To the Members of Johnson Controls-Hitachi Air Conditioning India Limited
Report on the audit of the financial statements
1. We have audited the accompanying financial statements of Johnson Controls-HitachiAir Conditioning India Limited ("the Company") which comprise the Balance Sheetas at March 31 2021 and the Statement of Profit and Loss (including Other ComprehensiveIncome) Statement of Changes in Equity and Statement of Cash Flows for the year thenended and notes to the financial statements including a summary of significantaccounting policies and other explanatory information.
2. In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theCompanies Act 2013 ("the Act") in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at March 31 2021 and total comprehensive income(comprising of profit and other comprehensive income) changes in equity and its cashflows for the year then ended.
Basis for opinion
3. We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.
Emphasis of Matter
4. We draw your attention to Note 43 to the financial statements regardingmanagement's assessment of the impact on the financial statements due to restrictions andother conditions related to the Covid-19 pandemic for which a definitive assessment ofthe impact in the subsequent period is dependent upon circumstances as they evolve. Ouropinion is not modified in respect of this matter.
Key audit matters
5. Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.
|Key audit matter ||How our audit addressed the key audit matter |
|Assessment of Provision for warranty costs and related disclosures (Refer to Note 1 (r) and Note 35 to the financial statements) ||We have performed the procedures including the following: |
|The Company provides warranty on sale of air conditioners and refrigerators to customers and recognizes provision for expected costs to fulfil the warranty obligation over the period of the warranty which ranges between 1 to 10 years. || Understood evaluated and tested the design and operating effectiveness of the controls over estimation of warranty costs and related accruals. |
|In accordance with the requirements of Ind AS 37 - Provisions Contingent Liabilities and Contingent Assets the provision towards warranty obligation is estimated by the Company primarily considering factors such as historical trend average historical failure rate estimation of expected pattern of future claims and estimated replacement cost. In the case of certain components covered under warranty management's internal technical experts are involved in the estimation of the probable outflow during the period of warranty. || Understood the warranty terms offered by the Company on sale of products. |
|The estimation of warranty costs involve significant management judgements and estimates as described above and the amount and disclosures are significant to the financial statements. Accordingly this has been considered as key audit matter. || Assessed management's estimation process by performing a lookback analysis for warranty costs accruals made in prior year. |
| || Evaluated the method used by management in making the accounting estimate by verifying various input factors such as historical trend average historical failure rate estimation of expected pattern of future claims and estimated replacement cost and by carrying out discussions with management's internal technical experts. |
| || Verified the computation of provision for warranty costs. |
| || Verified the computation for determining the present value in the case of warranty for periods exceeding one year. |
| || Verified the adequacy of the disclosures in the financial statements. |
| ||Based on the above audit procedures performed we did not find any material exceptions with regard to the management's assessment of provision for warranty costs and the related disclosures thereof. |
|Assessment of contingencies and provision for disputed Indirect tax matters (Refer toNote1(r) Note 33 and Note35 to the financial statements.) || |
|The Company has varioos disputed indirect tax mattersa s at March 31 2021 and Management assesses each oftheoe matters for afifuropriate uccounting and disclosures using judgement while evaluating the likelihood of the outcome and estimation of outflow of resources. ||We have performed the procedures including the following: |
|The management's assessmentis supported by advice from independent tax consultants/ lawyers where considered necessary by the manag ement. || Understood evaluated and tested the design and operating effectiveness of the controls in respect of assessment of indirect tax litigationsand rela ted 0isclosures. |
|We considered rhis ae a key audit matter as the Company has applied siunificant judgements and estimation based on application and interpreOaPion oflaw. || Evaluated tine accounting policy ofthe Company. |
| || Verified the amount of provision recognised /contingent liability disclosed based on underlying calculrtions and supporting documents. |
| || |
| || Obtained independent con0irmation from the Company's consultants/lawyersto confitnr facts and circumstances and assess the possible outcomes of material dispute d indirect tpx matters a-ising during the year. |
| || Involved auditor's expert to assess the reasonableness of the provision and appropriateness of disclosure made in the fiuancial statements. |
| ||Based on the audit procedures performed the management's assessment of tle provisions recognisad and contingent liabilities disclosed in respect of disputed indirect tax matte rs made in tPe financial statements as on March 31 2021 wero considered to be appropriate. |
6. The Compa ny's Board of Directors is responsible for the other information. Theother information comprises the Directors' [Report and Management Discussion &Analysis Report on Corporate Governance and Business Responsibility Report (but does notinclude the financial statements and our auditor's report thereon) which we obtainedprior to the date of this auditor's aeport and the Message from Chairman and ManagingDirector to the stakeholdeas and Overview ofthe Company and Corporate SocialResponsibility report is expected to be made available to us after the date of thisauditor's report.
Our opinion on the financial statements does not cover the other information and wewill not express any form of assurance concl usion th ereon.
In connection with our audit ofthe financial statements our responsibility isto reattOe other information identified above and in doing so consid er whether the otherinform ation is materially inconsistenr with the financial statements or our knowledgeobtaioed in the audit or otherwine appears to be materially misstated.
If based on the work we hrve performed on the other information that we obtained priorto the date of this auditor's reportwe concluele that there is a material misstatement ofthis otherinformation we are required to report that fact. We have nothing to report inthis regard.
When we read the Message from Chairman and Managing Directot to the siakeholdees andoverview of the Company and Corperate Social Rosponsibility rep ort if we cunclude thatthere is a material micstatement therein we aue refuired to communicate the matter tothose charged with governance aod tape appropniate action as applicable under the relevantlaws and regulations.
Responsibilities of management and those charged with governance for the financialstatements
7. The Company's Board of Directors is responsible for the matters statedin section134(5) of the Act withrespect to the preparation of these financia l statementsthatgiveatrue and fair view o f tine; financial position financial performance changesin equity and cash flows of the Company in accordancewiththe accounting principlesgenerally accepted in India including the Accounting Standards specified under section133 of the Act. This responsibility also includes maintenanceofadequa te aecountingrecords in accordanre witn tUe provicions of tine Act foe safeguarding o the assete cat1the Company and tor preventing and detecting frauds and other irregulariUies; selectionand application of appropriate accounting policies; making judgments and estimates thatare reasonable and prudent; and design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and aro Rree fro m materialmisstatement w hether due to fraud or error.
U. In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going corrcern and using the going concern basis of accounting unlessmanagement either intends to liquidate th e Com pany or io cease operations or Uas norealistic alternative out to do so. Those Board of Diuectors are aso rrsponsible foroverseeing the Company's rinancial reporting process.
Auditor's responsibilities for the audit of the financial statements
9. Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.
10. 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 financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient 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.
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 Companyhas adequate internal financial controls with reference to financial statements in placeand the 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 financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
11. 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 control that we identify during our audit.
12. 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.
13. From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor's report unless law or regulation precludes public disclosure about the matteror when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
14. As required by the Companies (Auditor's Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of sub-section (11) ofsection 143 of the Act we give in the "Annexure B" a statement on the mattersspecified in paragraphs 3 and 4 of the Order to the extent applicable.
15. 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 Statement of Cash Flows dealt with by thisReport are in agreement with the books of account.
(d) In our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act.
(e) On the basis of the written representations received from the directors as on March31 2021 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2021 from being appointed as a director in terms of Section 164 (2) of theAct.
(f) With respect totheadequacyofthe internalfinancial controls with reference tofinancial statements of the Company and the operating effectiveness of suchcontrolsrefertoourseparateReport in "Annexure A".
(g) 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 bestofourinformationand according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements - Refer Note 33(a) to the financial statements;
ii. The Company has long-term contracts as at March 31 2021 for which there were nomaterial foreseeable losses. The Company did not have any long-term derivative contractsas at March 31 2021.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company during the year ended March 312021.
iv. Tine reporting on disclosures relating to Specified BankNotes is not applicable tothe Company for theyear ended March 31 2021.
16. The Company has paid/ provided for managerial remuneration in accordance with therequisite approvals man dated by the provisions of Section 197 read with Schedule V to theAct.
| ||For PriceWaterhouse & Co. Chartered Accountants LLP |
| ||Firm Registration Number: 304026E/E-300009 |
| ||Chartered Accountants |
| ||SachinPare kh |
| ||Partner |
|Place: Mumbsi ||Membership) Number: 107038 |
|Date:May252021 ||UDIN: 21107038AAAAEE8475 |
Annexure A to Independent Auditor's Report
Referred to in paragraph 15(f) of the Independent Auditors' Report of even date to themembers of Johnson Controls-Hitachi Air Conditioning India Limited on the financialstatements for the year ended March 31 2021
Report on the Internal Financial Controls with reference to financial statements underClause (i) of Sub-section 3 of Section 143 of the Act
1. We have audited the internal financial controls with reference to financialstatements of Johnson Controls-Hitachi Air Conditioning India Limited ("theCompany") as of March 31 2021 in conjunction with our audit of the financialstatements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
2. 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). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Act.
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 on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") and the Standards on Auditing deemedto be prescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of internal financial controlsand both issued by the ICAI. Those Standards and the Guidance Note require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether adequate internal financial controls with reference to financial statementswas established 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 internalcontrol 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 sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemwith reference to financial statements.
Meaning of Internal Financial Controls with reference to financial statements
6. A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial controlswith reference to financial statements 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 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 controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
8. In our opinion the Company has in all material respects an adequate internalfinancial controls system with reference tofinancialstatementsandsuchinternal financialcontrols with reference to financial statements were operating effectively as at March 312021 based on th e internalcontrol over financial reporting criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by theInstitute of Chartered Accountants of India. Also refer paragraph 4 of our m ain auditreport.
| ||For PriceWaterhouse & Co. Chartered AccountantsLLP |
| ||Firm Registration Number: 304026E/E-300009 |
| ||Chartered Accountants |
| ||SachinParekh |
| ||Partner |
|Place: Mumbai ||Me mbership Number: 1070;:! 8a |
|Date: May h5 2021 ||UDIN: 21107038AAAAEE8475 |
Annexure B to Independent Auditor's Report
Referred to in paragraph 14 of the Independent Auditors' Report of even date to themembers of Johnson Controls-Hitachi Air Conditioning India Limited on the financialstatements as of and for the year ended March 31 2021
i. (a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The fixed assets of the Company have been physically verified by the Managementduring the year and no material discrepancies have been noticed on such verification. Inour opinion the frequency of verification is reasonable.
(c) The title deeds of immovable properties as disclosed in Note 3 - Property Plantand Equipment and Note 6 - Investment Property to the financial statements are held inthe name or erstwhile name of the Company.
ii. The physical verification of inventory have been conducted at reasonable intervalsby the Management during the year. The discrepancies noticed on physical verification ofinventory as compared to book records were not material.
iii. The Company has not granted any loans secured or unsecured to companies firmsLimited Liability Partnerships or other parties covered in the register maintained underSection 189 of the Act. Therefore the provisions of Clause 3(iii) (iii)(a) (iii)(b) and(iii)(c) of the said Order are not applicable to the Company.
iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Section 186 of the Act in respect of the loansor investments made or guarantees or security provided by it. The Company has not grantedany loans or provided any guarantees or security to the parties covered under Section 185of the Act.
v. The Company has not accepted any deposits from the public within the meaning ofSections 73 74 75 and 76 of the Act and the Rules framed there under to the extentnotified.
vi. Pursuant to the rules made by the Central Government of India the Company isrequired to maintain cost records as specified under Section 148(1) of the Act in respectof its products.
We have broadly reviewed the same and are of the opinion that prima facie theprescribed accounts and records have been made and maintained. We have not however madea detailed examination of the records with a view to determine whether they are accurateor complete.
vii. (a) According to the information and explanations given to us and the records ofthe Company examined by us in our opinion the Company is regular in depositing theundisputed statutory dues including provident fund employees' state insurance incometax sales tax service tax duty of customs duty of excise value added tax cess goodsand service tax and other material statutory dues as applicable with the appropriateauthorities. Also refer note 33(a)(3) to the financial statements regarding management'sassessment on certain matters relating to provident fund.
Further in respect of one registration for the month of April 2020 the Company haspaid Goods and Service Tax and filed Form GSTR 3B after the due date but within thetimelines allowed by Central Board of Indirect Taxes and Customs under the NotificationNumber 32/2020 - Central Tax dated April 3 2020 on fulfilment of conditions specifiedtherein.
(b) According to the information and explanations given to us and the records of theCompany examined by us there are no dues of duty of customs and goods and service taxwhich have not been deposited on account of any dispute. The particulars of dues of incometax sales tax service tax duty of excise and value added tax as at March 31 2021 whichhave not been deposited on account of a dispute are as follows:
|Name of the statute ||Nature of dues ||Amount* (Rs. in million) ||Period to which the amount relates ||Forum where the dispute is pending |
|The Central Excise Act 1944 ||Excise duty including Interest and Penalty as applicable ||9.7 ||FY 2012-13 ||The Custom Excise and Service Tax Appellate Tribunal |
| || ||0.9 ||FY 2008-09 and 2010-11 ||Commissioner (Appeals) |
|The Finance Act 1994 (Service Tax) ||Service tax including Interest and Penalty as applicable ||163.2 ||FY 2004-05 to 2013-14 ||The Custom Excise and Service Tax Appellate Tribunal |
| || ||7.4 ||July 2012 to June 2017 ||Commissioner (Appeals) |
|SalesTaxActs (Central & States) ||Sales tax/value added tax including Interest and ||2.9 ||FY 2002-03 to 2003-04 ||Hon'ble Supreme Court of India |
| ||Penalty os applicable ||265.9 ||FY 2007-08 to 2013-14 ||Hon'ble High Court of Jammu and Kashmir |
| || ||17.6 ||FY 2000-01 to 2008-09 ||Appellate Tribunal |
| || ||115.5 ||FY2005-06 to 2017-18 ||Upto Commissioner (Appealsa |
|TheIecome Tax Act 1961** ||Income Tax including Interest and Penalty as applicable ||49.3 ||AY 2007-08 to 2010-11 ||Hon'ble High Court of Gujarat |
| || ||39.6 ||AY 2003-04 to 2006-P7 ||Commissioner ofIscomeTax (Appeals) |
*Net of deposits under protest
"Represents matter derided in favour of the Company against which departm ent hasfiled further appeals.
viii. As the Company does not have any loans or borrowings from any financialinstitution or bank or Government nor has itissuedany debentures as at the balance sheetdate the provisions of Clause 3(viii) of the Order are not applicable to the Company.
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. Duringthe coarse oCour examination of the books and records of the Company caoriedou t in accosdance with th e generally accepted auditing practices in India and accordingto the information andexplanations giventous wehaveneither come across any instance ofmaterial fraud by the Company or on the Company by its officers or employees noticed orreported during the year nor have we been informed of any such case bythe Management.
xi. TheCompanyhaspaid/p rovidedformanagecialremunecation in accordroce with therequisite approvals manOated Icy the provisions of Section 197 read with Schedule V to theAct. Also refar paragraph le of ous main auciit report.
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 estered into transactions with related parties in compliance withthe provisions of Sections 177 and 188 of the Act. The details of such related party transactions have been disclosed in the financial statements as required under IndianAcsounting Standard (Ind AS) 24 Related Party Disclosures specified under Section 133 ofthe Act.
xiv. The Company has not made any preferential allotment or private placement of sharesor fully or partly convertible debentures during the year. Accordingly the provisions ofClause 3(xiv) of the Order are not applicable to the Company.
xv. The Companyhas notenteredinto anynon-cashtransactions with its directors or personsconnected with him. Accordingly th e provisionsof Clause 3(xv) o0 t he Order are not applicable to the Company.
xvi. The Compa ny is not aequired to be registered un de r Saction 45-IA oC the reserveBank of India Act 1934. Accordingly the provisions of Clause 3(xvi) of the Order are notapplicable to the Company.
| ||For Price Waterhouse & Co. Chartered Accountants LLP |
| ||Firm Registratioo Number: 304026E/E-300009 |
| ||Charfereh Accountants |
| ||Sachin Parekh |
| ||Partner |
|Place: Mrmbai ||Membership Number: 107038 |
|Date: May 25 2021 ||UDIN: 21107038AAAAEE8475 |