The company has identified only one Segment viz. "TEXTILES" as per Accounting Standard 17 of ICAI and has not identified any geographical segment, where risk and returns are materially different.

SHAHLON SILK INDUSTRIES PRIVATE LIMITED
91, GIDC, KHATODARA, B/H SUB JAIL, RING ROAD, SURAT

SIGNIFICANT ACCOUNTING POLICIES and NOTES ON ACCOUNTS

NOTENO.:  24

SIGNIFICANT ACCOUNTING POLICIES

Significant accounting policies adopted in the brparation and brsentation of the

accounts are based on accounting principles set out in Accounting Standards (AS) issued by

ICAI as enumerated below:

i. BASIS OF brPARATION OF FINANCIAL STATEMENTS (AS 1):

a) The financial statements are brpared and brsented under the historical cost

convention in accordance with the Generally Accepted Accounting Principles and the

provision of the Companies Act, 2013.

b) The financial statements have been brpared under the historical cost convention

on an accrual basis and in accordance with Generally Accepted Accounting Principles

including the Accounting Standards specified under section 133 of the Act, read with Rule

7 of the Companies (Accounts) Rules, 2014.

c) The Accounting policies are consistently applied by the Company. 

ii. USE OF ESTIMATES:

The brparation of financial statements in conformity with Indian GAAP required judgments,

estimates and assumptions to be made that affect the reported amount of assets and

liabilities, disclosure of contingent liabilities on the date of the financial statements

and the reported amount of revenues and expenses during the reporting period. Difference

between the actual results and estimates are recognized in the period in which the results

are known/materialized.

iii. INVENTORIES (AS 2)

Inventories are valued at cost or net realisable value whichever is lower except

stores,chemicals, fuel and packing materials, which are valued at cost.

iv. DEbrCIATION (AS 6)

Debrciation on Fixed Assets is provided to the extent of debrciable amount on the

Written Down Value (WDV) Method. Debrciation is provided as per revised useful life of

the assets as brscribed in Schedule II to the Companies Act, 2013. Accordingly, the

unamortised carrying value is being debrciated/ amortised over the revised/ remaining

useful lives. The Residual value of all the new assets have been considered at 5% cost of

acquisition as brscribed under the Part C of Schedule II of the Companies Act, 2013.

In respect of revalued assets, debrciation on revalued portion of fixed assets has been

withdrawn from the Revaluation Reserve.
 
v. REVENUE RECOGNITION (AS 9)

Revenue is recognized when the significant risks and rewards of ownership of the goods

have passed to the buyer. Sales are recognized when goods are supplied and recorded net of

trade discount, rebates, late payment charges and wherever applicable Value Added tax and

cenvat duty.

Late payment charges /discounts are recognized on the ground of prudence as and when

recovered.

Commission income is recognized as and when terms of the contract are fulfilled.

Other operational income is recognized on rendering of related services, as per terms of

contract.

Interest income is recognized as per rate of interest agreed with our customers/clients.

Other items of income are accounted as and when right to receive arises.

Income and Expenditure are accounted for on Accrual Basis.

vi. FIXED ASSETS (AS 10)

Fixed assets are stated at cost, (or revalued amounts, as the case may be), net of credit

availed in respect of any tax/duty less accumulated debrciation/amortisation and

impairment losses. Cost comprises the purchase price and any attributable cost of bringing

the asset to its working condition for its intended use. Financing costs relating to

acquisition of fixed assets are also included to the extent they relate to the period till

such assets are ready for its intended use. Cost of acquisition or construction is

inclusive of purchase price, duties and levies, inward freight, specific know how fee and

such other cost relating to acquisition and installation of the assets. Own manufactured

assets are capitalized at cost including an appropriate share of overheads.

vii. FOREIGN CURRENCY TRANSACTION (AS 11)

The reporting currency of the company is Indian Rupee.

Transactions in foreign currencies are recognized at the brvailing exchange rates on the

transaction dates. Realized gain and losses on settlements of foreign currency transaction

are recognized in the Profit and Loss Account under the natural revenue heads of accounts.

Foreign currency assets and liabilities at the year end are translated at the year end

exchange rates, and the resultant exchange difference is recognized in the Profit and Loss

Account, except those relating to acquisition of fixed assets, which are adjusted in the

cost of the fixed assets.

In case of forward contract, or other financial instruments that are in substance forward

exchange contracts, the brmium or discounts arising at the inception of the contract is

amortize as expense or income over the life of the contract. Gains /(losses) on settlement

of the transactions arising on cancellation/renewal of forward exchange contracts are

recognized as income or expense.

viii. INVESTMENTS (AS 13)

Investments are stated at cost of acquisition including Key man insurance brmium.

Investments that are readily realisable and intended to be held for not more than a year

are classified as current investments. All other investments are classified as long-term

investments. Current investments are carried at lower of cost and fair value determined on

an individual investment basis. Long-term investments are carried at cost.

ix. EMPLOYEE BENEFITS(AS 15)

(1) Short term Employee Benefits:

All employee benefits falling due within twelve months of rendering the service are

classified as short term employee benefits. The benefits like salaries, bonus, wages,

leave salary, exgratia are recognized in the period in which employee renders the related

service.

(2) Post Employment Plan:

(a) Defined Contribution Plan: Provident fund and pension scheme are the defined

contribution plan in the company. The contribution paid/payable under the scheme is

recognized during the period in which the employee renders the related service.

(b) Defined Benefit Plans: Employee gratuity fund scheme is the defined benefit plan.

The brsent value of obligation under benefit plan is determined based on actuarial

valuation carried out by an independent actuary.

Brief description: The type of defined benefit plans is as follow :

 Gratuity: 
The employee gratuity fund is managed by "Life Insurance Corporation of India" and "SBI Life

  Insurance Company Ltd". ThePresent value of obligation is determined based on actuarial

valuation. The liability is fully funded. 
  
  2016-17  2015-16  
a Amounts recognized in Balance Sheet are as follows: 
  
 A. Present Value of Defined Benefit Obligation 
  - Wholly Funded 16,247,049  11,926,508  
  
  - Wholly UnFunded 
  
 Less: Fair Value of Plan Assets 11,386,265  10,580,167  
  
 Amount to be recognized as Liability or (Assets) 
  
 B. Amount Reflected in Balance Sheet 
  - Liability 4,860,784  1,346,341  
  
b. Amounts recognized in Profit and Loss Account: 
  
 1. Current Service Cost 3,357,783  1,913,570  
 2. Other Adjustments   Nil  Nil  
 3.Expected Return on Plan Assets   (868,120)     (715,673) 

     
 4. Interest Cost 1,137,182  756,809  
 5. Actuarial Losses/(Gains) 213,191   381,852  
  
  
 Total included in " Payments to and Provision for Employees" (Refer Schedule 19) 

3,840,036  2,336,558  
  
c. Changes in brsent value of defined benefit obligation rebrsenting reconciliation

of opening and closing balances thereof are as follows:
  
 Opening Value of brsent value of defined benefit obligation 11,926,508  

9,460,117  
  
 Add : Current service cost 3,357,783  1,913,570  
 Add : Interest Cost 1,137,182  756,809  
 Add : Actuarial (Gain)/Loss 158,291   47,157  
  
 Less : Benefits paid 332,715  251,145  
  

 Closing Value of brsent value of defined benefit obligation

 16,247,049

  11,926,508

d.

e. 

Changes in Fair Value of Plan Assets 

10,580,167  5,889,917
 Add: Other Adjustments 

   Nil8,998
Add: Contributions of Employer 

325,5934,560,417
Add: Expected Return on Plan Assets  

868,120715,673
Add: Acturial Gain/(Loss)(54,900)  (343,693)

Less: Benefits Paid 

  332,715251,145

Closing Fair Value of Plan Assets  

11,386,26510,580,167

Principal Actuarial Assumptions at the Balance Sheet Date ( exbrssed as Weighted

Averages) 
  
 Discount Rate (p.a.) 8.75%  8.75%  
  
 Expected Rate of Return on Assets (p.a.) 8.75%  8.75%  

x. BORROWING COST(AS 16)

Borrowing cost that is directly attributable to the acquisition, construction or

production of a qualifying asset is capitalized as part of the cost of the asset till such

time as the asset is ready for its intended use or sale. A qualifying asset is an asset

that necessarily requires a substantial period of time to get ready for its intended use

or sale. All other borrowing costs are recognized as an expense in the period in which

they are incurred.

xi. SEGMENT DISCLOSURE (AS 17)

The company has identified only one Segment viz. "TEXTILES" as per Accounting Standard 17

of ICAI and has not identified any geographical segment, where risk and returns are

materially different.

xii. RELATED PARTY (AS18)

Disclosure required as per AS-18 issued by ICAI in respect of related party is as under.

Related parties where common control exist and transactions entered into:

Sr.No. Name of the Related Party Nature of Transaction Amount Balance as on

31/03/2017

  
1 Fairdeal Filaments Ltd.  (Common Control of Key Managerial Personal) 

Interest Payment(Under Channel Financing) 76,505 NIL
  Purchase 21,782,536 
  Job Charges 17,110,489 
  DEPB License Purchase 128,133 
  
  Job Income 27,292,340 
  Sale 15,048, 284 
  Re-imbursement of Salary recd. 488,353 
  Rent Income 103,500 
  Re-imbursement of PowerChgs. recd.
 252,429 
2 Fairdeal Textile Park Pvt. Ltd. (Common Control of Key Managerial Personal) 

Effluent Treatment Charges 618,982 NIL
  Maintenance Charges Paid 1,029,510 
  Lease Rent paid

Leave andLicense Agreement (Worker's Hostel)
Power Chgs. (Worker's Hostel)
Job Charges
Sale 128,724
977,075

39,423

873,723
305,311 
3 Lotus Marketing  (Common Control of Key Managerial Personal) 

Purchase
Sale
Commission Income 17,612,788
16,962
25,531 NIL
4
 
  Autotech Non-Wovens Pvt. Ltd. (Common Control of Key Managerial Personal) 

Sale
Job Income
Interest Income
Purchase 3,656,591
8,059,941
69,098
24,350 3,281,377/- Dr
5 Shahlon Textile Park Pvt. Ltd.
(Common Control of Key Managerial Personal) 
Investment of Equity Shares 
1,000,000 NIL
6 Shri J.R. Shah 
(Key Management Personal) Key Management/Director's Remuneration
Interest on Unsecured Loan  5,421,600

296,375 NIL
  
7 Shri M.R. Shah 
(Key Management Personal) Key Management/Director's Remuneration
Interest on Unsecured Loan  5,421,600

142,535 NIL
  
8 Shri N.R. Shah 
(Key Management Personal) Remuneration as President Technical
Interest on Unsecured Loan 5,421,600

831,535 NIL
  
9 Shri D.J. Shah 
(Key Management Personal) Key Management/Director's Remuneration
Interest on Unsecured Loan  5,421,600

384,007 NIL
  

xiii. TAXES ON INCOME (AS 22)

Current Tax is determined as the amount of tax payable in respect of taxable income for

the year as per Income tax Act, 1961.

xiv. DEFERRED TAXES (AS 22)

In accordance with the Accounting Standard - 22, Accounting for Taxes on Income, issued by

the Institute of Chartered Accountants of India ('ICAI'), the Company provides for

deferred tax at the year end. Deferred tax resulting from timing differences between

taxable income and accounting income for the year and reversal of timing difference of

earlier years are recognized at the current rate of tax to the extent that the timing

differences are expected to crystallise. During the financial year under consideration the

company has recognized deferred tax liability of `223.71 Lacs on the timing difference

arising on net block of fixed assets under Income Tax and Companies Act, Deferred Tax Asset

of `17.88 Lacs on account of provision for bonus, leave encashmentand gratuity and Deferred

Tax Asset of `284.93 Lacs on account of Unabsorbed Debrciation.

The difference in Debrciation on windmill assets at Jamanwada is a difference which is

arising in the current year and according to the management, the same is capable of being

reversed during the subsequent period in which tax holiday would be claimed u/s 80IA in

respect of these assets being a separate undertaking. And hence the same is ignored for

the purpose of calculation of deferred tax.

According to the management, the company shall be eligible to carry forward unabsorbed

debrciation loss of `9,22,09,264/- which shall be available for set off against profits

in subsequent years and there is a virtual certainty of sufficient profits in future years

and Deferred Tax Asset is created on the same.

xv. CONTINGENT LIABILITIES AND COMMITMENTS
(to the extent not provided for)

Particulars Figures for the current reporting period
(`in lacs) Figures for the brvious reporting period
(`in lacs)
i) Contingent Liabilities  
a) Bank guarantee provided to DGFT/Custom Authorities to secure machineries under

EPCG Scheme 15.38 15.38

Dakshin Gujarat Vij Company Ltd. has raised demand of cross subsidy surcharges for the 

financial year 2005-06 of ` 66.73 lacs vide its show cause notice / letter no.

DGVL/CandR/CPP/Cross-Sub.Surch/08/2821 dated 05-06-2008 to Shahlon Industrial Infrastructure

Pvt. Ltd, which is merged with Shahlon Silk Industries Pvt Ltd. The amount payable is

under Dispute.

Shahlon Industrial Infrastructure Pvt. Ltd., one of the transferor company which is merged

with Shahlon Silk Industries Pvt Ltd. has received notice from collector of electricity

duty demanding electricity duty @15% on supply of electricity to its members, whereas the

said company has paid electricity duty 0.40 paisa per unit considering power generation is

for captive purpose. The amount payable is under dispute.

xvi. Impairment:

The carrying amounts of assets are reviewed at each balance sheet date if there is any

indication of impairment based on internal / external factors. An impairment loss is

recognized wherever the carrying amount of an asset exceeds its recoverable amount. The

recoverable amount is the greater of the asset's net selling price and value in use.

xvii. Earnings per share:

Basic Earnings per share is calculated by dividing the net profit or loss for the period

attributable to equity shareholders by the weighted average number of equity shares

outstanding during the year.

xviii. Earning in foreign exchange: F.O.B. values of exports `2233.34 Lacs (Pre. Year

`3149.11)

xix. Sales/Purchase included inter-divisional transfers of `347.96 Lacs (Pre. Year

`374.64)

xx. Debtors of`8,236.01Lacs includes `32.81lacs (Pre.year `7,873.15 Lacs

includes`11.67 lacs) due from concern in which Directors are interested.

xxi. Loan and Advances of`1,073.54includes`Nil Lacs (Pre.year`943.38 Lacs includes`Nil)

due from concern inwhich Directors are interested.

xxii. Previous years' figures have been regrouped / recast wherever considered

necessary.

AS PER OUR REPORT OF EVEN DATE   FOR AND ON BEHALF OF THE BOARD
FOR RASESH SHAH and ASSOCIATES   SHAHLON SILK INDUSTRIES PRIVATE LIMITED
CHARTERED ACCOUNTANTS 
  
CA RASESH B SHAH  DIRECTOR   DIRECTOR
PARTNER 
M.NO.  : 034217  
FIRM REG. NO: 108671W  
PLACE : SURAT  
DATE   : 29.08.2017  

EMPLOYEE BENEFITS(AS 15)

(1) Short term Employee Benefits:

All employee benefits falling due within twelve months of rendering the service are

classified as short term employee benefits. The benefits like salaries, bonus, wages,

leave salary, exgratia are recognized in the period in which employee renders the related

service.

(2) Post Employment Plan:

(a) Defined Contribution Plan: Provident fund and pension scheme are the defined

contribution plan in the company. The contribution paid/payable under the scheme is

recognized during the period in which the employee renders the related service.

(b) Defined Benefit Plans: Employee gratuity fund scheme is the defined benefit plan.

The brsent value of obligation under benefit plan is determined based on actuarial

valuation carried out by an independent actuary.

Brief description: The type of defined benefit plans is as follow :

 Gratuity: 
The employee gratuity fund is managed by "Life Insurance Corporation of India" and "SBI Life

  Insurance Company Ltd". ThePresent value of obligation is determined based on actuarial

valuation. The liability is fully funded. 
  
  2016-17  2015-16  
a Amounts recognized in Balance Sheet are as follows: 
  
 A. Present Value of Defined Benefit Obligation 
  - Wholly Funded 16,247,049  11,926,508  
  
  - Wholly UnFunded 
  
 Less: Fair Value of Plan Assets 11,386,265  10,580,167  
  
 Amount to be recognized as Liability or (Assets) 
  
 B. Amount Reflected in Balance Sheet 
  - Liability 4,860,784  1,346,341  
  
b. Amounts recognized in Profit and Loss Account: 
  
 1. Current Service Cost 3,357,783  1,913,570  
 2. Other Adjustments   Nil  Nil  
 3.Expected Return on Plan Assets   (868,120)     (715,673) 

     
 4. Interest Cost 1,137,182  756,809  
 5. Actuarial Losses/(Gains) 213,191   381,852  
  
  
 Total included in " Payments to and Provision for Employees" (Refer Schedule 19) 

3,840,036  2,336,558  
  
c. Changes in brsent value of defined benefit obligation rebrsenting reconciliation

of opening and closing balances thereof are as follows:
  
 Opening Value of brsent value of defined benefit obligation 11,926,508  

9,460,117  
  
 Add : Current service cost 3,357,783  1,913,570  
 Add : Interest Cost 1,137,182  756,809  
 Add : Actuarial (Gain)/Loss 158,291   47,157  
  
 Less : Benefits paid 332,715  251,145  
  

 Closing Value of brsent value of defined benefit obligation

 16,247,049

  11,926,508

d.

e. 

Changes in Fair Value of Plan Assets   

10,580,167  5,889,917
 Add: Other Adjustments   

   Nil8,998
Add: Contributions of Employer   

325,5934,560,417
Add: Expected Return on Plan Assets  

868,120715,673
Add: Acturial Gain/(Loss)(54,900)  (343,693)

Less: Benefits Paid   

  332,715251,145

Closing Fair Value of Plan Assets  

11,386,26510,580,167

Principal Actuarial Assumptions at the Balance Sheet Date ( exbrssed as Weighted

Averages) 
  
 Discount Rate (p.a.) 8.75%  8.75%  
  
 Expected Rate of Return on Assets (p.a.) 8.75%  8.75%