j. Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised when the Company has a present obligation (Legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the Statement of Profit and Loss net of any reimbursement. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance Sheet date.
If the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects, its present value, that reflects the current market assessments of the time value of money and the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liabilities are disclosed in the Notes to the Financial Statements. Contingent liabilities are disclosed for (1) possible obligations which will be confirmed only by future events not wholly within the control of the Company or (2) present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.
The Company has ongoing disputes with Tax Authorities on various matters which are pending before appellate authorities. In this regard, the management evaluates whether it has any uncertain tax position requiring adjustments to provision for taxes. Depending on probability of success in the matter before the Appellate Authorities, a provision is created, or a Contingent liability is disclosed.
Contingent assets are not recognised in the financial statements as this may result in the recognition of income that may never be there.
k. Financial instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of the financial asset and financial liabilities (other than financial asset and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial asset or financial liabilities, as appropriate, on initial recognition. Transactions costs directly attributable to the acquisition of financial asset and financial liabilities at fair value through profit or loss are recognised immediately in the Statement of Profit and Loss.
l. Financial assets
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the market place.
All recognised financial assets (except trade receivables) are subsequently measured at either amortised cost or fair value through profit or loss or fair value through other comprehensive income, depending on the classification of the financial assets. Financial assets are not reclassified subsequent to their recognition, except during the period the Company changes its business model for managing financial assets.
Classification of financial assets
Debt instruments that meet the following conditions are subsequently measured at amortised cost:
a) The asset is held within a business model whose objective is to hold assets in order or collect contractual cash flows; and
b) The contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Debt instruments that do not meet the above conditions are subsequently measured at fair value. Financial assets that are held within a business model whose objective is achieved by both, selling financial assets and collecting contractual cash flows that are solely payments of principal and interest, are subsequently measured at fair value through other comprehensive income. Fair value movements are recognized in the other comprehensive income (OCI). A financial asset not classified as either amortised cost or Fair Value through OCI, is classified as Fair Value through Profit or loss.
Effective interest method
The effective interest is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument, or where appropriate, a shorter period, to the net carrying amount in initial recognition.
Income is recognised on an effective interest basis for debt instruments. Interest income is recognised in the Statement of Profit and Loss and is included in the "Other income" line item.
Impairment of financial assets
The Company applies expected credit loss model for recognising impairment loss on financial assets measured at amortised cost, trade receivables and other contractual rights to receive cash or other financial asset.
Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights. Credit loss is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive (i.e. all cash shortfalls), discounted at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets). The Company estimates cash flows by considering all contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) through the expected life of that financial instrument.
The Company measures the Loss allowance for a financial instrument at an amount equal to the Lifetime expected credit Losses if the credit risk on that financial instrument has increased significantly since initial recognition. If the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. 12-month expected credit losses are portion of the lifetime expected credit losses and represent the lifetime cash shortfalls that will result if default occurs within the 12 months after the reporting date and thus, are not cash shortfalls that are predicted over the next 12 months.
For trade receivables or any contractual right to receive cash, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses.
Further, for the purpose of measuring lifetime expected credit loss allowance for trade receivables, the Company has used a practical expedient as permitted under Ind AS 109. This expected credit loss allowance is computed based on a provision matrix which takes into account historical credit loss experience with adjusted for forward-looking information.
Derecognition of financial assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all of the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all of the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss if such gain or loss would have otherwise been recognised in the Statement of Profit and Loss on disposal of that financial asset.
On derecognition of a financial asset other than in its entirety, the Company allocates the previous carrying amount of the financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in the Statement of Profit and Loss on disposal of that financial asset. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.
Foreign exchange gains and losses
The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period.
For foreign currency denominated financial assets measured at amortised cost, the exchange differences are recognised in the Statement of Profit and Loss.
m. Financial liabilities and equity instruments Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liability or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company is recognised at the proceeds received, net of direct issue costs.
Repurchase of the Company's own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in the Statement of Profit and Loss on the purchase, sale, issue or cancellation of the Company's own equity instruments.
Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest method.
Financial liabilities at initial recognition are classified as financial liabilities at fair value through profit or loss, loans, borrowings and trade payables, as appropriate.
Financial liabilities that are not held for trading and are not designated as at fair value through profit or loss are measured at amortised cost at the end of the subsequent accounting period. The carrying amount of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included in the "Finance costs" in the Statement of Profit and loss.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, (where appropriate), a shorter period, to the net carrying amount at initial recognition.
Foreign exchange gains and losses
For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortised cost of the instrument and are recognised in the Statement of Profit and Loss.
Derecognition
The Company derecognises a financial liability when, and only when, the Company's obligations are discharged, cancelled or have expired. An exchange with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new liability. Similarly, a substantial modification of the terms of an existing financial liability is accounted for as an extinguishment of the original financial liability and the recognition of a new liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in the Statement of Profit and Loss.
n. Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM) of the Company. The CODM is responsible for allocating resources and assessing performance of the operating segments of the Company.
o. Cash and Cash Equivalents
Cash and cash equivalents for the purpose of Cash Flow Statement comprise cash and cheques in hand, bank balances, demand deposits with banks where the original maturity is three months or less and other short term highly liquid investments.
p. Earnings Per Share
Basic earnings per share is computed by dividing the net profit for the year after tax for the period attributable to the equity shareholders of the Company by the weighted average number of equity
shares outstanding during the period. The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares that have changed the number of equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net profit / loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
q. Claims
Claims against the Company not acknowledged as debts are disclosed after a careful evaluation of the facts and legal aspects of the matter involved.
2.4 Other accounting policies Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily takes a substantial period of time to get ready for its intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in the Statement of Profit and Loss in the period in which they are incurred.
2.5 Recent accounting pronouncements Standards issued but not yet effective
Ministry of Corporate Affairs (MCA), vide notification dated 12th August 2024, has made the following amendments to Ind AS which are effective 1st July, 2024 to the Company:
a. Ind AS 117 Insurance Contract
b. Ind AS 103 Business Combinations
c. Ind AS 101 First-time Adoption of Indian Accounting Standards
Based on preliminary assessment, the Company does not expect these amendments to have any significant impact on its financial statements.
3 Critical accounting judgments and key sources of estimation uncertainty
3.1 Critical judgments in applying accounting policies
In the application of the Company's accounting policies, which are described in Note 2, the Directors of the Company are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods of the revision if it affects both current and future periods.
3.2 Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
a. Useful lives of property, plant and equipment
As described at 2.3 (g) above, the Company reviews the estimated useful lives and residual values of property, plant and equipment at the end of each reporting period.
b. Fair value measurements and valuation processes
Some of the Company's assets and Liabilities are measured at fair value for financial reporting purposes. The Management of the Company determines appropriate valuation techniques and inputs for fair value measurements.
In estimating the fair value of an asset or a liability, the Company uses market-observable data to the extent it is available. Where level 1 inputs are not available, the Company engages third party qualified valuers to perform the valuation. The Management works closely with the qualified external valuers to establish the appropriate valuation techniques and inputs to the model.
Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities is disclosed in Note 31.
c. Defined benefit obligation
The costs of providing pensions and other post-employment benefits are charged to the Statement of Profit and Loss in accordance with Ind AS 19 ‘Employee benefits’ over the period during which benefit is derived from the employees’ services. The costs are assessed on the basis of assumptions selected by the Management. These assumptions include salary escalation rate, discount rates, expected rate of return on assets and mortality rates. The same is disclosed in note 24, ‘Employee benefits expense’.
d. Income taxes
The Company’s tax jurisdiction is India. Significant judgments are involved in estimating budgeted profits for the purpose of paying advance tax, determining the provision for income taxes, including amount expected to be paid / recovered for uncertain tax positions (refer note 27).
e. Measurement and likelihood of occurrence of provisions and contingencies - As disclosed in Note 14 and Note 36, Management has estimated and measured the likelihood of the litigations and accounted the provision and contingencies as appropriate.
f. The estimation of the various types of discounts, incentives, promotions and rebate schemes to be recognised based on sales made during the year (refer note 20).
30 Employee benefit plans
30.1 Defined contribution plans
The Company operates defined contribution superannuation fund and employees' state insurance plan for all qualifying employees of the Company. Where employees leave the plan, the contributions payable by the Company is reduced by the amount of forfeited contributions.
The employees of the Company are members of a state-managed employer's contribution to employees' state insurance plan and superannuation fund which is administered by the Life Insurance Corporation of India. The Company is required to contribute a specific percentage of payroll costs to the contribution schemes to fund the benefit. The only obligation of the Company with respect to the contribution plan is to make the specified contributions.
The total expense recognised in the statement of profit and loss of ' 59 lakhs (for the year ended June 30, 2023: ' 62 lakhs) for superannuation fund represent contributions payable to these plans by the Company at rates specified in the rules of the plans. As at June 30, 2024, contributions of ' 4 lakhs (as at June 30, 2023: ' 5 lakhs) due in respect of 2023-2024 (2022-2023) reporting period had not been paid over to the plans. The amounts were paid subsequent to the end of the reporting periods.
30.2 Defined benefit plans and other long term employee benefits plan
a) Gratuity Plan (Funded)
The Company sponsors funded defined benefit gratuity plan for all eligible employees of the Company. The Company’s defined benefit gratuity plan is a final salary plan for India employees, which requires contributions to be made to a separately administered trust, which is administered through trustees and / or Life Insurance Corporation of India, where one of the group company is also the participant. The gratuity plan is governed by the Payment of Gratuity Act, 1972 and Company Policy. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member’s length of service, designation and salary at retirement age.
b) Provident Fund (Funded)
Provident Fund for all permanent employees is administered through a trust. The provident fund is administered by trustees of an independently constituted common trust recognised by the Income Tax authorities where one of the group company is also a participant. Periodic contributions to the fund are charged to revenue. The Company has an obligation to make good the shortfall, if any, between the return from the investment of the trust and notified interest rate by the Government. The contribution by employer and employee together with interest are payable at the time of separation from service or retirement whichever is earlier. The benefit under this plan vests immediately on rendering of service.
c) Post Retirement Medical Benefit (PRMB) (Unfunded)
The Company provides certain post-employment medical benefits to employees. Under the scheme, employees get medical benefits subject to certain limits of amount, periods after retirement and types of benefits, depending on their grade at the time of retirement. Employees separated from the Company as part of early separation scheme are also covered under the scheme. The liability for post retirement medical scheme is based on an independent actuarial valuation.
d) Compensated absences for Plant technicians (Unfunded)
The Company also provides for compensated absences for plant technicians which allows for encashment of leave on termination / retirement of service or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment / availment. The Company makes provision for compensated absences based on an actuarial valuation carried out at the end of the year.
e) Long Service Awards (Unfunded)
Long Service Awards are payable to employees on completion of specified years of service.
These plans typically expose the Company to actuarial risks such as: Investment risk, interest rate risk, longevity risk and salary risk.
Significant actuarial assumptions in the determination of the defined obligation are discount rate, expected salary increase and mortality. The sensitivity analysis below have been determined based on reasonable possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.
Gratuity Plan (Funded)
If the discount rate is 50 basis points higher (lower), the defined benefit obligation would decrease by ' 340 lakhs (increase by ' 365 lakhs) (as at June 30, 2023: decrease by ' 383 lakhs (increase by ' 412 lakhs)).
If the expected salary growth increases (decreases) by 0.5%, the defined benefit obligation would increase by ' 351 lakhs (decrease by ' 332 lakhs) (as at June 30, 2023: increase by ' 397 lakhs (decrease by ' 374 lakhs)).
Compensated absence plan (Unfunded)
If the discount rate is 50 basis points higher (lower), the other benefit obligation would decrease by ' 31 lakhs (increase by ' 33 lakhs) (as at June 30, 2023: decrease by ' 42 lakhs (increase by ' 46 lakhs)).
If the expected salary growth increases (decreases) by 0.5%, the other benefit obligation would increase by ' 33 lakhs (decrease by ' 30 lakhs) (as at June 30, 2023: increase by ' 44 lakhs (decrease by ' 41 lakhs)).
Post retirement medical benefit (PRMB) (Unfunded)
If the discount rate is 50 basis points higher (lower), the defined benefit obligation would decrease by ' 8 lakhs (increase by ' 7 lakhs) (as at June 30, 2023: decrease by ' 7 lakhs (increase by ' 8 lakhs)).
If the expected medical inflation rate increases (decreases) by 0.5%, the defined benefit obligation would increase by ' 7 lakhs (decrease by ' 7 lakhs) (as at June 30, 2023: increase by ' 7 lakhs (decrease by ' 6 lakhs)).
If the expected life expectancy increases (decreases) by 1 year, the defined benefit obligation would increase by ' 3 lakhs (decrease by ' 3 lakhs) (as at June 30, 2023: increase by ' 3 lakhs (decrease by ' 3 lakhs)).
Long Service Awards (Unfunded)
If the discount rate is 50 basis points higher (lower), the other benefit obligation would decrease by ' 25 lakhs (increase by ' 27 lakhs) (as at June 30, 2023: decrease by ' 23 lakhs (increase by ' 25 lakhs)).
If the expected gold inflation rate increases (decreases) by 0.5%, the other benefit obligation would increase by ' 26 lakhs (decrease by ' 25 lakhs) (as at June 30, 2023: increase by ' 25 lakhs (decrease by ' 23 lakhs)).
The sensitivity analysis presented above may not be representative of the actual change of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method as the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.
30.3 Provident Fund
The Provident Fund assets and liabilities are managed by "Gillette Employees Provident Fund Trust" in line with The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952.
The plan guarantees minimum interest at the rate notified by the Provident Fund Authorities. The contribution by the employer and employee together with the interest accumulated thereon are payable to employees at the time of separation from the Company or retirement, whichever is earlier. The benefit vests immediately on rendering of the services by the employee. In terms of the guidance note issued by the Institute of Actuaries of India for measurement of provident fund liabilities, the actuary has provided a valuation of provident fund liability and based on the assumptions provided below, there is no shortfall as at June 30, 2024.
The Company's contribution to Provident Fund ' 974 Lakhs (Previous Year: ' 940 Lakhs) has been recognised in the statement of profit and loss under the head employee benefits expense (refer note 24).
The details of the "Gillette Employees Provident Fund Trust" and plan assets position as at June 30, 2024 is given below:
(iii) Other price risk management
Other price risk is the risk that the fair value of a financial instrument will fluctuate due to changes in market traded price. The Company is not exposed to pricing risk as the Company does not have any investments in equity instruments and bonds.
B. Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company.
Trade Receivables
Concentration of credit risk with respect to trade receivables are limited, due to the Company’s customer base being large and diverse. The Company performs ongoing credit evaluation of the counterparty’s financial position as a means of mitigating the risk of financial loss arising from defaults. The Company only grants credit to creditworthy counterparties.
The Company does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics as disclosed in Note 9 to the financial statements.
Other financial assets
Other financial assets include employee loans, security deposits, cash and cash equivalents, deposits with bank etc. Based on historical experience and credit profiles of counterparties, the Company does not expect any significant risk of default.
The Company’s maximum exposure to credit risk for each of the above categories of financial assets is their carrying values.
C. Liquidity risk management
Liquidity risk is the risk that the Company will encounter difficulty in raising funds to meet commitments associated with financial instruments that are settled by delivering cash or another financial asset. Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value. The Company maintains adequate highly liquid assets in the form of cash to ensure necessary liquidity.
The table below analyse financial liabilities of the Company into relevant maturity groupings based on the reporting period from the reporting date to the contractual maturity date:
31.4 Fair value measurements
The carrying amount of financial assets and financial liabilities measured at amortised cost in the financial statements are a reasonable approximation of their fair values since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.
32 Share-based payments
a) International Stock Ownership Plan (Stocks of the Ultimate Holding Company)
The Gillette Company, USA (TGC) had a “Global Employee Stock Ownership Plan” (employee share purchase plan) whereby specified employees of its subsidiaries have been given a right to purchase shares of TGC. Every employee who opted for the scheme contributed by way of payroll deduction up to a specified percentage (upto 15%) of his base salary towards purchase of shares on a monthly basis. The Company contributes 50% of employee's contribution (restricted to 2.5% of base salary). Such contribution is charged under employee benefits expense. Subsequent to the worldwide merger of Aquarium Acquisition Corporation (wholly owned subsidiary of the Procter & Gamble Company) with TGC on October 1, 2005, the shares of TGC got delisted from the New York Stock Exchange and the share purchase plan has been adopted by the Procter & Gamble Company.
The shares of TGC (till September 30 2005) / The Procter & Gamble Company are listed with New York Stock Exchange of USA and are purchased on behalf of the employees at market price on the date of purchase. During the year 3895.56 shares (Previous year: 4072.89 shares) excluding dividend were purchased by employees at weighted average fair value of ' 12 883.75 (Previous year: ' 11 770.88) per share. The Company's contribution during the year on such purchase of shares amounts to ' 139 lakhs (Previous year: ' 130 lakhs).
b) Employees Stock Options Plan (Stocks of the Ultimate Holding Company)
The Gillette Company, USA (TGC) had an Employees Stock Options Scheme whereby specified employees of its subsidiaries covered by the plan were granted an option to purchase shares of the Parent Company i.e. The Gillette Company, USA at a fixed price (grant price) for a fixed period of time. Subsequent to the worldwide merger of Aquarium Acquisition Corporation (wholly owned subsidiary of the Procter & Gamble Company) with The Gillette Company, USA on October 1, 2005, the shares of The Gillette Company got delisted from the New York Stock Exchange. Upon this change in control the 2005 Gillette Option award got automatically converted into P&G options at the established conversion ratio of 0.975 shares in the Procter and Gamble Company, for every share held in the Gillette Company. The shares of the Gillette Company (till September 30, 2005) / The Procter & Gamble Company, were/are listed with New York Stock Exchange of USA. The options were issued to Key Employees of the Company with Exercise price equal to the market price of the underlying shares on the date of the grant. The Grants issued are vested after 3 years/5 years and have a 5 years /10 years life cycle.
43 During FY 2021, National Anti Profiteering Authority (NAA) passed an order alleging that the Company has profiteered to the tune of ' 5 799 lakhs (excluding interest) and had directed the Company to deposit the said amount along with interest @18% into the Consumer Welfare Funds. The Company filed an appeal before Hon’ble Delhi High Court against the said order of NAA and the Hon’ble High Court has passed a ‘status quo’ order in favour of the Company, effectively staying the operation of the NAA order. The Delhi High Court (DHC) on January 29, 2024 upheld the constitutional validity of Antiprofiteering law. The individual cases filed by respective companies continue to be pending and interim orders passed in respective writ petitions shall continue. DHC will take up each company’s petition to determine on the aspect of correctness of NAA’s orders in their respective cases. The Company has filed an appeal against the DHC Order before the Supreme Court (SC), as in our view, DHC has erred in application of certain key legal principles and lacks appreciation for or has failed to take into consideration impracticability in implementation of the “proportionate price reduction” as the only method of passing off benefits of reduced tax. The SC has admitted the appeals and have posted it for further proceedings.
44 As per the MCA notification dated August 5, 2022, and the Companies (Accounts) Fourth Amendment Rules, 2022, the Company is required to maintain backups of books of account on servers physically located in India on a daily basis. The Company had maintained periodic backups of its books of account and other relevant books and papers maintained in electronic mode on servers physically located in India upto December 17, 2023. This was in addition to regular backups on the P&G Group's Global Servers outside India. The Company has commenced maintaining daily backups from December 18, 2023. The said backups include data from April 1, 2022, and onwards.
45 Maintenance of Audit Trail
As required under the second proviso to Section 128(1) of the Companies Act 2013, read with proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014, the Company has identified applications which meet the definition of books of account.
The Company uses an ERP for maintaining its books of accounts, together with certain surround applications which either initiate, store, or process information which is subsequently recorded in the ERP.
The said surround applications include certain third-party Software-as-a-Service (SaaS) applications, such as an 'Employee Lifecycle and Compensation' application, 'Leave, Workforce and Overtime'
application, 'Vendor Master Management' application, 'Product Price Approval and Management' application and an 'International Freight and Logistics Management' application which are hosted and managed by the service providers. The audit trail data for direct access to the database is available with the third-party software service providers, which has been validated through review of Service Organisation Controls (SOC) Reports. For the period not covered by the SOC Reports, Company has obtained Bridge Letters from the SaaS vendors.
The surround applications also include certain applications such as Inventory Management applications which are hosted on P&G Group’s global servers. These applications are managed by the Group’s IT teams and a privileged access management tool is used to monitor audit trail for direct access to the database. The ERP and the surround applications have a feature of recording audit trail (edit log) facility which has operated throughout the year for all transactions recorded in said applications as required under the Companies Act, 2013.
46 The Company has arrived at an Advanced Pricing Agreement with the concerned tax authorities, determining appropriate transfer pricing methodology for certain identified transactions with the Company’s affiliate(s) for the years ended March 2013, March 2015, March 2016 and March 2017. As a consequence of this agreement, an additional tax liability amounting to ? 615 lakhs and interest amounting to ? 140 lakhs, has been accounted under Prior Period Tax Adjustments and Finance Costs respectively. In view of the above, contingent liabilities have been reduced by ' 25 005 lakhs.
47 Approval of financial statements
The financial statements were approved for issue by the Board of Directors on August 29, 2024.
Signatures to Notes 1 to 47
For and on behalf of Board of Directors
Gurcharan Das Kumar Venkatasubramanian
Chairman Managing Director
DIN No : 00100011 DIN No : 08144200
Gautam Kamath Flavia Machado
Director & Chief Financial Officer Company Secretary
DIN No : 09235167
Place: Mumbai
Date: August 29, 2024
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