We have audited the accompanying Standalone Financial Statements of Indian Railway Catering and Tourism Corporation Limited (“the Company”), which comprise the Balance Sheet as at March 31, 2024, the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement and the Statement of Changes in Equity for the year then ended and Notes to the Standalone Financial Statements, including a summary of significant accounting policies and other explanatory information (hereinafter referred to as “Standalone Financial Statements”).
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, as amended, (“the Act”) in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards (“Ind AS”) prescribed under section 133 of the Act read with the Companies (Indian Accounting Standard) Rules, 2015, as amended, and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2024, its profit (financial performance including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.
Basis of 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 Auditor’s 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 financial Statements under the provisions of the Act and the Rules made 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 audit opinion on the standalone financial statements.
Emphasis of Matter
We draw attention to:
1. Note No. 37.2(iv) regarding Arbitration award pronounced in April 2022 amounting to H 7,471.65 Lakhs plus simple interest @ 6% per annum from January 2018 onwards, given in favour of certain licensees which represents
principal amount towards claims for supply of welcome drinks not paid to licensees and recovery of differential costs for the supply of regular meals to the passengers on the instructions of Railways whereas the price of combo meal, which is lower than the price of regular meal, was reimbursed to these licensees. The Company has filed objections against the award and the same was listed before Honourable High Court of Delhi. The Company contends that the main liability in this matter would be of Railways and the Company has the right to recovery from Railways in case ultimately it is made liable to pay.
The hearing before Hon’ble high court was done on 19.07.2023 and as per the interim order dated 09.10.2023, of Hon’ble high court, the company has been advised to deposit bank guarantee amount. The company has filed objections appeal against the award. In compliance of Hon’ble Delhi High Court order, Bank Guarantee to the tune of H 8,471.65 lakhs have been deposited with the court registry as per the orders of Hon’ble Delhi High Court. It is to mention that the Hon’ble High Court, Delhi has reserved the judgment in the said matter.
2. Note No.37.2(v) regarding Notice dated 25.02.2022 issued by the National Anti-Profiteering Authority (GST) alleging profiteering amounting to H 5,041.44 Lakhs for the period July 1, 2017 to May 31, 2020 against the Company under Section 171 of the CGST Act, 2017 for not passing on the benefit of reduction in rate of tax to the consumers by way of commensurate reduction in the MRP of Railneer brand of drinking water manufactured and sold by the Company even though there was reduction in the tax rate on the introduction of GST w.e.f. July 1, 2017. The Company contends that Railneer drinking water falls under controlled price segment as the MRP is fixed by Ministry of Railways, Government of India and the MRP fixed in the year 2012 is still continuing despite substantial increase in prices of raw-materials, power, HR cost, freight etc. Legal opinion obtained by the Company justifies the contention of the Company. Competent Commission of India (“CCI”) is now vested with powers to adjudicate all such cases in which benefit of tax reduction not being passed to consumers by the assesses and the matter is now pending with CCI.
3. Note Nos. 49(b) regarding Railway board clarified that for Rail Neer plants run departmentally by the company, the profits between Railway board and company shall be shared in the ratio of 15:85 and for plants operated under PPP model/run by DCO, profits between Railway board and
company shall be shared in the ratio 40:60. Accordingly, the company has recognized profit Share amounting to H 320.33 Lakhs being 15% of profit of Departmentally run Railneer plants and H 452.25 Lakhs being 40% of the profits of plants run on PPP model during the year ended 31st March, 2024 after charging profit Share amounting H 1451.24 Lakhs towards differential profit Share @25% on profits from PPP plants for previous years. Provision for the differential amount of profit sharing @25% (40%-15%) up to 31st March, 2023 amounting H 1451.24 Lakhs is shown as an exceptional item for the year ended 31st March, 2024, even though the Company has made representation to the Railway Board for sharing of profit at uniform ratio of 15:85 for all Railneer plants till FY 2022-23. Response from Railway Board is still awaited. These matters are subject to reconciliation with the Railways.
4. Note No. 39 regarding Balance confirmation letters from parties & banks: Guidelines issued by the Company for obtaining balance confirmation letters from parties & banks have been followed. We are informed that no balance confirmation letters are sent to Railways since their books of account are maintained on cash basis. We note that substantial amounts are receivable / payables from / to Railways which also includes number of inoperative debit balances and few credit balances as on March 31, 2024 including legacy debit & credit balances i.e. those pertaining to the period of transfer of catering operations from / to the Railways. Further, response to balance confirmation letters sought from other parties and banks was negligible and the system and procedures of obtaining balance confirmations at periodical intervals has not been reviewed and strengthened to ensure better response from the parties.
5. Note No.51(b) regarding non-sharing of input tax credit data of GST for certain periods by Developer cum Operators (“DCO”) of four Rail Neer plants resulting in non-recognition of these claims receivables in the books of account of the Company. Amount of such claims are not ascertainable at this stage. Further, these DCOs are also disputing these claims including claims of H 364.83 Lakhs debited to their accounts.
6. Note Nos.10.1 & 58(i) Regarding trade receivables as on March 31, 2024 includes of H 1,296.18 Crores due from Railways and Government as on March 31, 2024 (As on March 31, 2023 H 1053.53 Crores). Out of dues from Railways and Government, outstanding for more than 3 years amounts to H 134.65 Crores include defaulted amount to H 35.86 Crores.
7. Note No. 72 regarding Certain applications made by the Company for advance ruling relating to applicability of Goods and Services Tax in respect of certain income / receipts amounting to H 33,595 Lakhs received mainly from the Ministry of Railways, Government of India for which the decision of the Authority for Advance Ruling is awaited.
8. Note No.73 regarding non-recognition of revenue for the financial years 2020-21 to 2023-24 from the increase to be made in license fee for trains due to tariff revision made by the Railway Board in financial year 2019-20 as the exercise regarding sale-assessment of post-paid trains, which will determine the percentage of increase in license fee, is still under progress as on date. Regarding prepaid trains, even though the sale assessment is over but no revenue was also recognised as certain licensees have disputed demand of additional license fee on account of tariff revision. As the revenue to be recognised can’t be either ascertained at this stage or is disputed, the same has been postponed.
9. Note No. 78 regarding: (i) Differences between certain subsidiary and control ledger balances which are pending for identification, reconciliation and adjustments, if any, as on March 31, 2024, (ii) review and improvement of system of identification and disclosure of trade payables pending, (iii) identification of MSME suppliers and their classification into Micro, Small and Medium category to ensure proper disclosure of their dues in Standalone Financial Statements as on March 31, 2024 which needs improvement by way of confirmations from such parties and their classification into Micro, Small and Medium category.
10. Note No. 79 regarding Inadmissible payments made of ex-gratia / performance related pay to deputationists amounting to H 230.13 Lakhs since the year 2015-16 to 2020-21 as stated by C&AG in their provisional Para for C&AG’s Report (Railways) for the year ended March 31, 2022 sent to Railway Board. Vide letter dated January 24, 2023, the Company has given its response to the Railway Board letter dated January 09, 2023 seeking comments from the Company wherein payments made to deputationists was justified by the Company. No further communication has been received from Ministry of Railways by the company. Appropriate decision will be taken on this matter as and when response is received from Ministry of Railways.
11. Note No. 76 regarding enhancement of charges for operation of two Tejas trains by the Railway Board, Ministry of Railways with effect from August 13, 2021 vide its letter dated June 05, 2023 as the earlier instructions for charges were valid till August 12, 2021. During the year ended March 31, 2024, the Company has made provision for enhanced charges with effect from August 13, 2021 for the period up to March 31, 2023 amounting to H 5,126.20 Lakhs and shown as an “Exceptional Item' in the financial results. However, the Company has made representation to the Railway Board All for withdrawal of these instructions for enhanced charges from retrospective effect which is pending.
Our opinion on the Standalone Financial Statement is not modified in respect of above matters.
Key Audit Matter
Key audit matters are those matters that, in our professional judgement, 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 the 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 matter described below to be the key audit matter to be communicated in our report.
Assessment of litigation and related disclosure of contingent liabilities
Refer to Note No. 2 (o) to the Standalone Financial Statements - Use of estimates and judgements-Provisions, Contingent liabilities and Contingent assets and Note No. 37.2 to the Standalone Financial Statements for “Contingent Liabilities” and other significant litigations stated therein.
As at March 31, 2024, the Company has exposures towards number of litigations relating to various matters as set out in the aforesaid Note.
Significant management’s judgement is required to assess such matters to determine the probability of occurrence of material outflow of economic resources and whether a provision should be made. The judgement is also supported with legal advice in certain material cases as considered appropriate.
As the ultimate outcome of the litigations are uncertain and the position taken by the management are based on the application of their best judgement which may be subject to management bias, related legal advice including those relating to interpretation of laws/regulations, we have identified this as a Key Audit Matter.
How our audit addressed the key audit matter
Our audit procedures included the following:
• We understood, assessed and tested the design and operating effectiveness of key controls surrounding assessment of litigations relating to the relevant laws and regulations;
• We read and considered latest orders / awards by various courts / authorities on these matters;
• We conducted detailed discussions with in-house legal head, tax consultants and senior management to understand their assessment on the most likely outcome of the material litigations and to understand the basis considered for the provisions made towards these litigations;
• We performed our assessment on a test basis on the underlying calculations supporting the contingent liabilities/other significant litigations disclosed in the Standalone Financial Statements;
• We considered external legal opinions, where relevant, obtained by management;
• We evaluated management’s assessments by understanding precedent set in similar cases and assessed the reliability of the management’s past estimates /judgements;
• We evaluated management’s assessment around those matters that are not disclosed or not considered as contingent liability, as the probability of material outflow is considered to be remote by the management; and
• We assessed the adequacy of the Company’s disclosures.
Based on the above work performed, the assessment of management in respect of litigations and related disclosures relating to contingent liabilities/other significant litigations in the Standalone Financial Statements is considered to be reasonable.
Information Other than the Financial Statements and Auditor’s Report Thereon
The Company’s Board of Directors is responsible for the other information. The other information comprises the information included in the Management Discussion and Analysis, Board’s Report including Annexures to Board’s Report, Business Responsibility Report, Corporate Governance and Shareholder’s Information, but does not include the Standalone Financial Statements and our auditor’s report thereon.
Our opinion on the Standalone Financial Statements does not cover the other information and we do not express any form of assurance / conclusion thereon.
In connection with our audit of the Standalone Financial Statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the Standalone Financial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
When we read the other information, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance. Such other information is pending as on the date of our audit report.
Responsibilities of Management for the Standalone Financial Statements
The Company’s 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, and cash
flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended.
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 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 financial Statements, management is responsible for assessing the Company’s 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.
Those Board of Directors are also responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibility for the audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s 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 judgement and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the 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 control 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 management’s 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 Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the 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 auditor’s 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 financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the Consolidated financial statements that, individually or in aggregate, makes it probable that the economic decisions of reasonably knowledgeable user of the Consolidated financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and evaluating results of that work; and (ii) to evaluate the effect of any identified misstatements in the Consolidated 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.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the Standalone Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor’s Report) Order, 2020 (“the Order”), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure 1 a statement on the matters specified in paragraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act, based on our audit we report that:
(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit except for the following:
(i) Balance confirmation letters were not received by us from most of the parties and banks. Further, balance confirmation letters were not sent by offices to railways which is against the guidelines agreed upon with us.
Impact of our observations stated above on Standalone Financial Statements can’t be quantified.
(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.
(c) The Balance Sheet, the Statement of Profit and Loss including other Comprehensive income, the Cash Flow Statement and Statement of Changes in equity dealt with by this report are in agreement with the books of account.
(d) In our opinion, the aforesaid Standalone Financial Statements comply with the Indian Accounting Standards specified under Section 133 of the Act.
(e) In terms of Notification No. 463 (E) dated 5th June, 2015 issued by the Ministry of Corporate affairs, provisions of Section 164(2) of the Act regarding disqualifications of the Directors, are not applicable as it is a Government Company.
(f) With respect to the adequacy of internal financial controls over financial reporting with reference to the Standalone Financial Statements of the Company and the operating effectiveness of such
controls, refer to our separate Report in “Annexure 2”. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls over financial reporting.
(g) As required by sub-section (5) of section 143 of the Act, we enclose herewith “Annexure 3”, a Statement on the Directions issued by the Comptroller and Auditor General of India.
(h) As per notification No. GSR 463 (E) dated June 5, 2015 issued by the Ministry of Corporate Affairs, Government of India, Section 197 of the Act is not applicable to the Government Companies. Accordingly, reporting in accordance with requirements of provisions of section 197(16) of the Act is not applicable to the Company.
(i) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financial position in its Standalone Financial Statements. Refer Note No. 37.2 of the Standalone Financial Statements.
ii. The Company has not entered into any longterm contracts including derivative contracts.
iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.
iv. (a) The Company has represented that, to
the best of its knowledge and belief, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to any persons or entities, including foreign entities (“intermediaries”), with the understanding, whether recorded in writing or otherwise, that the intermediary shall, whether directly or indirectly lend or invest in other persons or entities or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
(b) The Company has represented that, to the best of its knowledge and belief, no funds have been received by the Company from any persons or entities, including foreign entities (“intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Company
|