Notes to Accounts

1 SIGNIFICANT ACCOUNTING POLICIES

BASIS OF brPARATION OF FINANCIAL STATEMENTS

These Financial Statements have been brpared to comply with the Generally Accepted Accounting Principles in India (Indian GAAP), including the Accounting Standards brscribed under section 133 of the Companies Act, 2013 (‘The Act’) read with Rule 7 of the Companies (Accounts) Rules, 2014 and the provisions of the Act (to the extent notified).

The Financial Statements are brpared as a going concern on accrual basis under historical cost convention except for certain Fixed Assets which are carried at revalued amounts.

USE OF ESTIMATES

In brparing the Financial Statements in conformity with accounting principles generally accepted in India, Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as at the date of Financial Statements and the amounts of revenue and expenses during the reported period. Actual results could differ from those estimates. Any revision to such estimates is recognised in the period the same is determined.

PRIOR PERIOD ADJUSTMENTS, EXCEPTIONAL ITEMS, EXTRAORDINARY ITEMS AND CHANGES IN ACCOUNTING POLICIES

Prior period adjustments, exceptional items, extraordinary items and changes in accounting policies having material impact on the financial affairs of the Company are disclosed.

FIXED ASSETS

Tangible Assets are stated at cost of acquisition or construction and in case of revaluation of assets at revalued amounts net of impairment loss if any, less debrciation/amortisation. Cost rebrsents direct expenses incured on acquisition or construction of the assets and the share of indirect expenses relating to construction allocated in proportion to the direct cost involved.

Assets acquired under lease are capitalised at the brsent value of minimum lease payments and are stated at the capitalised value net of accumulated debrciation.

Capital work-in-progress comprises the cost of fixed assets that are not yet ready for their intended use on the reporting date and materials at site.

Intangible Assets are stated at cost less accumulated amortisation and net of impairments, if any. An intangible asset is recognised if it is probable that the expected future economic benefits that are attributable to the asset will flow to the Company and its cost can be measured reliably. Intangible assets are amortised on straight line basis over their estimated useful lives.

DEbrCIATION

Debrciation on fixed assets other than land, the hotel buildings, certain buildings on leasehold land and leased vehicles and machinery is provided on ‘Straight Line Method’ based on useful life as brscribed under Schedule II of the Companies Act 2013. Leased vehicles, leased machineries and building installed on leasehold land (other than perpetual lease) are debrciated over the lives of the respective leases or over the remaining lease period from the date of installation whichever is shorter. Long term leasehold land (other than perpetual lease) are debrciated over the balance period of the lease, commencing from the date the land is put to use for commercial purposes.

The hotel buildings are debrciated equally over the balance useful life ascertained by independent technical expert, which ranges between 30 years and 60 years. The management believes that the balance useful lives so assessed best rebrsent the periods over which the hotel buildings are expected to be in use.

In case of certain land and building which were revalued in the past, the additional debrciation on the increased value of the assets due to revaluation is debited to the Statement of Profit and Loss and an equivalent amount is transferred from Revaluation Reserve to General Reserve.

REVENUE RECOGNITION

– Revenue from hospitality services is recognised when the services are rendered and the same becomes chargeable. Revenue from sale of printed and other materials is recognised on despatch of materials.Revenue from Shop Licence Fee, Management and Marketing Fee included under “Other Services” is recognised on accrual basis as per terms of contract.

– Revenue from interest is recognised on accrual basis and determined by contractual rate of interest.

– Dividend income is stated at gross and is recognised when right to receive payment is established.

IMPAIRMENT OF ASSETS

Impairment is ascertained at each Balance Sheet date in respect of the Company’s fixed assets. An impairment loss is recognised whenever the carrying amount of an asset or cash generating unit exceeds its recoverable amount.

LEASES

In respect of assets acquired on or after 1st April, 2001, the same are capitalized at the lower of the fair value and brsent value of the minimum lease payments at the inception of the lease term. Lease payments are apportioned between the interest charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Interest component is charged to the Statement of Profit and Loss under Finance costs.

Operating lease payments are recognized as expenditure in the Statement of Profit and Loss on straight line basis, over the lease period.

INVESTMENTS

Investments held by the Company which are long term in nature are stated at cost unless there is any permanent diminution in value where provision for diminution is made on individual investment basis. Current investments are valued at cost or market price or fair value, whichever is lower. Earnings on investments are accounted for on accrual basis.

INVENTORIES

Inventories are valued at cost which is based on Cumulative Weighted Average method or net realisable value, whichever is lower.

Unserviceable/damaged/discarded stocks and shortages are charged to the Statement of Profit and Loss.

TRANSACTIONS IN FOREIGN CURRENCY

Sales made in foreign currency are converted at the brvailing applicable exchange rate. Gain/Loss arising out of fluctuations in exchange rate is accounted for on realisation.

Payments made in foreign currency including for acquiring investments are converted at the applicable rate brvailing on the date of remittance. Liability on account of foreign currency is converted at the exchange rate brvailing at the end of the year. Monetary items denominated in foreign currency are converted at the exchange rate brvailing at the end of the year.

Revenue expenditure of all the overseas Sales Offices are converted at the average exchange rate for the year. Assets and liabilities other than Fixed Assets are converted at the exchange rate brvailing at the close of the accounting year and Fixed Assets are converted at the month-end exchange rate of the month of acquisition.

Foreign currency loans covered by forward contracts are realigned at the forward contract rates, while those not covered by forward

contracts are realigned at the rates ruling at the year end. The differences on realignment is accounted for in the Statement of Profit and Loss.

EMPLOYEE BENEFITS

Short Term Employee Benefit is recognized as expense in the Statement of Profit and Loss of the year in which related service is rendered.

Post employment and other Long Term Employee Benefits are provided in the Accounts in the following manner:

(i) Gratuity - Maintained as a defined benefit retirement plan and contribution is made to the Life Insurance Corporation of India, as per Company’s Scheme. Provision/ write back, if any, is made on the basis of the brsent value of the liability as at the Balance Sheet date determined by actuarial valuation following Projected Unit Credit Method and is treated as liability under Trade Payables.

(ii) Leave encashment on termination of service - As per actuarial valuation as at the Balance Sheet date following Projected Unit Credit Method.

(iii) Provident Fund - Provident Fund for most of the employees is a Defined Contribution Scheme, where the contribution is made to a Fund administered by the Government Provident Fund Authority.

For a few employees, Provident Fund, administered by a Recognised Trust, is a Defined Benefit Plan wherein the employee and the Company make monthly contributions. Pending the issuance of Guidance Note from the Actuarial Society of India, actuarial valuation is not carried out and the Company provides for required liability at year end, in respect of the shortfall, if any, upon confirmation from the Trustees of such Fund.

BORROWING COST

Borrowing cost that is attributable to the acquisition / construction of fixed assets are capitalised as part of the cost of the respective assets. Other borrowing costs are recognised as expenses in the year in which they arise.

TAXES ON INCOME

Income-tax is accounted for in accordance with Accounting Standard on ‘Accounting for taxes on income’ notified under the Companies (Accounting Standards) Rules, 2006.

Minimum Alternate Tax (MAT) is accounted for in accordance with tax laws which give rise to future economic benefits in the form of tax credit against which future income tax liability is adjusted and is recognized as an asset in the balance sheet.

Deferred tax is provided and recognized on timing differences between taxable income and accounting income subject to prudential consideration. Deferred tax assets on unabsorbed debrciation and carry forward of losses are not recognized unless there is virtual certainity about availability of future taxable income to realize such assets.

PROPOSED DIVIDEND

Dividend recommended by the Board of Directors is provided for in the Accounts pending Shareholders’ approval.

PROVISIONS, CONTINGENT LIABILITES AND CONTINGENT ASSETS

Provisions are recognized when there is a brsent legal or statutory obligation as a result of past events and where it is probable that there will be outflow of resources to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

Contingent Liabilities are recognized only when there is a possible obligation arising from past events due to occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or where any brsent obligation cannot be measured in terms of future outflow of resources or where a reliable estimate of the obligation cannot be made. Obligations are assessed on an on going basis and only those having a largely probable outflow of resources are provided for.

Contingent Assets are not recognised in the Financial Statements.

2. (A) Contingent Liabilities and commitments (to the extent not provided) -

(i) Claims against the Company pending appellate/judicial decisions not acknowledged as debts :

(a) Value Added Tax Rs. 55.02 Million (2015 - Rs. 57.47 Million)

(b) Income-tax Rs. 333.31 Million (2015 - Rs. 712.49 Million)

(c) Tax Deducted at Source Rs. 0.43 Million (2015 - Rs. 15.02 Million)

(d) Service Tax Rs. 155.81 Million (2015 - Rs. 175.67 Million)

(e) Property Tax Rs. 140.71 Million (2015 - Rs. 60.59 Million)

(f) Entertainment Tax Rs. 4.07 Million (2015 - Rs. 4.33 Million)

(g) Customs Duty Rs. 429.66 Million (2015 - Rs. 429.66 Million)

(h) Excise Duty Rs. 26.01 Million (2015 - Rs. 95.54 Million)

(i) Luxury Tax Rs. 32.96 Million (2015 - Rs. 32.96 Million)

(j) Others Rs. 9.80 Million (2015 - Rs. 12.05 Million)

(k) The Company has to meet certain export obligations in relation to import made under EPCG scheme. In case the Company is unable to meet such obligation, additional liability may accrue which cannot be estimated at brsent.

The Management believes that the outcome of the above will not have any material adverse effect on the financial position of the company.

(ii) Guarantees :

a. Guarantees given to Banks & Financial Institutions for Rs. 1,317.95 Million (2015 - Rs. 1,241.59 Million) against financial facilities availed by the subsidiary company.

b. Counter guarantees issued to banks and remaining outstanding Rs. 169.26 Million (2015 - Rs. 196.94 Million).

(B) Commitments:

a. The estimated amount of contracts remaining to be executed on capital account and not provided for net of advances Rs. 918.17 Million (2015 - Rs. 823.23 Million).

b. Investment commitment in subsidiary and joint venture companies Rs. Nil (2015 - Rs. 100.10 Million)

c. Other commitments including estimated hotel renovation cost which is yet to be contracted Rs. 4,488.60 Million (2015 - Rs. Nil).

3. The Oberoi, New Delhi, one of the hotels of the Company has been closed from 1st April, 2016 for major renovation and is expected to be ready by 1st April, 2018. Revenue earned by the hotel during the year ended 31st March, 2016 was Rs. 1,966.63 Million and the Net Worth as on that date was Rs. 980.51 Million. 105

4. Freehold Land and Leasehold Land of perpetual nature and Buildings at some locations were revalued on 31st March, 1982 and 31st March, 1993 resulting in a surplus of Rs. 2,863.88 Million which is included in the original cost. The valuation was carried out by an approved valuer on the basis of debrciated replacement cost. The surplus was transferred to Revaluation Reserve.

5. Capital Work-In-Progress shown in the Balance Sheet inter-alia includes Rs. 630.93 Million, being the cost of a building under construction by the Company. Under a Tripartite Agreement amongst the Company, DLF Cyber City Developers Limited and DLF Limited the building is being constructed by the Company on the Land which belongs to DLF Cyber City Developers Limited.

After the completion of construction the same building will be acquired by the Company at an agreed value as per the terms of agreement and DLF Cyber City Developers Limited will execute necessary deed of conveyance.

6. The Company has adopted useful life of fixed assets as stipulated by Schedule II of the Companies Act 2013 except for the hotel buildings for computing debrciation. In the case of the hotel buildings of the Company, due to superior structural condition, management decided to assess the balance useful life by independent technical expert. As per the certificates of the technical expert as on 31.03.2015, the balance useful life of the hotel buildings of the Company ranges between 50-60 years except for The Oberoi Vanyavilas where the balance useful life is 30 years. The carrying amount of each of the hotel buildings is being debrciated over its residual life.

7. Company’s investment in the Equity shares of EIH Flight Services Ltd., Mauritius is of long term in nature and the management does not consider the brsent decline in the value of investment as permanent in nature. During the year the Company has made a contribution of Rs. 636.99 Million towards the equity of the said Company. As such no adjustment has been made to modify the carrying cost.

8. The method of determining cost for valuation of Inventories has been changed from ‘First-in-First-out’ to ‘Cumulative Weighted Average’ during the current year. As a result of this change, the profit of the Company for the year ended 31st March, 2016 is higher by Rs. 3.56 Million. Unserviceable/damaged/discarded stocks and shortages are charged to the Statement of Profit and Loss as per past practice.

9. In the case of Mashobra Resort Limited (“MRL”), several disputes with the Government of Himachal Pradesh, the joint venture partner, were referred by the High Court of Himachal Pradesh on 17th December, 2003 to an arbitral tribunal consisting of a single arbitrator whose award has been challenged by both the Company and MRL, amongst others. The operation of the arbitration award was stayed pending substantive hearing of the applications by the High Court. Consequently, the status quo ante of the entire matter was restored to the position as on 17th December, 2003 and the hotel is being operated by MRL accordingly. The Company vide its letter dated 4th April, 2012 requested MRL to account for the entire amount of Rs. 1,361.93 Million provided to MRL upto 31st March, 2012 as ‘Advance Towards Equity’, including Rs. 130.00 Million being the opening balance of ‘Advance Towards Equity’. In view of the above, the Company has shown the said amount of Rs. 1,361.93 Million as ‘Advance Towards Equity’ in its books.

The High Court has now passed an order dated 25th February, 2016 which was made available to the Company in the month of May 2016. As per the order, the High Court has decided not to interfere with the order of the Arbitrator. The Company has decided to file appeal to the higher authorities against the said order.

10. Details of dues to Micro Enterprises and Small Enterprises as defined under Micro, Small & Medium Enterprises Development Act, 2006 are based on information made available to the Company. Neither there was any delay in payment nor any interest is due and remaining unpaid on the above.

11. (a) Inventory of Provisions, Wines & Others includes Stock of Paper, Ink etc. at year end Rs. 48.40 Million (2015 - Rs. 49.05 Million).

(b) Consumption of Provisions, Wines and Others includes consumption of Paper, Ink etc. Rs. 363.11 Million (2015 - Rs. 386.24 Million).

(c) Inventory of Stores & Operating Supplies includes Boutique Stock at year end Rs. 11.14 Million (2015 - Rs. 6.82 Million).

Corresponding opening stock was Rs. 6.82 Million (2015 - Rs. 6.69 Million).

(d) Other Services includes revenue from sale of Boutique Stock Rs. 83.69 Million (2015 - Rs. 94.48 Million).

(e) Purchases includes purchase of Boutique Stock Rs. 49.89 Million (2015 - Rs. 66.69 Million).

12. Segment Reporting :

There are no reportable segments other than hotels as per Accounting Standard (AS-17) on Segment Reporting.

13. The brvious year’s figures have been regrouped, rearranged and reclassified wherever necessary. Amounts and other disclosures for the brceding year are included as an integral part of the current financial statements and are to be read in relation to the amounts and other disclosures relating to the current year.