h. Provisions and contingencies
A provision is recognized if, as a result of a past event, the group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
Provisions for onerous contracts are recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract.
A disclosure for contingent liabilities is made where there is a possible obligation or a present obligation that may probably not require an outflow of resources or an obligation for which the future outcome cannot be ascertained with reasonable certainty. When there is a possible or a present obligation where the likelihood of outflow of resources is remote, no provision or disclosure is made.
i. Earning per share
Basic EPS is arrived at based on net profit after tax available to equity shareholders to the weighted average number of equity shares outstanding during the year.
The diluted EPS is calculated on the same basis as basic EPS, after adjusting for the effects of potential dilutive equity shares unless impact is anti-dilutive.
j. Cash and cash equivalents
Cash and Cash equivalents include cash and Cheque in hand, bank balances, demand deposits with banks and other short-term highly liquid investments that are readily convertible to known amounts of cash & which are subject to an insignificant risk of changes in value. Where original maturity is three months or less.
k. Cash flow statement
Cash flows are reported using the indirect method where by the profit before tax is adjusted for the effect of the transactions of a non-cash nature, any deferrals or accruals of past and future operating cash receipts or payments and items of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the company are segregated.
l. Use of estimates and judgements
The estimates and judgments used in the preparation of the financial statements are continuously evaluated by the Company and are based on historical experience and various other assumptions and factors (including expectations of future events) that the Company believes to be reasonable under the existing circumstances. Differences between actual results and estimates are recognized in the period in which the results are known/materialized.
The said estimates are based on the facts and events, that existed as at the reporting date, or that occurred after that date but provide additional evidence about conditions existing as at the reporting date
The above policies were followed to the extent wherever applicable. Subsequently there were no activities carried, hence there is no specific requirement for adherence of accounting policies.
However, there is no specific information relating to any change of policies due to loss of key managerial personnel in accounts as well as finance department.
m. Recent pronouncements
The Company applied for the first time these amendments of Ind AS 8, Ind AS 1 and Ind AS 12 and there is no material impact on financials.
Ministry of Corporate Affairs (“MCA”) notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. For the year ended March 31, 2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Company.
n. Non-current assets (or disposal groups) held for sale and discontinued operations:
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of the carrying amount and the fair value less cost to sell. An impairment loss is recognized for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognized for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognized. A gain or loss not previously recognized by the date of the sale of the non-current asset (or disposal group) is recognized at the date of de-recognition. Noncurrent assets (including those that are part of a disposal group) are not depreciated or amortized while they are classified as held for sale. Non-current assets (or disposal group) classified as held for sale are presented separately in the balance sheet. Any profit or loss arising from the sale or measurement of discontinued operations is presented as part of a single line item in statement of profit and loss.
Critical estimates and judgment in applying accounting policies
The management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Information about estimates and judgments made in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are as follows:
i) Provisions and contingencies
A provision is recognized if, as a result of a past event, the group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
Provisions for onerous contracts are recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract.
A disclosure for contingent liabilities is made where there is a possible obligation or a present obligation that may probably not require an outflow of resources or an obligation for which the future outcome cannot be ascertained with reasonable certainty. When there is a possible or a present obligation where the likelihood of outflow of resources is remote, no provision or disclosure is made.
ii) Accounting policy on taxation
In preparing financial statements, the Company recognizes income taxes of the jurisdiction in which it operates. There are certain transactions and calculations for which the ultimate tax determination is uncertain. The Company recognizes liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. The uncertain tax positions are measured at the amount expected to be paid to taxation authorities when the Company determines that the probable outflow of economic resources will occur. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.
iii) Fair value measurement
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or to settle a liability in an ordinary transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or to settle a liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 — Quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2 — other techniques for which all input which have a significant effect on the recorded fair value are observable, either directly or indirectly.
Level 3 — Inputs which are not based on observable market data
NATURE AND PURPOSE OF RESERVES Capital reserve
Capital reserve was created under the previous GAAP (Indian GAAP) out of the profit earned from a specific transaction of capital nature. Capital reserve is not available for the distribution to the shareholders.
Securities premium
Securities premium includes premium on issue of shares. It will be utilized in accordance with the provisions of the Companies Act, 2013.
Other Comprehensive Income
The Company has elected to recognize changes in the fair value of certain investments in equity securities in other comprehensive income. These changes are accumulated within the FVOCI equity investments reserve within equity.
Retained Earnings
Represents surplus/(deficit) in statement of Profit and Loss.
27. Contingent Liabilities (Not acknowledge as debt) -
(i) Claims against the Company not acknowledged as debts:
Payment of Excise Duty disputed by the Company in respect of CENVAT utilization of: Input & Capital Goods Matters ? 44,49,28,525/- (Principal amount of ? 18,80,87,415/- and penalty and fine of ? 25,68,41,110/-) (Previous Year : 44,49,28,525/-). Final hearing was held on 22nd March, 2023 and order was pronounced on 29th May, 2023 and remand back to Excise Department for re- examine. Matter is still pending.
(ii) Contingent Liabilities not provided for:
(a) Customs, Excise & Service Tax Appellate Tribunal, Ahmedabad vide its order dated 31.01.2022 has allowed the company to re-export the warehoused goods without payment of duty/fine/penalty if any. Regarding interest on Excise duty, company had requested to BIFR for waiver of interest, fine and penalty on duty for default period and it is also mentioned in circulated MDRS dated 13th October 2015. However Commissioner of Custom, Ahmedabad had not allowed the permission of re-export and therefore company had filed Special Civil Application (SCA) before Hon'ble High Court of Gujarat and the company's SCA was dismissed on 02nd January, 2023. Aggrieved by the impugned order, company had filled Special Leave Petition (Civil) with the Hon'ble Supreme Court of India which was admitted vide order dated 09th May, 2023. Matter is now pending at the Apex Court.
However aggrieved by the said order, some workmen challenged the same in Hon'ble Supreme Court of India. The apex court vide order dated 03rd January, 2022 has disposed of the matter. Thereafter the aggrieved workmen had approached the Labour Court, Surat and the matter is pending. Further company had made provision of dues amounting to ? 14,07,16,909/- in books of accounts as per norms of settlement during the year 2021 -22.
Excise -
Payment of Excise Duty disputed by the Company in respect of CENVAT utilization of: Input & Capital Goods Matters 44,49,28,525/- (Principal amount of 18,80,87,415/- and penalty and fine of ? 25,68,41,110/-) (Previous Year 44,49,28,525/-). Final hearing was held on 22nd March, 2023 and order was pronounced on 29th May, 2023 and remand back to Excise Department for re- examine. Matter is still pending.
Custom -
Customs, Excise & Service Tax Appellate Tribunal, Ahmedabad vide its order dated 31.01.2022 has allowed the company to re-export the warehoused goods without payment of duty/fine/penalty if any. Regarding interest on Excise duty, company had requested to BIFR for waiver of interest, fine and penalty on duty for default period and it is also mentioned in circulated MDRS dated 13th October 2015. However Commissioner of Custom, Ahmedabad had not allowed the permission of re-export and therefore company had filed Special Civil Application (SCA) before Hon'ble High Court of Gujarat and the company's SCA was dismissed on 02nd January, 2023. Aggrieved by the impugned order, company had filled Special Leave Petition (Civil) with the Hon'ble Supreme Court of India which was admitted vide order dated 09th May, 2023. Matter is now pending at the Apex Court.
Income Tax -
Income tax department raised a demand notice under Section 147 read with Section 144B of the Income Tax Act, 1961 of ? 8,09,43,740/- for AY 2014-15 vide assessment order dated 26th March, 2022. Aggrieved by the said demand, company had filled grievance two times against the said demand stating that with the available brought forward losses, the department has not considered the carried forward losses against the income determined under Section 68 of the Income Tax Act, 1961. Further the department raised demand notice under Section 271 (1)(c) of the Income Tax Act, 1961, for a penalty of ? 4,12,97,850/-. The matter is now pending at Income Tax Appellate Tribunal (ITAT), Mumbai. Company has not made any provision in this matter in view of already available Carried forwarded losses.
Company had received an Appellate order dated 28th December, 2023 from Commissioner of Income-tax (Appeals), National Faceless Assessment Centre (‘AO'), Delhi under section 250(6) of Income Tax Act, 1961 stating -
Ground 1 -
Appeal dismissed for unexplained cash credits u/s 68 of Income Tax Act, 1961 for ? 12,15,00,000 for FY 2013-14.
Ground 2 -
Appeal partly allowed by directing AO to examine the contention of the Appellant by giving adequate opportunity of being heard that there are brought forward losses in its case which are eligible for set off.
The Company has filled appeal before Income Tax Appellate Tribunal (ITAT), Mumbai against the said order on 12th February, 2024 and matter is pending.
Company has further received an Appellate order dated 21st February, 2024 from Commissioner of Income-tax (Appeals), National Faceless Assessment Centre (‘AO'), Delhi under section 250 of Income Tax Act, 1961 stating that the penalty of ? 4,12,97,850/- is hereby confirmed and the appeal has been dismissed. The company is in process of filing an appeal before Income Tax Appellate Tribunal (ITAT), Mumbai against the said order.
29. The balances of Sundry Debtors, Sundry Creditors, Bank balances and Loans & Advances are subject to confirmation and are shown as appearing in the Account.
30. Employee benefit -
(i) The liability for retiring/resigned employee's gratuities payable in accordance with the payment of Gratuities Act and Company's rule are determined and overdue for the employees up to 31st March, 2024 is NIL. (PY ? 16,13,49,871/-). The amount has been regrouped during the FY 2023-24.
(ii) The Company has received no dues certificate from Provident fund authorities relating to principal payment of Provident fund. Further company had deposited every month interest on PF contribution under 7Q of The Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The total amount was ? 5,09,81,677/- and company had deposited the said amount till 31.03.2022 amount of ? 5,09,81,677/- and no outstanding dues are pending under 7Q of Provident Fund Act, 1952. The Provident fund authorities
have issued letter to BIFR for waiver of damages for delayed in depositing & payment of P.F. contribution. After depositing interest under 7Q, company has made application for waiver of damages during the month of March, 2022.
31. Income tax -
As per Management representation, provisions for Minimum Alternate Tax (MAT) are not applicable because company has decided to opt for Section 115BAA of The Income Tax Act, 1961.
32. Borrowings -
i) As per the Modified Debt Restructuring Scheme (MDRS) the company had availed loans amounting to 157,29,49,931/- from Bhavani Syntex Limited, Ramsons Properties Pvt. Ltd., Unipat Rayon Ltd. and others by the way of assignment of debt. These debts have become overdue, however the Company has not made interest provision for the said debt. The interest provision will be made at the time of final settlement. The debt was assigned by way of Deed of Assignment dated 28.05.2019.
ii) Under the Modified Draft Restructuring Scheme (MDRS), the Company has availed the loan with immediate object to revive the Company.
The loan amount of ? 157,29,49,931/- received under MDRS on which interest is not provided is included with the borrowings under long term borrowings (refer Note 13) as Secured loans & unsecured loans and amount reported under (Note 14) as short term borrowings are aggregating to ? 211,39,80,066/-.
33. Segment reporting -
Entire operational activities in the textile segments are standstill since August 2008. The Company is currently engaged in the business of Real Estate Development and activities connected and incidental thereto. All operating segments' operating results are reviewed regularly by the Company's Managing Director (MD) to make decisions about resources to be allocated to the segments and assess their performance. On that basis, the Company has identified two reportable business segment for the purpose of IND AS 108 - Real Estate and Textile, the results of which are embodied below. The Company operates in only one geographical segment-within India.
*Currently there are no operational activities in textile segment.
34. Previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current year's classification / disclosure.
35. There are no amounts due and payable to Investors Education and Provident Fund as on the date of Balance sheet.
36. The entire operational activities of the textile segment of the company are standstill since August 2008, due to labour & other regulatory issues. Till date there are no plants or units in operation. However company has started new business in real estate segment. Management does not expect any adverse impact on its future cash flows and shall be able to continue as a going concern. The Company will continue to monitor future economic conditions for any significant change. The internal financial control over financial reporting, disclosure controls and risk assessment and minimization procedures are maintained, continued and followed and there is no change in the same.
38. Financial Instruments - Fair value and Risk Management (i) Fair value hierarchy
The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
The following methods and assumptions were used to estimate the fair values:
1) Fair value of cash and short-term deposits, trade and other short term receivables, trade payables, other current liabilities, short term loans from banks and other financial institutions approximate their carrying amounts largely due to short term maturities of these instruments.
2) Financial instruments with fixed and variable interest rates are evaluated by the Company based on parameters such as interest rates and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for expected losses of these receivables. Accordingly, fair value of such instruments is not materially different from their carrying amounts.
The Financial Instruments are categorised in three level based on the inputs used to arrive at fair value measurements as described below:-
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities. (at cost)
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.
Level 3: Inputs which are not based on observable market data
(ii) Financial risk management objectives and policies
The Company Financial risk management is an integral part of how to plan and execute its business strategies. The company risk management policy is set by the Managing Board.
Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits, foreign currency receivables, payables and loans and borrowings.
(a) Market Risk- Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of the financial instruments will fluctuate because of changes in market interest rates. In order to optimize the company's position with regards to interest income and interest expenses and to manage the interest rate risk, treasury performs a comprehensive corporate interest rate risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.
(c) Credit risk
Credit risk arises from the possibility that the counter party may not be able to settle their obligations as agreed. To manage this, the company periodically assess financial reliability of customer, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of accounts receivable. Individual risk limits are set accordingly.
The company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis through each reporting period. To assess whether there is a significant increase in credit risk the company compares the risk of default occurring on asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forwarding-looking information such as:
i) Actual or expected significant adverse changes in business,
ii) Actual or expected significant changes in the operating results of the counterparty,
iii) Financial or economic conditions that are expected to cause a significant change to the counterparty's ability to meet its obligations,
iv) Significant increase in credit risk on other financial instruments of the same counterparty,
v) Significant changes in the value of the collateral supporting the obligation or in the quality of the third-party guarantees or credit enhancements.
Act, 2013.
h. The Company is not required to spent CSR under Section 135 of Companies Act, 2013.
i. The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
j. The Company have not traded or invested in Crypto Currency or Virtual Currency during the period/year.
k. The Company does not have any transaction not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessment under the Income Tax Act, 1961.
l. The Company does not have number of layer of Companies as prescribed under clause (87) of section 2 of the Act read with the Companies (Restriction on number of Layers) Rules,2017.
As per our report of even date attached For and on behalf of the Board of Directors
The Baroda Rayon Corporation Limited
For Kansariwala &Chevli Damodarbhai Patel Viral Bhavani
Chartered Accountants Chairman & Managing Director Whole Time Director
Firm Registration No. 123689W DIN-00056513 DIN-02597320
A.H. Chevli Jugal Kishore Jakhotia Kunjal Desai
Partner Chief Financial Officer Company Secretary
Membership No. 038259 ACS-40809
Place - Surat Place - Surat
Date - 30th May, 2024 Date - 30th May, 2024
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