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United Spirits Ltd.

BSE: 532432 Sector: Consumer
NSE: MCDOWELL-N ISIN Code: INE854D01024
BSE 00:00 | 24 Apr 2020 United Spirits Ltd
NSE 05:30 | 01 Jan 1970 United Spirits Ltd

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OPEN 525.00
PREVIOUS CLOSE 529.10
VOLUME 59076
52-Week high 742.95
52-Week low 443.00
P/E 46.36
Mkt Cap.(Rs cr) 37,728
Buy Price 518.00
Buy Qty 10.00
Sell Price 519.20
Sell Qty 59.00
OPEN 525.00
CLOSE 529.10
VOLUME 59076
52-Week high 742.95
52-Week low 443.00
P/E 46.36
Mkt Cap.(Rs cr) 37,728
Buy Price 518.00
Buy Qty 10.00
Sell Price 519.20
Sell Qty 59.00

United Spirits Ltd. (MCDOWELL-N) - Auditors Report


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Company auditors report

To the Members of United Spirits Limited

Report on the audit of the Standalone FinancialStatements Opinion

1. We have audited the accompanying standalone financial statements of United SpiritsLimited ("the Company") which comprise the Balance Sheet as at March 31 2019the Statement of Profit and Loss (including Other Comprehensive Income) the Statement ofChanges in Equity and the Statement of Cash Flows for the year then ended and notes tothe financial statements including a summary of significant accounting policies and otherexplanatory information.

2. In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 (the "Act") in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards prescribed under Section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended ("Ind AS") and other accounting principles generally accepted in Indiaof the state of afiairs of the Company as at March 31 2019 and its total comprehensiveincome (comprising of profit and other comprehensive income) changes in equity and itscash flows for the year then ended on that date.

Basis for opinion

3. We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing (SAs) specified under Section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor’sResponsibilities for the audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India together with the ethical requirementsthat are relevant to our audit of the financial statements under the provisions of the Actand the Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is suficient and appropriate to provide a basis for our opinion.

Emphasis of Matter

4. We draw attention to the following matters:

a) As explained in Note 41 to the standalone financial statements upon completion ofthe Initial Inquiry which identified references to certain Additional Parties and certainAdditional Matters the MD & CEO pursuant to the direction of the Board of Directorshad carried out an Additional Inquiry that revealed transactions indicating actual andpotential diversion of funds from the Company and its Indian and overseas subsidiaries toin most cases Indian and overseas entities that appear to be afiliated or associated withthe Company’s erstwhile non-executive Chairman and other potentially impropertransactions. The amounts identified in the Additional Inquiry have been fully providedfor or expensed by the Company and/or its subsidiaries in earlier periods. Management iscurrently unable to estimate the financial impact on the Company if any arising frompotential non-compliances with applicable laws in respect of the above.

b) As explained in Note 42(b) to the standalone financial statements pursuant to itsstrategic objective of divesting non-core assets and rationalization of its subsidiariesthe Company has commenced the rationalization process and has sought approval ofregulatory authorities for divesting its stake in an overseas subsidiary and liquidatingthree of its wholly owned overseas subsidiaries and three of its wholly owned step-downoverseas subsidiaries. The completion of the above divestment as well as liquidations bythe Company are subject to regulatory and other approvals (in India and overseas). At thisstage it is not possible for the management to estimate the financial impact on theCompany if any arising out of potential historical non-compliances if established withapplicable laws with respect to its overseas subsidiaries.

c) As explained in Note 44(a) to the standalone financial statements the Managerialremuneration for the year ended March 31 2015 included an amount paid in excess of thelimit prescribed under the provisions of Schedule V to the Act by INR 134 million to theformer Executive Director and Chief Financial Officer (ED & CFO). The Company hasinitiated steps including by way of filing a suit for recovery before the jurisdictionalcourt to recover such excess remuneration from the former ED & CFO.

d) Note 45 to the standalone financial statements:

i) regarding clarifications sought by Securities and Exchange Board of India on matterscovered by the Company’s Initial Inquiry and Additional Inquiry and certain aspectsof the agreement entered into by the Company with its erstwhile non-executive Chairman towhich the Company has responded;

ii) regarding various issues raised and show cause notices issued pursuant to aninspection under Section 206(5) of the Companies Act 2013 by Ministry of CorporateAfiairs/ Registrar of Companies Karnataka alleging violation of certain provisions ofthe Companies Act 1956 and Companies Act 2013 to which the Company had responded.Following the aforesaid show cause notices the Company received a letter dated October13 2017 from the Registrar of Companies Karnataka (the "Registrar") invitingthe Company’s attention to the compounding provisions of the Companies Act 1956 andCompanies Act 2013. The Company thereafter filed applications for compounding of ofienceswith the Registrar in relation to three show cause notices applications for adjudicationwith the Registrar in relation to two show cause notices and requested the Registrar todrop one show cause notice based on expert legal advice received for which response isawaited.

iii) regarding the ongoing investigation by the Directorate of Enforcement inconnection with the agreement entered into by the Company with its erstwhile non-executiveChairman and investigations under the provisions of Foreign Exchange Management Act 1999and Prevention of Money Laundering Act 2002 to which the Company had responded; and

iv) regarding clarifications sought by Authorised Dealer banks in relation to certainqueries from the Reserve Bank of India with regard to remittances made in prior years bythe Company to its overseas subsidiaries past acquisition of the Whyte and Mackay groupclarifications on Annual Performance Reports submitted for prior years and clarificationson compliances relating to the Company’s overseas Branch office to which the Companyhas responded/ is in process of responding.

e) As explained in Note 46 to the standalone financial statements the Company is inlitigation with a bank ("the Bank") that continues to retain the pledge ofcertain assets of the Company and of the Company’s shares held by USL Benefit Trust(of which the Company is the sole beneficiary) despite the Company prepaying the term loanto that bank along with the prepayment penalty and further depositing an additional sum ofINR 459 million demanded by the Bank and as directed by the Hon’ble High Court ofKarnataka (the "Court"). The Court has directed the Bank not to deal with thepledged assets of the Company (including the shares held by USL Benefit Trust) asmentioned above till the disposal of the original writ petition filed by the Company inthe Court.

f) As explained in Note 48 to the standalone financial statements the Company cameacross information suggesting continuing past practices resulting in diffierences inreporting to the relevant Regulatory Authorities of yields of certain non-potableintermediates and associated process losses in the liquor manufacturing process and therelated actions taken by the Company in this respect. The Company will continue to monitordevelopments if any on this matter. Our opinion is not modified in respect of thematters described under paragraph 4 above.

Key audit matters

5. Key audit matters are those matters that in our professional judgment were of mostsignificance 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 financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters.

Key audit matter How our audit addressed the key audit matter
a) Assessment of the appropriateness of provisions recognised and contingent liabilities disclosed in respect of certain tax matters (Refer notes 8 18 and 50 to the standalone financial statements and Appendix 1 to Annexure A of the Audit Report) Our audit procedures included the following:
• Understood assessed and tested the design and operating effectiveness of the Company’s controls in respect of identifying potential tax exposures and/or the accounting and disclosures thereof.
As at March 31 2019 the Company has significant tax exposures and is subject to periodic assessments/ challenges by tax authorities on transfer pricing income tax and a range of indirect tax matters. • Evaluated the related accounting policy for provisioning for tax exposures/ disclosure of contingent liabilities.
Consequent to such tax assessments and demands relating to past several years the Company has paid certain amounts under protest at various dates. The Company has also filed appeals with various appellate authorities against such demands. • Obtained management’s assessment in respect of tax demands on whether tax outflow is either probable possible or remote.
Management judgement is involved in assessing the likelihood of ultimate outcome of the tax disputes to decide on the accounting/ disclosure requirements. In certain complex matters the probable amount of the outflows determined by management is supported by opinions obtained from external tax counsels/ experts (management tax experts). • Along with the auditors’ experts where necessary evaluated the management’s assessment as follows:
o For the samples selected read the correspondences received during the year from the tax authorities.
o Read views provided by the management management tax experts as applicable.
o Assessed management’s positions on significant tax exposures for reasonableness.
We considered this a key audit matter as: o Ensured completeness of litigations by inquiring with the management review of board minutes and review of significant legal expenses.
• The amounts involved are significant to the standalone financial statements
• Change in the management’s judgements and estimates may significantly afiect the provisions recognised or contingent liabilities disclosed o Evaluated the objectivity competence and capabilities of the management tax experts
o Evaluated the adequacy of disclosures made in the standalone financial statements.
• Matters of disputes are complex in some cases due to the industry in which the Company operates and may lack clarity under tax laws. Based on the above procedures we considered the management’s assessment in recognising provisions and disclosing contingent liabilities in respect of the stated tax matters as reasonable.
b) Assessment of Expected Credit Loss (ECL) provision in respect of Loans to subsidiaries Our audit procedures included the following:
(Refer Note 31 to the standalone financial statements) • Understanding evaluation of the design and testing the operating effectiveness of controls to assess the adequacy of credit loss on loans to subsidiaries.
The Company has outstanding loans due from some of its subsidiaries aggregating to INR 60616 million as at year end. • Tested the methodology applied in the credit loss provision estimation by comparing it to the requirements of the relevant accounting standard.
These loans to subsidiaries fall within the scope of Ind AS 109- Financial Instruments and are measured at amortised cost using effective interest method. A credit loss provision is recorded to adjust the balance to the present value of estimated cash flows. The Company carries an accumulated credit loss provision of INR 54363 million against such loans as at year end. • Tested the mathematical accuracy of management’s model used to calculate credit loss provision.
We considered provisioning for credit loss on loans to subsidiaries as a key audit matter as estimation of credit loss provision requires management to make significant assumptions on forward looking information for subsidiaries such as financial projections and the ability of the subsidiaries to repay those loans. • Examined the repayment terms by reference to the loan agreements with subsidiaries and evaluated key underlying assumptions such as expected growth in revenue cost savings timing and ability to repay loans by evaluation of forecasts of future cash flows.
• Evaluated the adequacy of disclosures made in the standalone financial statements.
Based on above audit procedures performed we did not note any significant exception to ECL provision in respect of loans to subsidiaries.

Other Information

6. The Company’s Board of Directors is responsible for preparation of otherinformation. The other information comprises the information included in the Report of theDirectors Business Responsibility Report Corporate Governance Report and ManagementDiscussion and Analysis but does not include the standalone financial statements and ourauditor’s report thereon.

7. Our opinion on the standalone financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.

8. In connection with our audit of the standalone financial statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained in the audit or otherwise appears to be materially misstated. Ifbased on the work we have performed we conclude that there is a material misstatement ofthis other information we are required to report that fact. We have nothing to report inthis regard.

Responsibilities of management for the Standalone Financial Statements

9. The Company’s Board of Directors is responsible for the matters stated inSection 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the financial position financial performance(including other comprehensive income) changes in equity and cash flows of the Company inaccordance with the Ind AS and other accounting principles generally accepted in India.This responsibility also includes maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding of the assets of the Company and forpreventing and detecting frauds and other irregularities; selection and application ofappropriate implementation and maintenance of accounting policies; making judgments andestimates that are reasonable and prudent; and design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theaccuracy and completeness of the accounting records relevant to the preparation andpresentation of the standalone financial statements that give a true and fair view and arefree from material misstatement whether due to fraud or error.

10. In preparing the standalone financial statements management is responsible forassessing the Company’s ability to continue as a going concern disclosing asapplicable matters related to going concern and using the going concern basis ofaccounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so. The Board of Directors is alsoresponsible for overseeing the Company’s financial reporting process.

Auditor’s responsibilities for the audit of the Standalone Financial Statements

11. Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor’s report that includes our opinion. Reasonableassurance is a high level of assurance but is not a guarantee that an audit conducted inaccordance with SAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these standalone financial statements.

12. As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional scepticism throughout the audit.

13. We also:

a) Identify and assess the risks of material misstatement of the standalone financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is suficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.

b) Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under Section 143(3)(i) of theAct we are also responsible for expressing our opinion on whether the company hasadequate internal financial controls with reference to the standalone financial statementsin place and the operating effectiveness of such controls.

c) Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.

d) Conclude on the appropriateness of management’s use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on theCompany’s ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor’s report to therelated disclosures in the financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor’s report. However future events or conditions may cause theCompany to cease to continue as a going concern.

e) Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the standalone financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.

14. We communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal controls that we identify during our audit.

15. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.

16. From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the standalone financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor’s report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.

Report on Other Legal and Regulatory Requirements

17. As required by the Companies (Auditor’s Report) Order 2016 issued by theCentral Government of India in terms of Section 143(11) of the Act ("theOrder") and on the basis of such checks of the books and records of the Company aswe considered appropriate and according to the information and explanations given to uswe give in the "Annexure A" statement on the matters specified in paragraphs 3and 4 of the Order to the extent applicable.

18. As required by Section 143(3) of the Act we report that:

a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.

c) The Balance Sheet the Statement of Profit and Loss (including other comprehensiveincome) the Statement of Changes in Equity and the Statement of Cash Flows dealt with bythis Report are in agreement with the books of account.

d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014.

e) The matters stated in paragraphs (a) (b) (d) (e) and (f) of paragraph 4 abovetitled ‘Emphasis of matter’ in our opinion may have an adverse efiect on thefunctioning of the Company.

f) On the basis of the written representations received from the directors as on March31 2019 and taken on record by the Board of Directors none of the directors isdisqualified as on March 31 2019 from being appointed as a director in terms of Section164(2) of the Act.

g) With respect to the adequacy of the internal financial controls with reference tothe standalone financial statements of the Company and the operating effectiveness of suchcontrols refer to our separate Report in "Annexure B".

h) With respect to the other matters to be included in the Auditor’s Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact if any of pending litigations as at March 312019 on its financial position in its standalone financial statements – Refer Notes8 18 43 44 46 47 and 50 to the standalone financial statements;

ii. The Company did not have any long term contracts including derivative contracts asat March 31 2019 for which there were any material foreseeable losses – Refer Note56 to the standalone financial statements;

iii. The Company has transferred amounts required to be transferred to the InvestorEducation and Protection Fund by due dates during the year ended March 31 2019 except forfive instances aggregating to INR 1 million with delays ranging from 5 to 22 days; and

iv. The reporting on disclosures relating to Specified Bank Notes is not applicable tothe Company for the year ended March 31 2019.

ForP rice Water house & Co Chartered Accountants LLP

Firm Registration Number: 304026E/E-300009

Pradip Kanakia

Partner

Membership Number: 039985

Bengaluru

May 29 2019

Referred to in paragraph 17 of the Independent Auditors’ Report of even date tothe members of United Spirits Limited on the standalone financial statements as of and forthe year ended March 31 2019

i. (a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) The fixed assets are physically verified by the Management according to a phasedprogramme designed to cover all the items over a period of three years which in ouropinion is reasonable having regard to the size of the Company and the nature of itsassets. Pursuant to the programme a portion of the fixed assets has been physicallyverified by the Management during the year and no material discrepancies have been noticedon such verification.

(c) The title deeds of immovable properties as disclosed in Note 3.1 to the standalonefinancial statements (Property plant and equipment) are held in the name of the Companyexcept as disclosed below:

Particulars Freehold land Leasehold land Buildings
Number of cases 3 1 3
Gross carrying amount as at March 31 2019 (INR millions) 16 10 398
Net carrying amount as at March 31 2019 (INR millions) 16 5 351

ii. The physical verification of inventory including stocks with certain third partiesand excluding stock in transit have been conducted at reasonable intervals by theManagement during the year. In respect of inventory lying with the remaining thirdparties these have substantially been confirmed by them. The discrepancies noticed onphysical verification of inventory as compared to book records were not material.

iii. There are no companies covered in the register maintained under Section 189 of theAct for the purpose of loans granted by the Company. iv. In our opinion and according tothe information and explanations given to us the Company has complied with the provisionsof Section 185 and 186 of the Act in respect of the loans and investments made. TheCompany has not provided any guarantees or security to parties covered under Section 185and 186 of the Act.

v. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Sections 73 74 75 and 76 or any otherrelevant provisions of the Act and the Rules framed thereunder to the extent notifiedwith regard to the deposits accepted from the public. According to the information andexplanations given to us no order has been passed by the Company Law Board or NationalCompany Law Tribunal or Reserve Bank of India or any Court or any other Tribunal on theCompany in respect of the aforesaid deposits.

vi. The Central Government of India has not specified the maintenance of cost recordsunder Section 148 (1) of the Act for any of the products of the Company.

vii. (a) According to the information and explanations given to us includingmanagement’s assessment in respect of the provident fund matter as referred to inNote 50 (d) to the standalone financial statements and the records of the Company examinedby us in our opinion the Company is generally regular in depositing the undisputedstatutory dues in respect of provident fund employees’ state insurance tax deductedat source tax collected at source value added tax goods and services tax though therehas been a delay in a few cases and is regular in depositing other undisputed statutorydues including sales tax duty of excise income tax duty of customs and other materialstatutory dues as applicable with appropriate authorities.

The extent of the arrears of undisputed statutory dues outstanding as at March 312019 for a period of more than six months from the date they became payable are asfollows:

Name of the statute Nature of dues Amount Period to which the amount relates Due date Date of Payment
(INR million)
Stamp duty acts of various states Stamp duty and interest thereon 138 # Various Various Not yet paid

# Estimated amount of liability including interest for delay in payment.

(b) According to the information and explanations given to us and the records of theCompany examined by us the particulars of dues of income tax sales tax value added taxservice tax duty of customs duty of excise and entry tax as at March 31 2019 which havenot been deposited on account of a dispute are disclosed in Appendix 1 to this report.There have been no dues of goods and services tax which have not been deposited on accountof a dispute.

viii. According to the records of the Company examined by us and the information andexplanations given to us the Company has not defaulted in repayment of loans orborrowings to any financial institution or bank or Government or dues to debenture holdersas at the balance sheet date.

ix. The Company has not raised any moneys by way of initial public offer furtherpublic offer (including debt instruments) and term loans. Accordingly the provisions ofClause 3(ix) of the Order are not applicable to the Company.

x. During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us except for the matter relatingto differences in reporting to relevant Regulatory Authorities of yields of certainnon-potable intermediates and associated process losses in the liquor manufacturingprocess described in Note 48 to the standalone financial statements for the year endedMarch 31 2019 we have neither come across any instance of material fraud by the Companyor on the Company by its Officers or employees noticed or reported during the year norhave we been informed of such case by the Management.

xi. Read with paragraph 4(c) of our report of even date on the standalone financialstatements the Company has paid/ provided for managerial remuneration in accordance withthe requisite approvals mandated by the provisions of Section 197 read with Schedule V tothe Act.

xii. As the Company is not a Nidhi Company and the Nidhi Rules 2014 are not applicableto it the provisions of Clause 3(xii) of the Order are not applicable to the Company.

xiii. The Company has entered into transactions with related parties in compliance withthe provisions of Sections 177 and 188 of the Act. The details of such related partytransactions have been disclosed in the standalone financial statements as required underIndian Accounting Standard (Ind AS) 24 Related Party Disclosures specified under Section133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014.

xiv. The Company has not made any preferential allotment of shares or fully or partlyconvertible debentures during the year. Accordingly the provisions of Clause 3(xiv) ofthe Order are not applicable to the Company.

xv. The Company has not entered into any non cash transactions with its directors orpersons connected with them. Accordingly the provisions of Clause 3(xv) of the Order arenot applicable to the Company.

xvi. The Company is not required to be registered under

Section 45-IA of the Reserve Bank of India Act 1934. Accordingly the provisions ofClause 3(xvi) of the Order are not applicable to the Company.

ForP rice Water house & Co Chartered Accountants LLP

Firm Registration Number: 304026E/E-300009

Pradip Kanakia

Partner

Membership Number: 039985

Bengaluru

May 29 2019

APPENDIX 1 - PARTICULARS OF TAX DUES NOT DEPOSITED ON ACCOUNT OF A DISPUTE*

Referred to in paragraph vii(b) of Annexure A to the Independent Auditors’ Reportto the members of United Spirits Limited on the standalone financial statements as of andfor the year ended March 31 2019

Name of the statute Nature of dues Disputed amount Amount paid Unpaid Amount Financial Year to which the amount relates Forum where the dispute is pending
(INR millions) (INR millions) (INR millions)
Income Tax Act 1961 Income Tax 563 563 - 2006-07 to 2008-09 Assessing Officer of Income Tax
Income Tax Act 1961 Income Tax 2553 1615 938 1996-97 2003-04 2005-06 2007-08 2009-10 2010-11 2012-13 and 2013-14 Commissioner of Income Tax (Appeals)
Income Tax Act 1961 Income Tax 7023 302 6721 2014-15 Dispute Resolution Panel
Income Tax Act 1961 Income Tax 16767 7080 9687 1988-89 to 1989-90 1991-92 to 1993-94 1995-96 1997- 98 to 2000-01 2002-03 to 2003-04 2004-05 2005-06 to 2008-09 2011-12 to 2013-14 Income Tax Appellate Tribunal
Income Tax Act 1961 Income Tax 1679 - 1679 1993-94 to 2004-05 High Courts of various states
Customs Act 1962 Custom Duty 0 - 0 1997-98 Commissioner of Customs
Customs Act 1962 Custom Duty 2 - 2 1993-94 to 1995-96 Madras High Court
Service Tax - Finance Act 1994 Service Tax 1344 - 1344 2006-07 to 2015-16 Commissioner of Service Tax
Service Tax - Finance Act 1994 Service Tax 678 31 647 2004-05 to 2006-07 2008-09 to 2010-11 Customs Excise and Service Tax Appel- late Tribunal
Service Tax - Finance Act 1994 Service Tax 1 - 1 2012-13 High Court of Kerala
Central Excise Act 1944 Central Excise Duty 1473 70 1403 1994-95 1999-2000 and 2017-2018 Commissioner of Central Excise
Central Excise Act 1944 Central Excise Duty 2 - 2 1999-2000 Deputy Commissioner of Central Excise
Karnataka Sales Tax Act1957 Sales Tax/ Value Added Tax 43 - 43 1996-97 and 2006-07 Civil Court Karnataka
West Bengal Sales Tax Act 1994 Sales Tax/ Value Added Tax 760 - 760 2015-16 Commissioner of Commercial Taxes
Central and Various State Sales Tax Acts Sales Tax/ Value Added Tax 32 6 26 1993-94 to 1997-98 2010-11 to 2014-15 Commercial Tax Officer

* As represented by the management

# ‘0’ indicates that the amounts involved are below INR five lakhs and thesign ‘-’ indicates that amounts are Nil

Referred to in paragraph vii(b) of Annexure A to the Independent Auditors’ Reportto the members of United Spirits Limited on the standalone financial statements as of andfor the year ended March 31 2019

Disputed amount Amount paid Unpaid Amount Financial Year to which the amount relates Forum where the dispute is pending
Name of the statute Nature of dues (INR millions) (INR millions) (INR millions)
Central and Various State Sales Tax Acts Sales Tax/Value Added Tax 137 41 96 1994-95 to 1996-97 2005-06 2006-07 2009-10 to 2013-14 2015-16 Assistant Commissioner of Commercial Taxes
Central and Various State Sales Tax Acts Sales Tax/Value Added Tax 21 0 21 2003-04 2004-05 2006-07 to 2013-14 2016-17 and 2017-18 Additional Commis- sioner of Commercial Taxes
Central and Various State Sales Tax Acts Sales Tax/Value Added Tax 213 53 160 1985-86 1989-90 2004-05 to 2013-14 and 2015-16 and 2017-18 Deputy Commis- sioner of Commercial Taxes
Central and Various State Sales Tax Acts Sales Tax/Value Added Tax 1619 471 1148 2000-01 to 2014-15 Joint Commissioner of Commercial Taxes
Central and Various State Sales Tax Acts Sales Tax/Value Added Tax 237 47 190 1987-881990-91 1992-93 to 2000-01 2004-05 2005-06 2007-08 2009-10 to 2013-14 Commercial Taxes Appellate Tribunal
Central and Various State Sales Tax Acts Sales Tax/Value Added Tax 15 - 15 1993-94 2003-04 2005-06 Commercial Taxes Appellate Tribunal and Revisionary Board
Central and Various State Sales Tax Acts Sales Tax/Value Added Tax 198 157 41 1978-79 to 1984-85 1988-89 1989-90 1992-93 1993-94 1996-97 to 2001-02 2007-08 and 2009-10 to 2011-12 High Courts of various states
Various Entry Tax Acts Entry Tax 0 0 0 1989-90 Assessing Officer
Various Entry Tax Acts Entry Tax 37 - 37 2010-11 to 2012-13 Deputy Commissioner of Commercial Taxes
Various Entry Tax Acts Entry Tax 7 1 6 2007-08 to 2010-11 Joint Commissioner of Commercial Taxes
Various Entry Tax Acts Entry Tax 24 16 8 2000-01 2004-05 and 2007-08 Commercial Taxes Appellate Tribunal
Various Entry Tax Acts Entry Tax 250 - 250 2005-06 2009-10 High Court of various states
Various Entry Tax Acts Entry Tax 39 30 9 2003-04 to 2013-14 Supreme Court
Bengal Excise Act 1909 and Bengal Excise (Amendment) Act 2012 State Excise 13 - 13 1993-94 Civil Court West Bengal
Bengal Excise Act 1909 and Bengal Excise (Amendment) Act 2012 State Excise 0 - 0 1994-95 and 2014-15 Collector of State Excise West Bengal
Bengal Excise Act 1909 and Bengal Excise (Amendment) Act 2012 State Excise 9 - 9 1993-94 and 2016-17 Additional District Magistrate West Bengal
Various State Excise Acts State Excise 26 - 26 2010-11 to 2017-18 Superintendent of State Excise
Various State Excise Acts State Excise 103 6 97 1974-75 to 1988-89 1993-94 to 1998-99 2002-03 to 2009-10 2011-12 2013-14 to 2016-17 Commissioners of State Excise
Various State Excise Acts State Excise 69 3 66 1987-88 2001-02 to 2003-04 and 2005-06 Additional Commissioners of Excise
Various State Excise Acts State Excise 24 - 24 2001-02 and 2003-04 to 2007-08 State Taxation Tribunals
Various State Excise Acts State Excise 474 140 334 1972-73 1973-74 1980- 81 1982-83 1997-98 1998-99 2001-022002- 03 2010-11 2012-13 to 2015-16 High Courts of various states
Various State Excise Acts State Excise 1234 75 1159 1971-72 1992-93 1996- 97 2002-03 Supreme Court

* As represented by the management

# ‘0’ indicates that the amounts involved are below INR five lakhs and thesign ‘-’ indicates that amounts are Nil

Report on the Internal Financial Controls under Section 143(3)(i) of the Act

1. We have audited the internal financial controls with reference to the financialstatements of United Spirits Limited ("the Company") as of March 31 2019 inconjunction with our audit of the standalone financial statements of the Company for theyear ended on that date.

Management’s Responsibility for Internal Financial Controls

2. The Company’s management is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India ("ICAI"). These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and eficient conduct of its business including adherence tocompany’s policies the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.

Auditors’ Responsibility

3. Our responsibility is to express an opinion on the Company’s internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note and the Standards on Auditing deemed to be prescribedunder Section 143(10) of the Act to the extent applicable to an audit of internalfinancial controls both applicable to an audit of internal financial controls and bothissued by ICAI. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls with reference to financial statements wereestablished and maintained and if such controls operated effectively in all materialrespects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the internal financial controls system with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of internal financial controlswith reference to financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrols based on the assessed risk. The procedures selected depend on the auditor’sjudgement including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error.

5. We believe that the audit evidence we have obtained is suficient and appropriate toprovide a basis for our audit opinion on the Company’s internal financial controlssystem with reference to the financial statements.

Meaning of Internal Financial Controls with reference to Financial Statements

6. A company’s internal financial control with reference to financial statementsis a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles. A company’s internalfinancial control with reference to financial statements includes those policies andprocedures that (1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance with authorisations of management and directors of the company; and (3)provide reasonable assurance regarding prevention or timely detection of unauthorisedacquisition use or disposition of the company’s assets that could have a materialefiect on the financial statements.

Inherent Limitations of Internal Financial Controls with reference to FinancialStatements

7. Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial control with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.

Opinion

8. In our opinion the Company has in all material respects an adequate internalfinancial controls system with reference to financial statements and such internalfinancial controls with reference to financial statements were operating effectively as ofMarch 31 2019 based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note issued by ICAI.

ForP rice Water house & Co Chartered Accountants LLP

Firm Registration Number: 304026E/E-300009

Pradip Kanakia

Partner

Membership Number: 039985

Bengaluru

May 29 2019


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