The Company has advanced Loans to Allied Digital Inc. (USA), its wholly owned Subsidiary, on regular basis. The same being in the nature of Contribution towards Working Capital of the Subsidiary should have been classified under the head of Loans & Advances but has been classified as Investments. No Shares have been issued against this capital contribution.
Investments in Mutual Funds are stated at the lower of cost and fair value, determined on a portfolio basis.
During the FY 2015-16 the Company has written off an amount of '''' 3433.20 lakh towards old doubtful Loans and Advances.
In respect of confirmation for other Loans and Advances as at 31st March 2016, the Company has not produced the same from the parties at the time of signing of the Balance sheet. Due to the absence of these confirmations the need to make provisions for the doubtful debts has not been ascertained and provided for by the company. The ageing of the debtors as reported in the balance sheet could also not be verified by the Auditors and has been considered as certified by the management of the company. However, the management is of the opinion that all the Loans and Advances as appearing in the Balance Sheet are good and recoverable.
Inventories are valued at lower of cost and net realizable value Note 2
The value of the Inventory as on 31st March 2016 includes certain slow moving items which has not been provided for during the valuation of the same.
The valuation of the Inventory is as certified by the management.
In respect of confirmation for Sundry Debtors for the balance amount , the Company has not produced the same from any of these other parties till the signing of the Balance sheet. Due to the absence of these confirmations the need to make provisions for the doubtful debts has not been ascertained and provided for by the company. The aging of the debtors as reported in the balance sheet could also not be verified by the Auditors and has been considered as certified by the management of the company. However, the management is of the opinion that all the Sundry Debtors, as appearing in the Balance Sheet are good and recoverable.
In respect of confirmation for Loans and Advances as at 31st March 2016, the Company has not produced the same from the parties at the time of signing of the Balance sheet. Due to the absence of these confirmations the need to make provisions for the doubtful debts has not been ascertained and provided for by the company. However, the management is of the opinion that all the Loans and Advances as appearing in the Balance Sheet are good and recoverable.
(i) Unbilled Revenue of Rs, 1,542.66 Lakhs has been considered as certified and represented by the Management.
(ii) In the opinion of the Management, the Current Assets, Loans and Advances have a value on realization, in the ordinary course of business at least equal to the amount at which they are stated in the Accounts.
(i) Inventories are valued at lower of cost and net realizable value.
(ii) The value of the Inventory as on 31st March 2016 includes certain slow moving items which has not been provided for during the valuation of the same. The valuation of the Inventory is as certified by the management.
Note 6 There is a delay in payment of statutory dues and filing of Return of Service Tax, Provident Fund, ESIC, Profession Tax, TDS and VAT due to which an additional liability of these taxes on account of Interest on delay in payment of these taxes as well as penalty on delay in filing the returns shall accrue for the year under consideration as well as the earlier years.
Note 7 The Income tax Authorities carried out a search operation at certain locations of the Company on 4th February 2011.
The Company extended its full co-operation to the tax authorities and various statements were recorded during the course of search. The search operation got concluded on the same business day. The Company was thereafter asked to file the Revised Return of Income from A.Y. 2005-06 to 2011-12 which was duly complied with. Thereafter the Income Tax Department completed the Assessments of the Company till 2011-12 and the details of the same areas under:
The additional Income Tax Liability of Rs, 1,094.60 Lakhs is on account of some additions made by the Income Tax Department. Out of which company has paid Rs, 75.00 Lakhs and Income tax department adjusted Income tax refund of Rs, 508.42 lakh against the demand. Against the said order company has filed appeal with Appellate authority of Income Tax department. The Company expects major relief from this demand once these appeals are decided.
Note 8 The company has received the Assessment Orders from Maharashtra Value Added Tax Department (MVAT), demand has been raised on the company. This demand is on account of total disallowance of Input Credit availed by the Company. As the said Order is bad in law and on facts the company has filed appeal with the Appellate authority of Sales Tax. The Company expects major relief from this demand once these appeals are decided. This liability has not been recognized in the Books of Accounts of the Company. The details of the same are as under:
9) Corporate information
Allied Digital Services Limited (referred to as “ADSL” or the “Company”) is renowned as a leading Global IT Transformation Architect, having its operations in pan India, USA, Australia, Europe and Middle east Asia with an impeccable track record for designing, developing, deploying and delivering end-to-end IT infrastructure services. It provides wide range of information technology and consultancy services including Infrastructure Services, End user IT Support, IT asset life cycle, enterprise applications and integrated solutions.
The Company''''s registered office is in Mumbai and has presence in pan India, and it has Subsidiary companies in USA, UK,Singapore and Australia.
10) Significant Accounting Policies
a) Basis of preparation
The financial statements have been prepared in accordance with the Generally Accounting Accepted Accounting Principles in India (Indian GAAP) under the historical cost convention on accrual basis. These financial statements have been prepared to comply with the in all material aspects with the Accounting Standards issued by the Institute of Chartered Accountants of India and referred to Sec 129 & 133 of the Companies Act, 2013, of India. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.
b) Principles of Consolidation
The financial statements of the subsidiary companies used for the publishing of the consolidated results are drawn up to the same reporting date as of the Company.
The consolidated financial statements have been prepared on the following basis:
i. The financial statements of the Company and its subsidiary companies have been combined on the line by line basis by adding together like item of assets, liabilities, income and expenses. Inter-Company balances and transactions and unrealized profits or losses have been fully eliminated.
ii. The excess of cost to the Parent Company of its investments in subsidiary companies over its share of the equity of the subsidiary companies at the dates on which the investment in subsidiary companies are made, is recognized as ''''Goodwill'''' being an asset in the consolidated financial statements. Alternatively, where the share of equity in the subsidiary companies as on the date of investment is in excess of cost of investment of the Company, it is recognized as ''''Capital Reserve'''' and shown under the head ''''Reserves and Surplus'''', in the consolidated financial statements.
iii. Minority interest in the net assets of the consolidated subsidiaries consists of the amount of the equity attributable to the minority shareholders at the dates on which investments are made by the Company in the subsidiary companies and further movements in their share in the equity, subsequent to the dates of investments.
iv. Interest in a jointly controlled entity is reported using proportionate consolidation.
c) Use of estimates
The preparation of financial statements requires the management of the Company to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to the contingent liabilities as at the date of the financial statements and reported amounts of income and expenses during the year. Examples of such estimates include provisions for doubtful debts, employee benefits, provision for income taxes, accounting for contract costs expected to be incurred to complete software development and the useful lives of depreciable fixed assets.
d) Tangible fixed assets
Fixed assets are stated at cost less accumulated depreciation. Costs include all expenses incurred to bring the assets to its present location and condition. Subsequent expenditure related to fixed assets is capitalized only if such expenditure results in an increase in the future benefits from such assets beyond its previously assessed standard of performance.
e) Intangible assets
Intangible assets are carried at cost less accumulated amortization and impairment losses, if any. The cost of an intangible asset comprises its development cost/purchase price, including any import duties and other taxes (other than those subsequently recoverable from the taxing authorities), and any directly attributable expenditure on making the asset ready for its intended use and net of any trade discounts and rebates. Subsequent expenditure on an intangible asset after its purchase / completion is recognized as an expense when incurred unless it is probable that such expenditure will enable the asset to generate future economic benefits in excess of its originally assessed standards of performance and such expenditure can be measured and attributed to the asset reliably, in which case such expenditure is added to the cost of the asset.
f) Depreciation and amortization
Depreciation has been provided based on estimated useful life assigned to each asset in accordance with Schedule II of the Companies Act, 2013:
Depreciation is charged only from the date the asset concerned is put to use by the Company.
Intangible assets are amortized over the estimate useful life.
The depreciation has been charged using straight line Method over the estimated life of assets of three to seven years in case of Allied Digital Services LLC.
Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor, are recognized as operating leases. Lease rentals under operating leases are recognized in the profit and loss account on pro-rata basis over the period of the lease.
The carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors. An asset is treated as impaired when the carrying cost of the assets exceeds its recoverable value. An impairment loss, if any, is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired. Reversal of impairment losses recognized in the prior years is recorded when there is an indication that the impairment losses recognized for the assets no longer exist or have decreased.
Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as current investments. All other investments are classified as long-term investments.
Investments are recorded at cost on the date of purchase, which includes acquisition charges such as brokerage, stamp duty, taxes, etc. Current Investments are stated at lower of cost and net realizable value. Long term investments are stated at cost after deducting provisions made, if any, for other than temporary diminution in the value.
Profit or Loss on sale of Investments is determined on specific identification basis. j) Employee benefits
(i) Post-retirement benefit plans
Payments to the defined retirement benefit schemes are recognized as expenses when employees have rendered services entitling them to contributions.
In accordance to the applicable Indian Laws and as per the Accounting Standard 15 (Revised) for “Accounting for Employees Benefit”, the Company with effect from April 1, 2006 provides for gratuity for its eligible employees. The Actuarial Gains or Losses are charged to the Profit and Loss Account for the period in which they occur.
(ii) Employees defined contribution plans
The Company makes Provident Fund contributions to defined contribution plans for qualifying employees. Under the schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. This contribution is made to the Government''''s Provident Fund.
k) Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and can be reliably measured.
Revenues from contracts priced on a time and material basis are recognized when services are rendered and related costs are incurred.
Revenues from maintenance contracts are recognized on pro-rata basis over the period of the contract.
Service revenue is considered on acceptance of the contract and is accrued over the period of the contract, net of all taxes, local levies and other discounts & rebates.
Sales in case of supply of goods are recognized when the goods are invoiced or dispatched to the customers and are recorded exclusive of VAT, CST, other local levies and other discounts and rebates.
Revenue from sale of software licenses are recognized upon delivery where there is no customization required. In case of sale of customized software the same is recognized on the basis of achieving the various milestones attached with the customization, net of all taxes, local levies and other discounts & rebates.
Interest income is accounted on time proportion basis taking into account the amount outstanding and the applicable interest rate. Dividends income is accounted when the right to receive it is established.
Tax expense comprises of current and deferred tax.
Provision for current tax is made on the basis of estimated taxable income of the current accounting year in accordance with the Income Tax Act, 1961.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle the asset and the liability on a net basis.
The deferred tax for timing differences between the book and tax profits for the year is accounted for, using the tax rates and laws that have been substantively enacted as of the Balance Sheet date. Deferred tax assets arising from timing differences are recognized to the extent there is reasonable certainty that these would be realized in future.
The carrying amount of deferred tax assets are reviewed at each Balance Sheet date. The Company writes down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain, that sufficient future taxable income will be available.
In case of unabsorbed losses and unabsorbed depreciation, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profit. At each Balance Sheet date the Company reassesses the unrecognized deferred tax assets.
Minimum Alternate Tax (MAT) credit is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. In the year in which the MAT credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in Guidance Note issued by the ICAI, the said asset is created by way of a credit to the Statement of Profit and Loss and shown as MAT Credit Entitlement. The Company reviews the same at each Balance Sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that the Company will pay normal Income Tax during the specified period.
m) Foreign Currency Transactions
The transactions in foreign currencies on revenue accounts are stated at the rate of exchange prevailing on the date of transaction. The difference on account of fluctuation in the rate of exchange prevailing on the date of transaction and the date of realization is treated as revenue / expenditure.
Differences on translation of Current Assets and Current Liabilities remaining unsettled at the yearend are recognized in the Profit and Loss Account except those relating to acquisition of fixed assets which are adjusted in the cost of the assets.
n) Employee Stock Option Scheme
In accordance with the Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines, 1999 issued by the Securities and Exchange Board of India (“SEBI”), the Company is following the Intrinsic Value Method of ESOP cost whereby the excess of Fair Market Value of the shares of the Company one day prior to the date of issue of the shares over the price at which they are issued is recognized as employee compensation cost. This cost is amortized on straight-line basis over the period of vesting of the Option.
However, during the year there were no Options exercised and vested hence no expenses have been provided on account of Employee Stock Options Cost (Previous Year: Nil).
Inventories are carried at lower of cost and net realizable value. Cost is determined on a first in first out basis. Purchased goods in transit are carried at cost. Stores and spare parts are carried at cost less provision for obsolescence.
3) Notes to Accounts
a) Employee Benefits Gratuity Plan
(i) An amount of Rs, 147.83 lakhs has been recognized towards the Employees Gratuity Fund against the liability of Rs, 147.83 lakhs as per the Actuarial Valuation for Gratuity as on 31st March 2016. The Company has its Employees Gratuity Fund managed by Birla Sun Life Insurance Company. The particulars under AS 15 (Revised) furnished below are those which are relevant and available to the company and which are as per the Acturial Valuation Report:-
b) Current Assets, Loans and Advances
(i) In the opinion of the Board, the Current Assets, Loans and Advances are approximately of the value stated and are realisable in the ordinary course of business.
(ii) Amounts extended to wholly or partially owned subsidiary Companies has been shown under the head of investment as the same is long term in nature.
c) Current Liabilities and Provisions
In the opinion of the Board, the current liabilities are approximately at the fair value in the Balance Sheet. Balances of sundry creditors are subject to confirmation and reconciliation.
The Company creates a provision when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation.
The company has received Notices from the MVAT Department for the disallowance of Input Credit on purchases made from certain registered dealers in Maharashtra. The company has contested the said claim of the MVAT Department but the quantum of the proposed disallowance of Input Credit has not been worked out by the company and hence cannot be quantified for provision.
h) Taxes on Income
(i) Provision for taxation for the year has been made in accordance with the provisions of the Income Tax Act, 1961.
(iii) In terms of Accounting Standard on “Accounting for Taxes on Income” (AS 22) the Company has recognized Deferred Tax Liability amounting to Rs, 58.31Lakh (Previous Year Rs, 174.09Lakh ) for the period ended 31st March, 2016 in the Statement of Profit and Loss.
i) Related Party Disclosures
A) Related Parties and their Relationship
1. Allied Digital Services LLC (formerly known as En Pointe Global Services LLC)
2. Allied Digital INC
3. Allied Digital Singapore Pte Ltd
4. Allied Digital Asia Pacific Pty Ltd
5. Allied-E Cop Surveillance Private Limited
6. En Pointe Technologies India Private Limited
7. Allied Digital Services (UK) Limited
1. Assetlite Equipment India Private Limited
(iii) Key Management Personnel & their Relatives (KMP)
a. Key Management Personnel
Mr. Nitin Shah Chairman & Managing Director
Mr. Prakash Shah Executive Director - Commercial
Mr. Paresh Shah Executive Director & CEO
Mr. Gopal Tiwari Chief Financial Officer
Mr. Ravindra Joshi Company Secretary
Mrs.Tejal P. Shah Wife of Mr. Prakash Shah
Mr. Nehal N. Shah Son of Mr. Nitin Shah
Miss Dhara N. Shah Daughter of Mr. Nitin Shah
n) These financial statements have been prepared in the format prescribed by the Schedule III to the Companies Act, 2013.
o) Previous year''''s figures have been regrouped / recast / restated, wherever necessary.