THE MEMBERS OF
Report on the Audit of the Standalone Ind AS Financial Statements
We have audited the accompanying standalone Ind AS financial statements of ITC Limited("the Company") which comprise the Balance Sheet as at March 31 2022 theStatement of Profit and Loss including the statement of Other Comprehensive Income theCash Flow Statement and the Statement of Changes in Equity for the year then ended andnotes to the standalone Ind AS financial statements including a summary of significantaccounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone Ind AS financial statements give the informationrequired by the Companies Act 2013 as amended ("the Act") in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 31 2022its profit including other comprehensive income its cash flows and the changes in equityfor the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone Ind AS financial statements in accordance withthe Standards on Auditing (SAs) as 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 Ind AS Financial Statements' section ofour report. We are independent of the Company in accordance with the 'Code of Ethics'issued by the
Institute of Chartered Accountants of India together with the ethical requirements thatare relevant to our audit of the financial statements under the provisions of the Act andthe 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 sufficient and appropriate to provide a basis for our auditopinion on the standalone Ind AS financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone Ind AS financial statements for the financialyear ended March 31 2022. These matters were addressed in the context of our audit of thestandalone Ind AS financial statements as a whole and in forming our opinion thereon andwe do not provide a separate opinion on these matters. For each matter below ourdescription of how our audit addressed the matter is provided in that context.
We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the standalone Ind AS financial statementssection of our report including in relation to these matters. Accordingly our auditincluded the performance of procedures designed to respond to our assessment of the risksof material misstatement of the standalone Ind AS financial statements. The results of ouraudit procedures including the procedures performed to address the matters below providethe basis for our audit opinion on the accompanying standalone Ind AS financialstatements.
|Key audit matters ||How our audit addressed the key audit matter |
|Revenue recognition || |
|Revenue from the sale of goods (hereinafter referred to as "Revenue") is recognised when the Company performs its obligation to its customers and the amount of revenue can be measured reliably and recovery of the consideration is probable. The timing of such revenue recognition in case of sale of goods is when the control over the same is transferred to the customer which is mainly upon delivery. ||Our audit procedures included the following: |
| ||- Assessed the Company's revenue recognition accounting policies in line with Ind AS 115 ("Revenue from Contracts with Customers") and tested thereof. |
| ||- Evaluated the integrity of the general information and technology control environment and testing the operating effectiveness of key IT application controls over recognition of revenue. |
|The timing of revenue recognition is relevant to the reported performance of the Company. The management considers revenue as a key measure for ||- Evaluated the design implementation and operating effectiveness of Company's controls in respect of revenue recognition. |
|evaluation of performance. There is a risk of revenue being recorded before control is transferred. ||- Tested the effectiveness of such controls over revenue cut off at year-end. |
|Refer Note 1 to the Standalone Ind AS Financial Statements - Significant Accounting Policies and Note 21A / 21B. ||- On a sample basis tested supporting documentation for sales transactions recorded during the year which included sales invoices customer contracts and shipping documents. |
| ||- Performed an increased level of substantive testing in respect of sales transactions recorded during the period closer to the year end and subsequent to the year end. |
| ||- Compared revenue with historical trends and where appropriate conducted further enquiries and testing. |
| ||- Assessed disclosures in financial statements in respect of revenue as specified in Ind AS 115. |
|Litigations - Contingencies || |
|The Company has ongoing litigations with various authorities and third parties which could have a significant impact on the results if the potential exposures were to materialise. ||Our audit procedures included the following: |
|The amounts involved are significant and the application of accounting standards to determine the amount if any to be provided as a liability or disclosed as a contingent liability is inherently subjective. ||- Obtained and read the Company's accounting policies in respect of claims provisions and contingent liabilities to assess compliance with accounting standards. |
|Claims against the Company not acknowledged as debts are disclosed in the Financial Statements by the Company after a careful evaluation of the facts and legal aspects of the matters involved. The outcome of such litigation is uncertain and the position taken by management involves significant judgment and estimation to determine the likelihood and / or timing of cash outflows and the interpretation of preliminary and pending court rulings. ||- Assessed the design and implementation of the Company's controls over the assessment of litigations and completeness of disclosures. Supporting documentation were tested for the positions taken by the management meetings conducted with in-house legal counsel and / or legal team and minutes of Board and sub-committee meetings were reviewed to test the operating effectiveness of these controls. |
| ||- Involved our tax specialists to assess relevant historical and recent judgements passed by the appropriate authorities in order to challenge the basis used for the accounting treatment and resulting disclosures. |
|Refer Note 27(iv)(a) to the Standalone Ind AS Financial Statements. ||- Additionally considered the effect of new information in respect of contingencies as at April 1 2021 to evaluate whether any change was required in the management's position on these contingencies as at March 31 2022. |
| ||- Assessed in accordance with accounting standards the provisions in respect of litigations and assessed disclosures relating thereto including those for contingencies. |
|Impairment assessment of investment in WelcomHotels Lanka (Private) Limited (WLPL') a wholly owned subsidiary || |
|WLPL is developing a mixed-use project in Colombo Sri Lanka which includes a hotel and a residential apartment complex. At March 31 2022 the carrying value of Company's investment in WLPL is Rs 2169.27 Crores. The Company's investments in subsidiaries are assessed annually by management for potential indicators of impairment. ||Our audit procedures included the following: |
| ||- Evaluated the key judgements / assumptions underlying management's assessment of potential indicators of impairment. |
| ||- Obtained and read the projections / estimated selling price / future cashflows along with sensitivity analysis thereof of the underlying PPE and inventory at WLPL. |
|In view of the recent deterioration in the macro-economic scenario in Sri Lanka the Company has assessed the carrying value of investments basis evaluation of the recoverable value of the capital work in progress of the hotel (PPE) and inventory of the residential apartments being developed by WLPL. The said determination is based on assumptions that by their nature imply the use of the management's judgment in particular with reference to forecast of future cash flows selling price balance cost to complete the project selling costs terminal value long-term growth rates and discount rates applied to such forecasted cash flows. Considering the judgment required for estimating the cash flows and the assumptions used this is considered as a key audit matter. ||- Discussed and obtained assessment of recoverable value of PPE and inventory from component auditor of WLPL. |
| ||- Evaluated management's methodology assumptions and estimates used in these calculations. |
| ||- Involved valuation specialist to review the appropriateness of methodology and key assumptions considered by management to determine discounted future cash flows. |
| ||- Performed sensitivity analysis around impact on future cash flows due to changes in key assumptions considered by management. |
| ||- Verified the arithmetical accuracy of the future cash flow model including comparison with approved budgets. |
|Refer Note 1 - Significant Accounting Policies and Note 2 - Use of estimates and judgements to the Standalone Ind AS Financial Statements. ||- Assessed the recoverability of investment with regard to underlying value in use of PPE and net realisable value of inventory in WLPL. |
We have determined that there are no other key audit matters to communicate in ourreport.
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual report but does not includethe standalone Ind AS financial statements and our auditor's report thereon.
Our opinion on the standalone Ind AS financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone Ind AS financial statements ourresponsibility is to read the other information and in doing so consider whether suchother information is materially inconsistent with the financial statements or ourknowledge obtained in the audit or otherwise appears to be materially misstated. If basedon the work we have performed we conclude that there is a material misstatement of thisother information we are required to report that fact. We have nothing to report in thisregard.
Responsibilities of Management for the Standalone Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Act with respect to the preparation of these standalone Ind AS financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified under Section 133 of the Act read with theCompanies (Indian Accounting Standards) Rules 2015 as amended. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and the designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone Ind AS financialstatements
that give a true and fair view and are free from material misstatement whether due tofraud or error.
In preparing the standalone Ind AS financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so. Those Board of Directors are also responsible foroverseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Ind AS Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone Ind ASfinancial 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. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone Ind AS financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalone Ind ASfinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under Section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
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 the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the Company to cease to continue asa going concern.
Evaluate the overall presentation structure and content of the standalone IndAS financial statements including the disclosures and whether the standalone Ind ASfinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone Ind AS financialstatements for the financial year ended March 31 2022 and are therefore the key auditmatters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2020 ("the Order")issued by the Central Government of India in terms of sub-section (11) of Section 143 ofthe Act we give in the "Annexure 1" a statement on the matters specified inparagraphs 3 and 4 of the Order.
2. 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 the Statement ofOther Comprehensive Income the Cash Flow Statement and Statement of Changes in Equitydealt with by this Report are in agreement with the books of account;
(d) In our opinion the aforesaid standalone Ind AS financial statements comply withthe Accounting Standards specified under Section 133 of the Act read with Companies(Indian Accounting Standards) Rules 2015 as amended;
(e) On the basis of the written representations received from the directors as on March31 2022 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2022 from being appointed as a director in terms of Section 164 (2) of theAct;
(f) With respect to the adequacy of the internal financial controls with reference tothese standalone Ind AS financial statements and the operating effectiveness of suchcontrols refer to our separate Report in "Annexure 2" to this report;
(g) In our opinion the managerial remuneration for the year ended March 312022 hasbeen paid / provided by the Company to its directors in accordance with the provisions ofSection 197 read with Schedule V to the Act;
(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 as amended inour opinion and to the best of our information and according to the explanations given tous:
i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements - Refer Note 27(iv)(a) to the standaloneInd AS financial statements;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company
iv. a) The management has represented that to the best of its knowledge and belief nofunds have been advanced or loaned or invested (either from borrowed funds or sharepremium or any other sources or kind of funds) by the Company to or in any other person orentity including foreign entities ("Intermediaries") with the understandingwhether recorded in writing or otherwise that the Intermediary shall whether directlyor indirectly lend or invest in other persons or entities identified in any mannerwhatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provideany guarantee security or the like on behalf of the Ultimate Beneficiaries;
b) The management has represented that to the best of its knowledge and belief nofunds have been received by the Company from any person or entity including foreignentities ("Funding Parties") with the understanding whether recorded inwriting or otherwise that the Company shall whether directly or indirectly lend orinvest in other persons or entities identified in any manner whatsoever by or on behalf ofthe Funding Party ("Ultimate Beneficiaries") or provide any guarantee securityor the like on behalf of the Ultimate Beneficiaries; and
c) Based on such audit procedures performed that have been considered reasonable andappropriate in the circumstances nothing has come to our notice that has caused us tobelieve that the representations under sub-clause (a) and (b) contain any materialmisstatement.
v. The final dividend paid by the Company during the year in respect of the samedeclared for the previous year is in accordance with Section 123 of the Act to the extentit applies to payment of dividend.
The interim dividend declared and paid by the Company during the year and until thedate of this audit report is in accordance with Section 123 of the Act.
As stated in Note B of Statement of changes in equity to the standalone Ind ASfinancial statements the Board of Directors of the Company have proposed final dividendfor the year which is subject to the approval of the members at the ensuing Annual GeneralMeeting. The dividend declared is in accordance with Section 123 of the Act to the extentit applies to declaration of dividend.
Annexure 1 referred to in paragraph 1 under the heading "Report on Other legal andRegulatory Requirements" of our report of even date
Re: ITC Limited (the "Company")
In terms of the information and explanations sought by us and given by the Company andthe books of account and records examined by us in the normal course of audit and to thebest of our knowledge and belief we state that:
(i) (a) (A) The Company has maintained proper records showing full particularsincluding quantitative details and situation of property plant and equipment.
(B) The Company has maintained proper records showing full particulars of intangiblesassets.
(b) The property plant and equipment were physically verified during the year by themanagement in accordance with a regular programme of verification which in our opinionprovides for physical verification of all the property plant and equipment at reasonableintervals. According to the information and explanations given to us no materialdiscrepancies were noticed on such verification.
(c) According to the information and explanations given by the management the titledeeds of all the immovable properties (other than properties where the Company is thelessee and the lease agreements are duly executed in favour of the lessee) are held in thename of the Company.
(d) The Company has not revalued its Property Plant and Equipment (including Right ofuse assets) or intangible assets during the year ended March 31 2022.
(e) There are no proceedings initiated or are pending against the Company for holdingany benami property under the Prohibition of Benami Property Transactions Act 1988 andrules made thereunder.
(ii) (a) The inventory has been physically verified by the management during the year.In our opinion the frequency of verification by the management is reasonable and thecoverage and procedure for such verification is appropriate. Inventories lying with thirdparties have substantially been confirmed by them as at year end. No discrepancies of 10%or more in aggregate for each class of inventory (including inventories lying with thirdparties) were noticed.
(b) As disclosed in note 8 to the financial statements the Company has been sanctionedworking capital limits in excess of Rs 5 Crores in aggregate from banks during the year onthe basis of security of inventories of the Company. Based on the records examined by usin the normal course of audit of the financial statements the quarterly returns /statements filed by the Company with such banks are in agreement with the books ofaccounts of the Company.
(iii) (a) During the year the Company has not provided loans advances in the nature ofloans stood guarantee or provided security to companies firms Limited LiabilityPartnerships or any other parties. Accordingly the requirement to report on clause3(iii)(a) of the Order is not applicable to the Company.
(b) During the year the investments made by the Company is not prejudicial to theCompany's interest. The Company has not provided guarantees or security and has notgranted loans and advances in the nature of loans to companies firms Limited LiabilityPartnerships or any other parties and hence not commented upon.
(c) The Company has not granted loans and advances in the nature of loans to companiesfirms Limited Liability Partnerships or any other parties. Accordingly the requirementto report on clause 3(iii)(c) to 3(iii)(f) of the Order is not applicable to the Companyand hence not commented upon.
(iv) In our opinion and according to the information and explanations given to usprovisions of Section 185 and 186 of the Companies Act 2013 in respect of loans todirectors including entities in which they are interested and in respect of loans andadvances given investments made and guarantees and securities given have been compliedwith by the Company.
(v) According to the information and explanations given to us the Company has notaccepted any deposit from the public nor accepted any amounts which are deemed to bedeposits during the year within the meaning of Sections 73 and 76 of the Companies Act2013. In respect of unclaimed deposits the Company has complied with the provisions ofSections 74 and 75 or any other relevant provisions of the Companies Act 2013. We areinformed by the management that no order has been passed by the Company Law BoardNational Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.
(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the rules made by the Central Government for the maintenance of cost records underSection 148(1) of the Companies Act 2013 related to the manufacture of specifiedproducts of the Company and are of the opinion that prima facie the specified accountsand records have been made and maintained. We have not however made a detailedexamination of the same.
(vii)(a) The Company is regular in depositing with appropriate authorities undisputedstatutory dues including Goods and Services Tax provident fund employees' stateinsurance income-tax duty of custom duty of excise cess and other statutory duesapplicable to it.
(b) According to the information and explanations given to us no undisputed amountspayable in respect of Goods and Services Tax provident fund employees' state insuranceincome-tax duty of custom duty of excise cess and other statutory dues wereoutstanding at the year end for a period of more than six months from the date theybecame payable.
(c) The dues of income-tax sales-tax service tax duty of custom duty of excisevalue added tax cess and other statutory dues have not been deposited on account of anydispute are as follows:
|Name of the statute ||Nature of the dues ||Amount (Rs in Crores)* ||Period to which the amount relates (Financial Year) ||Forums where the dispute is pending |
|Sales Tax and Value Added Tax Laws ||Sales Tax and VAT ||58.08 ||1987-2018 ||Appellate Authority- upto commissioners'/ Revisional Authorities Level |
| || ||29.27 ||2000-2018 ||Appellate Authority- Tribunal Level |
| || ||219.25 ||1994-2017 ||High Court |
|Customs Act 1962 ||Customs Duty ||0.75 ||2012-2016 ||Appellate Authority - upto commissioners'/ Revisional Authorities Level |
| || ||7.90 ||2011-2022 ||Appellate Authority- Tribunal Level |
|Central Excise Act 1944 ||Excise Duty ||0.44 ||1996-2018 ||Appellate Authority - upto commissioners'/ Revisional Authorities Level |
| || ||91.28 ||1973-2017 ||Appellate Authority- Tribunal Level |
| || ||4.35 ||2004-2012 ||High Court |
|Finance Act 1994 ||Service Tax ||4.82 ||2006-2017 ||Appellate Authority - upto commissioners'/ Revisional Authorities Level |
| || ||74.69 ||2003-2017 ||Appellate Authority- Tribunal Level |
| || ||4.93 ||2005-2007 ||High Court |
|Entry Tax Laws ||Entry Tax ||0.04 ||2005-2014 ||Appellate Authority - upto commissioners'/ Revisional Authorities Level |
| || ||32.40 ||2010-2018 ||Appellate Authority - Tribunal Level |
| || ||50.06 ||1999-2018 ||High Court |
|Luxury Tax Laws ||Luxury Tax ||55.22 ||1999-2010 ||High Court |
|Mandi Laws ||Mandi Fees & Cess ||2.54 ||2010-2022 ||Mandi Board |
| || ||2.27 ||2001-2011 ||High Court |
|Municipal Local Bodies and Property Tax Laws ||Municipal Local Bodies and Property Taxes & Charges ||3.44 ||2014-2021 ||Appellate Authority - upto commissioners'/ Revisional Authorities Level/ Municipal Council |
| || ||2.40 ||2004 ||Appellate Authority - Tribunal Level |
| || ||32.31 ||2001-2018 ||High Court |
|Stamp Duty Laws ||Stamp Duty ||4.22 ||2004-2016 ||Registrar/ Appellate Authority |
| || ||0.04 ||1987-2008 ||High Court |
|The Employees' Provident Funds and Miscellaneous Provisions Act 1952 ||Provident Fund ||0.14 ||2012-2016 ||Appellate Authority - Tribunal Level |
| || ||1.49 ||1982-1990 ||High Court |
|Employees' State Insurance Act 1948 ||Employees' State Insurance ||0.08 ||2007-2014 ||Principal Labour Court |
| || ||0.95 ||1995-2012 ||High Court |
Out of the total disputed dues aggregating Rs 683.36 Crores as above Rs 549.91 Crorespertain to matters which have been stayed for recovery by the relevant authorities.
*Net of amount paid under protest.
(viii) The Company has not surrendered or disclosed any transaction previouslyunrecorded in the books of account in the tax assessments under the Income Tax Act 1961as income during the year. Accordingly the requirement to report on clause 3(viii) of theOrder is not applicable to the Company.
(ix) (a) The Company has not defaulted in repayment of loans or other borrowings or inthe payment of interest thereon to any lender.
(b) The Company has not been declared wilful defaulter by any bank or financialinstitution or government or any government authority.
(c) The Company did not have any term loans outstanding during the year hence therequirement to report on clause (ix)(c) of the Order is not applicable to the Company.
(d) The Company did not raise any funds during the year hence the requirement toreport on clause (ix)(d) of the Order is not applicable to the Company.
(e) On an overall examination of the financial statements of the Company the Companyhas not taken any funds from any entity or person on account of or to meet the obligationsof its subsidiaries associates or joint ventures. Hence the requirement to report onclause (ix)(e) of the Order is not applicable to the Company.
(f) The Company has not raised loans during the year on the pledge of securities heldin its subsidiaries joint ventures or associate companies. Hence the requirement toreport on clause (ix)(f) of the Order is not applicable to the Company.
(x) (a) According to the information and explanations given by the management theCompany has not raised any money during the year by way of initial public offer / furtherpublic offer (including debt instruments) hence reporting under clause 3(x)(a) is notapplicable to the Company and hence not commented upon.
(b) The Company has not made any preferential allotment or private placement of shares/ fully or partially or optionally convertible debentures during the year under audit andhence the requirement to report on clause 3(x)(b) of the Order is not applicable to theCompany.
(xi) (a) No fraud by the Company or no material fraud on the Company has been noticedor reported during the year.
(b) During the year no report under sub-section (12) of Section 143 of the CompaniesAct 2013 has been filed by cost auditor / secretarial auditor or by us in Form ADT - 4 asprescribed under Rule 13 of Companies (Audit and Auditors) Rules 2014 with the CentralGovernment.
(c) We have taken into consideration the whistle blower complaints received by theCompany during the year while determining the nature timing and extent of auditprocedures.
(xii) In our opinion the Company is not a nidhi company. Therefore the provisions ofclause 3(xii) (a) to (c) of the order are not applicable to the Company and hence notcommented upon.
(xiii) According to the information and explanations given by the managementtransactions with the related parties are in compliance with Section 177 and 188 ofCompanies Act 2013 where applicable and the details have been disclosed in the notes tothe financial statements as required by the applicable accounting standards.
(xiv) (a) The Company has an internal audit system commensurate with the size andnature of its business.
(b) The internal audit reports of the Company issued till the date of the audit reportfor the period under audit have been considered by us.
(xv) According to the information and explanations given by the management the Companyhas not entered into any non-cash transactions with directors or persons connected withhim as referred to in Section 192 of Companies Act 2013.
(xvi) (a) According to the information and explanations given to us the provisions ofSection 45-IA of the Reserve Bank of India Act 1934 are not applicable to the Company.
(b) The Company is not engaged in any Non-Banking Financial or Housing Financeactivities. Accordingly the requirement to report on clause (xvi)(b) of the Order is notapplicable to the Company.
(c) The Company is not a Core Investment Company as defined in the regulations made byReserve Bank of India. Accordingly the requirement to report on clause 3(xvi) of theOrder is not applicable to the Company.
(d) The Group does not have more than one CIC as part of the Group hence therequirement to report on clause 3(xvi)(d) of the Order is not applicable to the Company.
(xvii) The Company has not incurred cash losses in the current year and in theimmediately preceding financial year.
(xviii) There has been no resignation of the statutory auditors during the year andaccordingly requirement to report on Clause 3(xviii) of the Order is not applicable to theCompany.
(xix) On the basis of the financial ratios disclosed in note 27 (xiii) to the financialstatements ageing and expected dates of realization of financial assets and payment offinancial liabilities other information accompanying the financial statements ourknowledge of the Board of Directors and management plans and based on our examination ofthe evidence supporting the assumptions nothing has come to our attention which causesus to believe that any material uncertainty exists as on the date of the audit report thatCompany is not capable of meeting its liabilities existing at the date of balance sheet asand when they fall due within a period of one year from the balance sheet date. Wehowever state that this is not an assurance as to the future viability of the Company. Wefurther state that our reporting is based on the facts up to the date of the audit reportand we neither give any guarantee nor any assurance that all liabilities falling duewithin a period of one year from the balance sheet date will get discharged by theCompany as and when they fall due.
(xx) (a) In respect of other than ongoing projects there are no unspent amounts thatare required to be transferred to a fund specified in Schedule VII of the Companies Act(the Act) in compliance with second proviso to sub-section 5 of Section 135 of the Act.This matter has been disclosed in note 27 (ii) to the financial statements.
(b) All amounts that are unspent under sub-section (5) of Section 135 of Companies Actpursuant to any ongoing project has been transferred to special account in compliance ofwith provisions of sub-section (6) of Section 135 of the said Act. This matter has beendisclosed in note 27 (ii) to the financial statements.
Annexure 2 to the Independent Auditor's Report of even date on the Standalone FinancialStatements of ITC Limited
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls with reference to standalone financialstatements of ITC Limited ("the Company") as of March 31 2022 in conjunctionwith our audit of the standalone financial statements of the Company for the year ended onthat date.
Management's Responsibility for Internal Financial Controls
The Company's Management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India ("ICAI"). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to the Company's policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to these standalone financial statements based on our audit. Weconducted our audit in accordance with the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting (the "Guidance Note") and the Standards onAuditing as specified under Section 143(10) of the Act to the extent applicable to anaudit of internal financial controls both issued by ICAI. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlswith reference to these standalone financial statements was established and maintained andif such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to these standalone financial statementsand their operating effectiveness. Our audit of internal financial controls with referenceto standalone financial statements included obtaining an understanding of internalfinancial controls with reference to these standalone financial statements assessing therisk that a material weakness exists and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. The procedures selecteddepend on the auditor's judgement including the assessment of the risks of materialmisstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls withreference to these standalone financial statements.
Meaning of Internal Financial Controls With Reference to these Standalone FinancialStatements
A company's internal financial controls with reference to standalone financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles.
A company's internal financial controls with reference to standalone financialstatements includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.
Inherent Limitations of Internal Financial Controls With Reference to StandaloneFinancial Statements
Because of the inherent limitations of internal financial controls with reference tostandalone financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to standalone financial statements to future periods are subjectto the risk that the internal financial control with reference to standalone financialstatements may become inadequate because of changes in conditions or that the degree ofcompliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects adequate internal financialcontrols with reference to standalone financial statements and such internal financialcontrols with reference to standalone financial statements were operating effectively asat March 312022 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 the ICAI.
| ||For S R B C & CO LLP |
| ||Chartered Accountants |
| ||ICAI Firm Registration Number: 324982E / E300003 |
| ||per Sudhir Soni Partner |
|Place of Signature: Mumbai ||Membership Number: 41870 |
|Date: May 18 2022 ||UDIN: 22041870AJEIXG8741 |