.00 144.68
Total 1146.15 1133.38
Deferred Tax Liabilities (-)
Depreciation -410.16 -345.15
Reserve under
section36(i)(viii) of I.T Act - -96456.74
Total -410.16 -96801.89
Net Deferred Tax Asset /(Liabilities) 735.99 -95668.51
(B) The Company has started creating deferred tax liability (DTL)
on special reserve created and maintained under Section
36(1)(viii) of Income tax act, 1961, from financial year
2006-07 onwards. DTL for the special Reserve created till
financial year 2005-06 was also created in FY 2006-07 by
transferring the amount from General Reserve.
The Company has passed a Board Resolution that it has no
intention to make withdrawal from the Special Reserve
created and maintained under section 36(1)(viii) of the
Income Tax Act 1961. Hence, the special reserve created and
maintained is not capable of being reversed and thus it
becomes a permanent difference as per AS 22 issued by the
Institute of Chartered Accountants of India (ICAI).
Accordingly, the Company is not creating any deferred tax
liability on the said reserve.
Now, considering the opinions given by the various
concerned authorities and also the practice followed by the
other similarly placed institutions of not creating deferred
tax liability (DTL) on account of special reserve created and
maintained under Section 36(1)(viii) of Income Tax Act,
1961, the Corporation is of the view that there is no
requirement of DTL as per AS 22 of ICAI. Accordingly, the
Corporation has not created deferred tax liability (DTL) of
Rs.15,564.67 lacs on account of special reserve created and
maintained under Section 36(1)(viii) of Income Tax Act,
1961, for the year ended on 31st March. 2010 and has also
reversed the DTL of Rs. 96,456.74 lacs created in earlier years
on this account.
The reversal of DTL is done by crediting General reserve by
Rs. 63,879.87 lacs for the FYs up-to 2005-06 and through
Profit and Loss Appropriation by Rs.32,576.87 lacs for the
FY 2006-07 to FY 2008-09.
Had the Company followed the same Accounting treatment
as in the earlier years, the Profit after Tax for the year ended
31.03.2010 would have been Rs. 186,660.67 lacs against
reported profit of Rs. 2,02,225.34 lacs and the Reserve and
Surplus would have been Rs. 8,99,658.26 lacs as against
reported reserve and surplus of Rs. 10,11,679.67 lacs as on
31.03.2010.
23. In line with the decisions of Authority for Advance Ruling
and Income Tax Appellate Tribunal for different assessment
years, the Corporation has accounted for Rs. 5,690.16 lacs
towards refund of Income Tax and interest thereon due from
the Income Tax Department out of which Rs. 2,562.12 lacs
has been received during this year.
24. Subsequent to settlement of liabilities of REC between
MPSEB and CSEB on bifurcation of erstwhile State of MP,
there is a legal dispute between them regarding sharing of
dues, as a result of which CSEB has been claiming refund of
approx. Rs.16,000 Lacs plus interest which if accrues shall
be payable by MPSEB.
25. Some of the erstwhile State Electricity Boards (SEBs) against
whom loans were outstanding or on whose behalf guarantees
were given, were restructured by the respective State
Governments and new entities were formed in the past.
Consequently, the liabilities of the erstwhile SEBs stand
transferred to new entities and transfer agreements in most
of the cases are to be executed amongst the Corporation,
new entities and the State Governments.
26. The pay revision of the employees of the Corporation is due
w.e.f.1st January 2007. Pending final calculation of revised
pay scales (including perks) as notified by Govt. of India
and approved by Board of Directors an estimated additional
provision Rs.2,026.24 lacs based on average salary (Previous
year Rs. 463.16 lacs) had been made towards wage revision
arrears during the year and accordingly Rs. 3,306.24 lacs
(previous year Rs. 1,280 lacs) is cumulatively available