AIRLINE ALLIED SERVICES LIMITED - · PDF fileAASL 4 VISION: To be prominent domestic airline...
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AIRLINE ALLIED SERVICES LIMITED AASL
Transcript of AIRLINE ALLIED SERVICES LIMITED - · PDF fileAASL 4 VISION: To be prominent domestic airline...
AIRLINE ALLIED SERVICES LIMITED
AASL
AASL
CONTENTS
Page No.
1. Board of Directors 1
2. Chairman’s Message 2
3. Directors’ Report 5
4. Comments of the Comptroller & Auditor General of India 31
5. Independent Auditors’ Report 32
6. Balance Sheet as at 31 March 2016 55
7. Statement of Profit & Loss for the year ended 31 March 2016 56
8. Cash Flow Statement 57
9. Notes forming part of the Financial Statements for the year ended 31 March 2016 58
AASL
BOARD OF DIRECTORS (as on 30 DECEMBER 2016)
Shri Ashwani Lohani Chairman
Shri Vinod Hejmadi Director
Shri Pankaj Srivastava Director
Smt. Meenakshi Dua Director
Capt Arvind Kathpalia Director
Dr. (Smt.) Shefali Juneja Director
Chief Executive Officer
Shri C.S. Subbiah
Auditors
M/s. Chandra Gupta & Associates
Chartered Accountant
E-103, Palm Court Apartments
Plot No.-3, Sector-19-B, Dwarka
New Delhi-110 075.
Company Secretary
Shri Gagan Batra
Registered Office
Old Lufthansa Hanger Building,
(Adjacent to ED-NR Office)
I.G.I. Airport, T-1,
New Delhi-110 037
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CHAIRMAN'S MESSAGE
Dear Shareholders,
It gives me great pleasure to present to you the Thirty Third Annual Report of the Company for the year 2015-16.
Airline Allied Services Ltd. (AASL) is the leading airline in the country providing connectivity to Tier II & Tier III cities in India.
NEW CIVIL AVIATION POLICY – REGIONAL CONNECTIVITY SCHEME
The Ministry of Civil Aviation (MoCA), Government of India released the National Civil Aviation Policy 2016 (NCAP 2016). One of the objectives of NCAP 2016 is to “enhance regional connectivity through fiscal support and infrastructure development”.
In the new Civil Aviation Policy, the Government has capped passenger fares for flight journeys from unserved and underserved airports at Rs 2,500 per hour of flying for approximately 500 kilometres under the regional connectivity scheme.
In this scheme, the gap in costs and revenues, if any, will be compensated through Viability Gap Funding (VGF). No landing charges, parking charges and Terminal Navigation Landing Charges will be imposed for regional connectivity scheme flights. The regional connectivity scheme will be in operation for 10 years with individual route contracts to be for a 3-year span. Limited period exclusive route rights will be allotted to selected operators.
This appears to open up tremendous opportunities and markets for the airline like AASL which are operating with small aircraft and connecting smaller cities.
PERFORMANCE OF THE COMPANY DURING THE YEAR
In the current year, the net loss is higher by Rs.14.83 crores as company registered a net Loss of Rs. 198.75 crores during 2015-16 in comparison with previous year's loss of Rs.183.92 crores. This is mainly attributed to following factors:
1. Increased lease charges by Rs. 43.63 crores due to induction of five new aircraft in the fleet.
2. Upward increase in Maintenance charges by Rs. 37.47 crores due to induction of new aircraft and higher upkeep of old aircraft of the fleet, namely CRJ and ATR- 42.
3. There was upward increase in Landing and Navigation expenses, Catering expenses due to discontinuation of BOB, increase in interest paid to parent company Air India Limited, increase in redelivery charges of returned leased aircraft, appreciation of USD vis-a-vis Indian Rupee.
4. Although the Passenger Revenue increased by Rs.29.61 crores owing to increase in passenger carriage but there was a decline in passenger yield by Rs.558/- per passenger. Thus, growth remaining stunted.
5. Although ATF cost registered a decrease of Rs. 26.31 crores due to fall in average ATF rate but this gain was more than offset by above stated elements of cost. Besides, Sundry Receipts too registered the decline owing to decrease in Maintenance Reserve refunds from the Lessors.
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FUTURE PLANS
Company is in process of inducting 10 New ATR 72-600 aircraft in its fleet in the ensuing financial year. With this induction, revenue is likely to increase three times. With additional flights, fixed overhead cost will be apportioned accordingly. This will lead to lowering of operational cost. Plans are afoot to increase the aircraft utilization from 6.5 hrs to 8.4 hrs a day with the planned recruitment of new pilots. Hopefully, the bottom line in the next fiscal will turn black from the red.
ACKNOWLEDGEMENT
I take this opportunity to thank Air India Limited and Ministry of Civil Aviation for their unstinted support. I also acknowledge the support extended by all other authorities including banks and regulatory agencies and assure that we will continue our course on a growth trajectory, taking Airline Allied Services Limited to greater heights. I would like to thank my colleagues on the Board for their valuable guidance.
I would like to thank all employees of Airline Allied Services Limited for exemplary efforts to show the world the strength and resilience of our team spirit in pursuit of excellence. I want to thank each one of our employees for his contribution and everybody in the Airline Allied Services Limited family who had risen to the occasion to uphold the image of the company.
On behalf of the Board, I seek your continued support, as always.
� � � (Ashwani Lohani)Chairman
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VISION:
To be prominent domestic airline providing connectivity to Tier 2 and 3 cities and a feeder airline to the network & in complete synergy with Air India.
MISSION & OBJECTIVES :
Prominent domestic airline
Customer
l Provide safe, reliable and on-time services
l Take effective steps to provide high level of customer satisfaction
l Explore new passenger base for airline market
l Provide one-stop connectivity to metros and beyond for seamless travel to main domestic and international destinations.
Processes
l Continuously improve standards of safety and efficiency
l Operate and maintain a young and modern fleet
l Provide the best and most efficient network in conjunction with main network of Air India
l Create economic value
l Enhance its competitive market standing and image as a domestic short haul airline operator.
Route – Network
l Compete with high density train traffic
l Meet regional aspirations of swift connection to metros and beyond
l Provide connectivity to cities so far not air connected.
People
l Build a highly motivated and professional team
l Maintain highest degree of transparency and ethics
l Be a responsible corporate citizen
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DIRECTORS’ REPORT
The Shareholders,
The Directors of your company have pleasure in presenting the Thirty Third Annual Report together with audited Statement of Accounts of Airline Allied Services Ltd. for the year ended 31 March 2016.
1 FINANCIAL AND PHYSICAL PERFORMANCE
The Financial and Physical performance for the year under review vis-a-vis the previous year was as under:
Financial Performance :
(Rs. in Crs.)
2015-16 2014-15
Operating Revenue 268.20 226.63 Schedule Revenue 209.13 179.93 Non schedule revenue 58.64 37.64 Incidental Revenue 00.43 09.06
Other Income 5.66 1.32
Total Revenue 273.86 227.95
Total Expenses 472.61 411.87 Net Profit/(Loss) for the year Before Tax (198.75) (183.92) Net Profit/(Loss) for the year After Tax (198.75) (183.92) Share Capital 402.25 2.25
Physical Performance : 2015-16 2014-15 ASKMs (in millions) 342.639 289.614 RPKMs (in millions) 227.984 197.916 Passengers Carried (in millions) 0.400 0.310 Seat Factor (%) 66.5 68.3 Load Factor (%) 61.7 58.5
In current year, the net loss is higher by Rs. 14.83 crore as company registered a net Loss of Rs.198.75 crores during 2015-16 in comparison with previous year's loss of Rs.183.92 crores. This is mainly attributed to following factors:
1. Increased lease charges by Rs. 43.63 crores due to induction of five new aircraft in the fleet.
2. Upward increase in Maintenance charges by Rs. 37.47 crores due to induction of new aircraft and higher upkeep of old aircraft of the fleet, namely CRJ and ATR- 42.
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3. There was upward increase in Landing and Navigation expenses, Catering expenses due to discontinuation of BOB, increase in interest paid to parent company Air India Limited, increase in redelivery charges of returned leased aircraft, appreciation of USD vis-a-vis Indian Rupee.
4. Although the Passenger Revenue increased by Rs.29.61 crores owing to increase in passenger carriage but there was a decline in passenger yield by Rs. 558/- per passenger. Thus, growth remaining stunted.
5. Although ATF cost registered a decrease of Rs.26.31 crores due to fall in average ATF rate but this gain was more than offset by above stated elements of cost. Besides, Sundry Receipts too registered the decline owing to decrease in Maintenance Reserve refunds from the Lessors.
2. DETAILS OF REVISION OF FINANCIAL STATEMENTS OR BOARD'S REPORT
The Company has not revised its Financial Statements or Board's Report in respect of any of the three preceding financial years as mentioned in Section 131 (1) of the act.
3. AMOUNT, WHICH THE BOARD PROPOSES TO CARRY TO ANY RESERVES
The Board of the company has decided/proposed to carry “Nil” amount to its reserves.
4. DIVIDEND
The directors are not recommending any dividend as the company has not earned profits.
5. MAJOR EVENTS DURING THE YEAR
a) State of the company's affairs
Fleet Position
As on 31 March 2016 the fleet of the company comprised 11 leased aircraft as under:- Aircraft Type� No. of Aircraft � Owner� ATR-42-320 03 Leased from M/s Abric Leasing Ltd, Ireland
ATR 72-600 05 Leased from different overseas lessors
Bombardier CRJ-700 03 Leased from different overseas lessors Network/ New Links
As at the year end, the network of the company consisted of 29 domestic stations and the Alliance Air operated around (ATR-72-600-132, ATR-42-38 +CRJ-26 & flights/ week) 196 flights per week.
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Technical Reliability
Aircraft-wise Technical Reliability during the year 2015-16 was as under:
a) ATR 72-600� � 99.50% b) ATR 42-320� � 99.41% c) CRJ-700� � � 99.21%
Aircraft Utilization
Aircraft utilization during the year 2015-16 was as under:
a) ATR 72-600� � � 7482:58 BH b) ATR 42-320� � � 5816:16 BH c) CRJ-700� � � 2981:21 BH
The company introduced services on the following new routes/additional flights during the year 2015-16:-
New Flights / Links
i) ATR-72 Aircraft
§ Hyderabad/Vijayawada/Hyderabad-4 flights per week w.e.f. 10 July 2015 to 31 October 2015 (flight restructured to operate as Hyderabad/Vijayawada/Vizag & v.v. w.e.f. 02 November 2015)
§ Hyderabad/Tirupati/Hyderabad- 4 flights per week w.e.f. 10 July 2015 to 31 October 2015. Withdrawn as not meeting operating cost.
§ Mumbai/Diu/Mumbai- 4 times per week w.e.f 25 October 2015.
§ Hyderabad/Vijayawada/Vizag & v.v.- 5 times per week w.e.f 2 November 2015.
§ Mumbai/Surat/Mumbai- 3 times per week w.e.f 25 December 2015.
§ Mumbai/Gwalior/Mumbai- 3 times per week w.e.f 25 December 2015.
§ Delhi/Gorakhpur/Delhi- 6 times per week w.e.f 15 January 2016.
§ Frequency increased to Daily instead of 6 times/ week on Delhi/Kullu/Delhi w.e.f. 27 March 2016.
§ Delhi/Surat/Delhi- 2 Flights per week with ATR 72 w.e.f. 18 February 2016 making Delhi/Surat/Delhi a daily flight (5 flights with CRJ aircraft).
ii) ATR-42-320 Aircraft
§ Bangalore/Puducherry/Bangalore - 6 flights per week w.e.f. 14 April, 2015 to 15 October 2015. Flight operated under VGF. Operations withdrawn as VGF limit was exhausted.
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§ Kolkata/Durgapur /Kolkata - 6 flights per week w.e.f. 18 May, 2015 to 20 December 2015. Flight operated under VGF. Withdrawn at the request of Durgapur Airport Authorities.
§ Bangalore/Mysore/Bangalore - 6 flights per week w.e.f. 2 September, 2015 to 17 November 2015. Flight operated under VGF. Operations withdrawn as VGF limit was exhausted.
Operation of flights with VGF support/Charters:
During the year 2015-16, the following flights/routes continued to operate regularly under VGF support program with the respective State Governments/Government agencies.
1. Kochi/Agatti/Kochi with ATR-42 aircraft 6 times per week with support from Lakshadweep Administration.
2. With VGF support from North Eastern Council:
a. Kolkata/Silchar/Tezpur & return 3 times per week with ATR-42 aircraft. b. Kolkata/Guwahati/Lilabari & return 4 times per week with ATR-42 aircraft. c. Kolkata/Shillong/Kolkata 6 times per week with ATR-42 aircraft.
3. Bangalore/ Puducherry /Bangalore - 6 flights per week w.e.f. 14 April, 2015 to 15 October 2015. Flight operated under VGF. Operations withdrawn as VGF limit was exhausted.
4. Kolkata/Durgapur /Kolkata - 6 flights per week with ATR- 42 aircraft w.e.f. 18 May, 2015 to 20 December 2015. Flight operated under VGF support provided by Bengal Aetropolis Private Limited (BAPL). Withdrawn at the request of BAPL.
5. Bangalore/Mysore/Bangalore-6 flights per week with ATR-42 aircraft w.e.f. 2 September, 2015 to 17 November 2015. Flight operated under VGF support from Government of Karnataka. Flights were withdrawn as VGF limit was exhausted.
6. Mumbai/Diu/Mumbai- 4 times per week with ATR-72 aircraft w.e.f 25 October 2015. Flights are being operated under VGF support from Diu Administration.
7. Charter operations on Portblair/Car Nicobar/Portblair sectors with CRJ aircraft once a week continued during the year. Charter flight operated for Andaman and Nicobar Administration. The charters operated regularly. The charter flight was withdrawn w.e.f. 1 August 2016.
Human Resources
The staff strength of the company at the close of the year was 455 (664) excluding 14 (17) employees on deputation from the parent Company, Air India. All the employees of the Company are on fixed term contract basis. Out of the 455 contractual employees, 190 (41.75%) were female employees. Cadre-wise, as on 31 March 2016, there were 77 Pilots, 149 cabin crew and remaining 229 were other categories of employees. The Company has been supplementing cabin crew and other manpower as required by Air India. 40 Employees deputed from AIESL to AASL as on 31 March 2016.
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AASL had deployed 169 staff (35 cabin crew, 43 Operations, 04 VHF Operators, 58 Ground & Other Commercial & 29 Security Attendants) till 31 March 2016 on deputation to Air India.
Therefore, Company effectively had 340 (286+14+40) employees at close of the year for in its own operations.
Since the Company could not develop in-house expertise in the field, it had recruited 7 employees on contract who were superannuated from AIL, by virtue of their knowledge and long experience to handle some key positions, to satisfy/meet the regulatory requirements.
As on 31 March 2016, there were total 10 expatriate pilots, out of which (9) expatriate commanders on ATR fleet and 1 expatriate commander on CRJ fleet. Out of these 9 on ATR fleet, 4 were Training Captain. The Company's endeavor is to keep the number of expatriate pilots to bare minimum to maintain minimum mandatory strength of commander vis-à-vis aircraft fleet. There is no expatriate pilot in P2 category.
ATR-42-320/ATR-72-600 Aircraft
Air India Engineering Services Ltd. (AIESL), a wholly owned subsidiary of our parent Company, Air India undertakes maintenance of all our aircraft. Its hangar in Kolkata is the main engineering base for maintenance activities on ATR 42-320 aircraft. The Scheduled Line Maintenance and Major Maintenance activities (upto '4C' Check i.e. 16000 FH) are being carried out by AIESL including special inspections, snag rectifications as per trouble shooting / maintenance manuals for continued airworthiness of the aircraft.
The base has capability for carrying out replacement of main elements of the aircraft i.e. engines, landing gears, propellers and Structural Repair etc. which are major maintenance tasks. Infrastructure and capability has been developed to carry out '1C' Check (4000 FH), '2C' Check (8000 FH), '4C' Check (16000 FH) & '8' yearly check. The structural integrity of the aircraft is ensured by carrying out by Environmental Damage (Corrosions) and Fatigue Damage inspections.
ATR 42-320 aircraft is being operated from Bangalore also. AIESL Delhi, Kolkata, Mumbai and Hyderabad base have the capability to carry out maintenance up to 'A' Check on ATR 72-600 aircraft. MRO AIESL, Hyderabad is in the process of developing its facilities to have capability to carry out 'C' check on ATR 72-600 aircraft.
ATR- Engine Repair Facilities
Alliance Air does not have any Repair / Refurbishment / Performance restoration facility for PW121/127M engine of ATR aircraft and CF34-8C engine of CRJ 700 aircraft. The repair of PW 121/127M engine has been outsourced to M/s Pratt and Whitney, (Original Engine Manufacturer) and that of CRJ 34-8C Engine to M/s.GE (Original Engine Manufacturer).
ATR Component Shop Facilities Alliance Air does not have any facilities for repair of components. There is no plan in future to develop any such facility either for component or for engines as it is not cost effective.
Bombardier CRJ 700 Aircraft
Delhi is the main engineering base for maintenance activities on CRJ 700 aircraft. The Main base has infrastructure and capability to carry out checks till '6A' check. Heavy maintenance ('C' check) of CRJ-700 aircraft is outsourced to a FAA/EASA approved MRO as per the requirements of lease arrangements.
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Technical Training Type Refresher Course for Engineers both for ATR-42-320 and CRJ-700 are carried out in-
house at Air India Engineering Training School. General refresher for engineers is also conducted in-house at Air India Engineering Training School. Differential type training for some engineers for newly inducted ATR-72-600 was conducted at manufacturer's facility at Toulouse. Now Type training for ATR-72-600 also is being conducted in-house at Air India Engineering Training School.
Future Perspective
The fleet of Alliance Air comprises 11 aircraft (03 ATR-42-320, 05 ATR-72-600 and 03 CRJ 700 aircraft) on lease. 03 CRJ-700 are being prepared for re-delivery to lessors on the expiry of their lease term. As per plan 03 more ATR-72-600 aircraft have been inducted in 2016-17 into AASL on lease of 12 years. Negotiations with L1 bidder, on the lease terms, for induction of new 10 more ATR-72-600 is under process. 01 ATR 42-320 aircraft VT-ABO (MSN 406) was hit by Jet airways bus and the insurance claim and settlement with Jet Airways is under process. The extension of lease of 02 ATR-42-320 aircraft is being considered for a period of 6-12 months (from the date of expiry of their lease term on 31.03.17) to maintain existing operations, including NE and Agatti.
Further, as per Turn Around Plan (TAP) of AIL, Alliance Air shall have a fleet of 40 Turbo prop aircraft by the year 2020.
Flight Safety
The Company has an independent Flight Safety Department which functions as per the DGCA requirements in proactive manner. Flight Safety Department carries out preventive and investigative functions for the Airline. The preventive functions include, the cockpit voice recorder monitoring, flight data recorder monitoring and Internal Safety Audits of the stations, being operated by Airline which includes Airfield Inspection, Spot Checks, Ramp Inspection and Cockpit Surveillance Checks at regular interval.
All reported incidents are investigated by the Permanent Investigation Board (PIB) of the Company and the recommendations of PIB are included in the operation procedures and policy to prevent recurrences. The investigations of incidents are carried out along with DGCA representatives and no PIB cases of the financial year 2015-16 are pending.
During the financial Year 2015-16, Alliance Air had no occurrence, classified as serious incident on CRJ-700 aircraft, ATR-42-320 and ATR-72-600 aircraft. To ensure safety of aircraft, following measures are taken up by Flight Safety Department:-
l The procurement of FOQA system for new ATR 72-600 aircraft fleet in the year 2016.
l The flight occurrences which are classified as incidents by the regulatory norms are investigated by the Investigation Board of the Airline in coordination with the Air Safety Directorate of the DGCA.
l The recommendations of Investigation Board are circulated to the respective departments for their compliance to the applicable recommendations.
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l The Airline has facility for downloading the data from the flight data recorder and same is monitored by Flight Safety Department.
l Regular Internal Safety Audit is conducted for safety evaluations of the Airline and the findings are reported to the concerned departments and the DGCA.
l Load and Trim Sheet of ATR-72-600, CRJ-700 & ATR 42-320 aircraft fleet are being monitored on monthly basis.
l Ramp Inspection/Spot Check of Base Stations/ Line Stations are carried out randomly.
l Safety inspection of Line stations are being carried out as per direction of DGCA.
l Recommendations of DGCA is Annual Air Safety review meet are being emphasized during counseling of Pilots.
Training
Alliance Air has upgraded 1 ATR co-pilot into Commander and 1 ATR co-pilot is undergoing PIC upgrade training. With our planned training measures and conversion of some of co-pilots into commander, we were able to keep the number of foreigners (Expatriates) commanders/ trainer/examiner to bare minimum level.
Inventory Control
Aircraft inventory consisting of aircraft spare parts and consumable items is monitored and controlled through computerized RAMCO software, which is used for both AIESL and AASL inventories. AIESL exercises its procurement and control procedures for AASL inventories also.
Plan for 2016-17
Out of the fleet of Five ATR 72-600, three new ATR 72-600 aircraft were inducted during the year 2015-16. Three more ATR 72-600 aircraft have been inducted till 15 August, 2016 making it a fleet of 8 ATR 72-600 aircraft as on date. As stated earlier, induction of 10 more ATR 72-600 aircraft is under process. These aircraft are proposed to be deployed on Tier 2 & 3 cities to improve regional connectivity as proposed in the New National Civil Aviation Policy envisaged by Ministry of Civil Aviation.
Use of Hindi
To fulfill the objectives of the Official Language policy of the Government, the Company played its role in promoting the usage of Hindi at all levels. Staff were encouraged to work in Hindi. To promote Hindi, a Hindi Pakhwara is conducted every year, wherein employees participate in various competition categories like essay writing, poem reciting etc. Prizes and awards are distributed during the function.
Contribution to Exchequer
The Company has contributed Rs. 2.18 cores (Rs. 3.32 crores) to Government exchequer by way of Sales Tax and other levies on Aviation Turbine Fuel.
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b) Change in the nature of business
The Company has not commenced any new business or discontinued any of its existing business during the year.
c) Material changes and commitments, if any, affecting the financial position of the company which have occurred between the end of the financial year of the company to which the Financial Statements relate and the date of the Report.
� � No such material changes or commitments made affecting the financial position of the Company during the intervening period from April 2016 to December 2016.
6. GENERAL INFORMATION AND FUTURE OUTLOOK
Airline Allied Services Limited which had been set up in 1983 by erstwhile Indian Airlines, started airline operations with B737 aircraft under the brand name of Alliance Air in April 1996. These aircraft were taken on dry lease from erstwhile Indian Airlines.
The passenger aviation market in India has recorded a steady growth of around 20-22% in the last year. This has been possible due to induction of capacity by all airlines and also fares becoming more affordable. The growth in Tier 2 & 3 cities is still largely untapped, as larger airlines have focused on trunk routes and operate larger capacity aircraft which are not suitable for serving in smaller airports.
Alliance Air has the advantage of operating ATR type of aircraft since January 2003. It intends to build on this experience of over a decade of serving to Tier 2 & 3 cities. The average age of the ATR-42 type of aircraft of the fleet is about 20 years. Alliance Air has inducted 04 ATR-72-600 aircraft in its fleet in the year 2015/2016. With the induction of these aircraft. Alliance Air has commenced services on many new routes like Mumbai/Surat, Mumbai/Gwalior, Delhi/Gorakhpur, Mumbai/Diu, Hyderabad/ Vijayawada/ Vizag. We propose to induct more ATR-72 aircraft in the fleet. The Turn Around Plan of Air India approved by Government of India envisages a fleet of 40 turbo prop aircraft to be inducted by year 2020/2021. Addition of more aircraft will enable operations of increased flights to smaller cities, so that it complements the operations of Air India from major cities. Apart from introduction of services to new small routes, ATR-72 will enable up-gradation of existing routes on ATR-42 to this aircraft.
7. CAPITAL STRUCTURE
7.1 Details of equity shares issued
During the financial year, the company has allotted 4,00,00,000 (Four Crores) Equity Shares of Rs. 100/- each at par, aggregating to Rs. 4,00,00,00,000 (Four Hundred Crores) to Air India Ltd on rights basis.
8. MANAGEMENT
8.1 Directors and Key Managerial Personnel (KMP)
The following changes have occurred in the constitution of Directors and KMP of the Company during the FY 2015-16.
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S.No Name Designation Date of Date of Appointment Cessation
1. Shri Rohit Nandan Chairman - 31.08.2015
2. Shri Ashwani Lohani Chairman 31.08.2015 -
3. Capt. A.K. Govil Director - 18.08.2015
4. Capt Arvind Kathpalia Director 30.09.2015
5. Shri S Venkat Director - 31.10.2015
6. Shri Vinod S. Hejmadi Director 20.11.2015 -
7. Shri Sunil Dua Chief Finance 24.06.2015 31.10.2016 Officer
Facts Of Resignation Of Director [Section 168(1)]
There was no incident of resignation by any Director of the Company during the FY 2015-16.
8.2 Number of Meetings of the Board of Directors
During the Financial Year 2015-16, the Company held seven meetings (including adjourned & re-adjourned meetings) of the Board of Directors as per Section 173 of Companies Act, 2013 which is summarized below.
S No. Date of Meeting Board Strength No. of Directors Present
1 24.06.2015 7 6
2 07.07.2015 7 5
3 14.08.2015 7 7
4 22.09.2015 6 5
5 08.10.2015 7 7
6 19.11.2015 7 6
7 10.03.2016 7 5
8.3 Composition of Committees and details of changes, if any
AUDIT COMMITTEE
The constitution of Audit Committee as required under the Companies Act, 2013 was approved by the Board of Directors in its 133 Meeting held on 24 December 2014 and following were its members as on 31 March 2016:
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Smt. (Dr.) Shefali Juneja � � -� Chairperson*Ms. Puja Jindal� � � -� MemberShri Vinod S. Hejmadi�� -� MemberShri Ashwani Lohani � � -� Permanent Invitee
*Ms. Puja Jindal ceased to be the member of the Committee w.e.f. 8 April 2016 in her ex-officio capacity.
Appointment of Independent Directors & Declaration
As there was no Independent Director on the Board of AASL, the matter had been taken up with the Ministry of Civil Aviation by Air India Limited.
NOMINATION, REMUNERATION AND STAKEHOLDERS RELATIONSHIP COMMITTEE
The Constitution of Nomination and Remuneration Committee shall be taken up after the appointment of Independent Directors by Holding Company/Administrative Ministry.
8.4 Company's Policy on Director's appointment and remuneration
Appointment Policy
The Company being wholly owned subsidiary of Air India Ltd., the appointment of directors is done by Holding Company i.e. Air India in consultation with Administrative Ministry.
Remuneration Policy
Section 197 in respect of remuneration to Directors of the Company is not applicable to AASL, being a Government Company Vide Notification No. G.S.R.463(E) dated 5 June 2015.
8.5 Board Evaluation
It is not applicable to AASL, being a Government Company Vide Notification No. G.S.R. 463(E) Dated 5 June, 2015.
8.6 Remuneration received by Managing / Whole time Director from holding or subsidiary company
There was no whole time Director on the Board of the Company during FY 2015-16.
8.7 Directors' Responsibility Statement
The Board of Directors of the Company confirm:-
(a) That in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;
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(b) The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;
(c) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
(d) The Directors have prepared the Annual Accounts on a going concern basis;
(e) Company being unlisted sub clause (e) of section 134(3) is not applicable.
(f) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.
8.8 Internal financial controls
AASL appointed M/s MGC & KNAV, Global Risk Advisors LLP to conduct a risk management assessment for the purpose of Internal Financial Control on various process and activities for the year 2015-16 and submitted a fair report with various suggestions and recommendation to be implemented in 2016-17. The report was shared with statutory auditors of the Company for their comments thereon.
8.9 Disclosure regarding frauds
There are no frauds reported by the Auditor to the Audit Committee or to the Board.
9. DISCLOSURES RELATING TO SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES
Company does not have any Subsidiary, Joint Venture or Associate Company.
10. DETAILS OF DEPOSITS The Company has not accepted any public deposits during the year ended 31 March 2016 as covered
under the provisions of Section 76 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014.
11. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS
Particulars of loans, guarantees and investments have been disclosed in the financial statement.
12. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All related party transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large and Approval of the Board of Directors was obtained wherever required.
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Company does not have any details of transaction entered with the related parties which are required to be attached in Form No. AOC-2.
13. DISCLOSURES PERTAINING TO CORPORATE SOCIAL RESPONSIBILITY
Provisions of Section 135 of Companies Act, 2013 relating to Corporate Social Responsibility is not applicable to the Company as the Company has not earned any profits during the year.
14. DETAILS OF REMUNERATION OF EMPLOYEES
Section 197 read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company is not applicable to AASL, being a Government Company, vide Notification No. G.S.R.463(E) dated 5 June 2015.
15. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
(A) The particulars as required under the provisions of Section 134(3) (m) of the Companies Act, 2013 in respect of conservation of energy and technology absorption have not been furnished considering the nature of activities undertaken by the Company during the year under review.
(B) Foreign exchange earnings and Outgo
(Rs. in Crores)
Earnings NIL
Outgo 167.06
16. RISK MANAGEMENT Since the revenue of AASL is tied up through its parent company Air India and the parent company is
having adequate risk management policy in case of sales through Agents, credit cards etc; by establishing a Capping monitoring policy, Bank Guarantee policy, Risk monitoring through Risk engine attached to web portal, AASL being 100 percent subsidiary is not prone to high business risk. Moreover, the IFCR for AASL for 2015-16 is being done for which AASL is taking necessary steps as recommended in the report.
Therefore, the Company does not have any Risk Management Policy yet as the element of risk
threatening the Company's existence is very minimal.
17. MATERIAL ORDERS OF REGULATORS
No significant and material orders have been passed by the regulators or courts or Tribunals impacting the going concern status and Company's operation in future during the year.
18. DETAILS OF ESTABLISHMENT OF VIGIL MECHANISM
Provisions of Section 177(9) read with rule 7(1) of Companies (Meetings of Board and its powers) Rules 2014 relating to establishment of Vigil Mechanism for directors and employees, to report a genuine concern, are not applicable to the Company as the Company has not accepted any deposits or borrowed any money from banks in excess of specified amount.
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17
19. AUDITORS
The Comptroller & Auditor General of India (CAG), has appointed M/s. Chandra Gupta & Associates, Chartered Accountants as Statutory Auditors of the Company for FY 2015-16.
Qualifications or adverse remarks in the Auditors' Report which require any clarification/ explanation along with reply of management thereto are attached.
The Notes on financial statements are self-explanatory and needs no further explanation.
20. COMMENTS OF COMPTROLLER AND AUDITOR GENERAL OF INDIA
The comments of Comptroller and Auditor General of India (C&AG) as required under Section 143(6)(b)
of the Companies Act, 2013 on the accounts of the Company for the year ended 31 March 2016 are attached.
21. SECRETARIAL AUDIT REPORT
The Company appointed Mr. Jiwan Parkash Saini, Practicing Company Secretary, as Secretarial Auditor to conduct the Secretarial Audit for FY 2015-16. The Secretarial Audit Report (Form No. MR.3) is attached.
The explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report are also attached.
22. COMPLIANCE WITH SECRETARIAL STANDARDS
The Secretarial Standards issued by ICSI under Section 118(10) of Companies Act, 2013 have been complied with by the Company.
23. DETAILS OF SICKNESS OF THE COMPANY
The Company is not a sick Company. Hence details not applicable.
24. EXTRACT OF ANNUAL RETURN
In compliance with the provisions of Section 92(3) of the Companies Act, 2013 read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, extract of Annual Return is attached.
25. DISCLOSURES UNDER THE SEXUAL HARASSMENT OF WOMEN AT THE WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013
The details of sexual harassment cases reported in the Company during the financial year, are as under:-
1) No complaint of sexual harassment was received during the relevant year.
2) Number of cases pending for more than ninety days are Nil.
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18
Number of workshops or awareness programmes carried out in connection with sexual harassment: General awareness programmes is normally conducted periodically. Besides this, posters on sexual
harassment are being displayed at work places.
Remedial measures taken by the company :
A Committee is being formed to deal with the complaints and also spread awareness in the organization.
26. COMPLIANCE WITH RTI ACT, 2005
The Company being a public sector enterprise has successfully ensured compliance with the provisions of Right to Information Act, 2005 for providing information to the citizens.
The Company has a CPIO (Central Public Information Officer) and Appellate Authority for timely disposal of applications and appeals.
During 2015-16, 20 Requests / Appeals were received and 19 have been disposed off.
27. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCTION AND PROTECTION FUND
The provisions of Section 125(2) of the Companies Act, 2013 do not apply as there was no dividend declared and paid last year.
28. CORPORATE GOVERNANCE
The Company has complied with the requirements of Corporate Governance with the exception of appointment of Independent Directors on the Board. This matter is being pursued by the Holding company i.e. Air India Ltd. with the Administrative Ministry.
A detailed Corporate Governance Report forms part of this Annual Report separately.
29. ACKNOWLEDGEMENTS
Board sincerely acknowledges the support and guidance received from the Ministry of Civil Aviation, Comptroller and Auditor General of India, Ministry of Corporate Affairs and other agencies.
For and on behalf of the Board of Directors
Sd/- ASHWANI LOHANI ChairmanPlace : New DelhiDate : 21 March 2017�
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Annexure to Directors' Report for the year 2015-16 Annexure-I
FORM NO. MGT 9 EXTRACT OF ANNUAL RETURN
As on financial year ended 31.03.2016 Pursuant to Section 92 (3) of the Companies Act, 2013 and rule 12(1) of the Companies
(Management & Administration) Rules, 2014.
I. REGISTRATION & OTHER DETAILS:
II. PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY (All the business activities contributing 10 % or more of the total turnover of the company shall be stated) -
1. CIN U51101DL1983GOI016518
2. Registration Date 13/09/1983
3. Name of the Company AIRLINE ALLIED SERVICES LIMITED (AASL)
4. Category/Sub-category of the Company
Government Company
5. Address of the Registered office & contact details
OLD LUFTHANSA HANGER BUILDING, (ADJECENT TO ED-NR OFFICE), IGI AIRPORT, T-1, NEW DELHI- 110037
6 Whether listed company No
7. Name, Address & contact details of the Registrar & Transfer Agent, if any.
N.A.
Sr No
Name and Description of main products / services NIC Code
of the Product/
service
% to total turnover of
the company
1
To establish, maintain and operate international and domestic air transport services, scheduled and non scheduled, in all the countries of the world for the carriage of passengers, meals and freight and for
any other purposes.
621 100
III. PARTICULARS OF HOLDING, SUBSIDIARY AND ASSOCIATE COMPANY:
Sr. No.
Name and Address of the Company
CIN/GIN
Holding / Subsidiary / Associate
% of Shares
Applicable Section
1 Air India Limited 113, Airlines House, Gurudwara Rakabganj Road, New Delhi, 110 001.
U62200DL2007GOI161431
Holding
100%
2 (46)
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IV. SHARE HOLDING PATTERN (Equity Share Capital Breakup as percentage of Total Equity) : Category-wise Share Holding
Category of Shareholders
No. of Shares held at the beginning of the year
[As on 01-04-2015]
No. of Shares held at the end of the year [As on 31-03-2016] %
Change during
the year
Demat
Physical
During the year
% of Total
Shares Demat Physical Total
% of Total
Shares
A. Promoters
(1) Indian
a) Individual/ HUF - - - - - - - - -
b) Central Govt - - - - - - - - -
c) State Govt(s) - - - - - - - - -
d) Bodies Corp. - 2,25,000 4,00,00,000 100 - 40,225,000 40,225,000 100 0.00
e) Banks / FI - - - - - - - - -
f) Any other - - - - - - - - -
Total shareholding of Promoter (A)
- 2,25,000 4,00,00,000 100 - 40,225,000 40,225,000 100 0.00
B. Public Shareholding Not Applicable
1. Institutions
a) Mutual Funds/UTI - - - - - - - - -
b) Banks / FI - - - - - - - - -
c) Central Govt. - - - - - - - - -
d) State Govt.(s) - - - - - - - - -
e) Venture Capital Funds
- - - - - - - - -
f) Insurance Companies
- - - - - - - - -
g) FIIs - - - - - - - - -
h) Foreign Venture Capital Funds
- - - - - - - - -
i) Others (specify) Foreign Banks
- - - - - - - - -
Sub-total (B)(1):- - - - - - - - - -
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Category of Shareholders
No. of Shares held at the beginning of the year [As on 01-04-2015]
No. of Shares held at the end of the year [As on 31-03-2016]
% Change during
the year
Demat
Physical
Total
% of Total
Shares
Demat
Physical
Total
% of Total
Shares
2. Non-Institutions Not Applicable
a) Bodies Corp.
(Market Maker +
LLP)
i) I Indian - - - - - - - - - ii) Overseas - - - - - - - - - b)
Individuals
i)
Individual
shareholders
holding nominal
share capital upto
Rs. 1 lakh
-
-
-
-
-
-
-
-
-
ii)
Individual
shareholders
holding nominal
share capital in
excess of Rs.
1 lakh
-
-
-
-
-
-
-
-
-
c)
Others (specify)
i)
Non Resident
Indians
-
-
-
-
-
-
-
-
-
ii)
Non Resident
Indians -
Non
Repatriable
-
-
-
-
-
-
-
-
-
iii)
Office Bearers
-
-
-
-
-
-
-
-
-
iv)
Directors
-
-
-
-
-
-
-
-
-
v)
HUF
-
-
-
-
-
-
-
-
-
vi)
Overseas
Corporate Bodies
-
-
-
-
-
-
-
-
-
vii)
Foreign Nationals
-
-
-
-
-
-
-
-
-
viii)
Clearing
Members
-
-
-
-
-
-
-
-
-
ix)
Trusts
-
-
-
-
-
-
-
-
-
x)
Foreign Bodies -
D R
-
-
-
-
-
-
-
-
-
Sub-total (B)(2):-
-
-
-
-
-
-
-
-
-
Total Public Shareholding (B) = (B)(1)+ (B)(2)
-
-
-
-
-
-
-
-
-
C.
Shares held by
Custodian for
GDRs & ADRs
-
-
-
-
-
-
-
-
-
Grand Total (A+B+C)
2,25,000
4,00,00,000
100
-
40,225,000
40,225,000
100
0.00
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B) Shareholding of Promoter-
C) Change in Promoters' Shareholding (please specify, if there is no change)
Sr No.
Particulars Shareholding at the beginning of the year
Cumulative Shareholding at end of the year
No. of shares
% of total shares of the
company
No. of shares
% of total shares of the
company
At the beginning of the year
Air India Limited 2,25,000 100% 2,25,000 100% At the end of the year
Air India Limited 40,225,000 100% 40,225,000 100%
D) Shareholding Pattern of top ten Shareholders: (Other than Directors, Promoters and Holders of GDRs and ADRs):
Sr. No.
Shareholder's Name
Shareholding at the beginning of the year
Shareholding at the end of the year % change
In Share- holding during
the year
No. of Shares
% of total Shares of the
company
% of Shares
Pledged / Encum- bered to
total shares
No. of Shares
% of total Shares of the
company
% of Shares
Pledged / Encum- bered
to total shares
1 Air India Limited
along with its
nominees
2,25,000
100
NIL
40,225,000
100
NIL
0.00
Sr No
For Each of the Top 10 Shareholders
Shareholding at the beginning of the year
Cumulative Share-holding at end of the year
No. of shares
% of total shares of
the company
No. of shares
% of total shares of
the company
1 NOT APPLICABLE
2
3
4 5
6
7
8
9
10
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23
E) Shareholding of Directors and Key Managerial Personnel:
S. No.
Shareholding of each Directors and each Key Managerial Personnel
Shareholding at the beginning of the year
Cumulative Shareholding at the end of year
No. of shares
% of total shares of
the company
No. of shares
% of total shares of
the company
NIL
Total
V. INDEBTEDNESS -Indebtedness of the Company including interest outstanding/accrued but not due for payment.
(Rs. in Crore)
Secured Loans
excluding deposits
Unsecured Loans
Deposits Total
Indebtedness
Indebtedness at the beginning of the financial year
i) Principal Amount
ii) Interest due but not paid
iii) Interest accrued but not due
Total (i+ii+iii)
Change in Indebtedness during the financial year
* Addition
* Reduction
Net Change
Indebtedness at the end of the financial year
i) Principal Amount
ii) Interest due but not paid
iii) Interest accrued but not due
Total (i+ii+iii)
- 10,551,004,433 - 10,551,004,433
- - - -
- - - -
- 10,551,004,433 - 10,551,004,433
33,572,817 -
- -
33,572,817 -
- 10,584,577,250 - 10,584,577,250
- - - -
- - - -
- 10,584,577,250 - 10,584,577,250
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VI. REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL A. Remuneration to Managing Director, Whole-time Directors and/or Manager:
(In figures)
Sr No
Particulars of Remuneration Name of MD/WTD/ Manager Total
Amount
1 Gross salary - - - - - -
(a) Salary as per provisions contained in section 17(1) of the Income-tax Act, 1961 - - - - - -
(b)Value of perquisites u/s 17(2) Income-tax Act, 1961 - - - - - -
(c)Profits in lieu of salary under section 17(3) Income- tax Act, 1961 - - - - - -
2 Stock Option - - - - - -
3 Sweat Equity - - - - - -
4 Commission as % of profit others, specify. - - - - - -
5 Others : (PF, DCS, House Perks tax etc) - - - - - -
Total (A) - - - - - -
Ceiling as per the Act - - - - - -
There are no Managing, Whole Time Directors in the Company.
B. Remuneration to other directors
Sr No.
Particulars of Remuneration Name of Directors Total
Amount
1 Independent Directors - - - - - -
Fee for attending board committee meetings
- - - - - -
Commission - - - - - - Others, please specify (Fees for attending Board Sub Committee Meetings)
- - - - - -
Total(1) - - - - - - 2 Other Non-Executive Directors - - - - - -
Fee for attending board committee meetings
- - - - - -
Commission - - - - - - Others, please specify - - - - - -
Total (2) - - - - - Total (B)=(1+2) - - - - - - Total Managerial Remuneration - - - - - -
Overall Ceiling as per the Act - - - - - -
- - - - - -
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VII. PENALTIES / PUNISHMENT/ COMPOUNDING OF OFFENCES:
Type
Section of the
Companies Act
Brief Description
Details of Penalty /
Punishment/ Compounding fees imposed
Authority [RD / NCLT/
COURT]
Appeal made, if
any (give Details)
A. COMPANY
Penalty - - - - -
Punishment - - - - -
Compounding - - - - - B. DIRECTORS
Penalty - - - - -
Punishment - - - - -
Compounding - - - - -
C. OTHER OFFICERS IN DEFAULT
Penalty - - - - -
Punishment - - - - -
Compounding - - - - -
C. REMUNERATION TO KEY MANAGERIAL PERSONNEL OTHER THAN MD/MANAGER/WTD
* Not applicable to Government Companies. Only CFO and CS are KMPs. ** The Company Secretary is holding the position in addition to his responsibilities as Manager-Corporate Affairs, Air India Ltd.
( figures in Rs)
Sr. No.
Particulars of Remuneration Key Managerial Personnel
CEO CS CFO Total
1 Gross salary *Not
Applicable ** 1951827 -
(a) Salary as per provisions contained in section 17(1) of the Income-tax Act, 1961
- - - -
(b) Value of perquisites u/s 17(2)
Income-tax Act, 1961 - - - -
(c) Profits in lieu of salary under section
17(3) Income-tax Act, 1961 - - - -
2 Stock Option - - - -
3 Sweat Equity - - - -
4 Commission - - - -
- as % of profit - - - -
Others, specify. - - - -
5 Others: (PF, DCS, House Perks tax etc) - - - -
Total -
-
1951827
-
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26
SECRETARIAL AUDIT REPORTFOR THE FINANCIAL YEAR ENDED 31ST MARCH, 2016
(Pursuant to Section 204 (1) of the Companies Act, 2013 and rule No.9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014)
To,The Members,Airline Allied Services LimitedOld Lufthansa Hanger Building, (Adjacent To Ed-Nr Office), IGI Airport, T-1,New Delhi – 110037.
I have conducted the secretarial audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by Airline Allied Services Limited (CIN:U51101DL1983GOI016518) (hereinafter called the Company). Secretarial Auditwas conducted in a manner that provided me a reasonable basis for evaluating the corporate conducts / statutory compliances and expressing my opinion thereon.
Based on my verification of the Airline Allied Services Limited's books, papers, minute books, forms and returns filed and other records maintained by the company and also the information provided by the company, its officers, agents and authorised representatives during the conduct of secretarial audit and as per the explanations given to me and the representations made by the Management, I hereby report that in my opinion, the Company has, during the audit period covering the financial year ended on 31st March, 2016 generally complied with the statutory provisions listed hereunder and also that the Company has proper Board processes and compliance mechanism in place to the extent, in the manner and subject to the reporting made hereinafter:
A. I have examined the books, papers, minute books, forms and returns filed and other records made available to me and maintained by the company for the financial year ended on 31st March, 2016 according to the applicable provisions of:
i. The Companies Act, 1956 and the Companies Act, 2013 ('the Act') and the rules made there under;
During the period under review the Company has complied with the provisions of the Companies Act, 1956 and the Companies Act, 2013 ('the Act') and the rules made there under, as applicable, subject to the following observations:
a) There were few instance of delay in filing of e-forms under the Companies Act, 1956 and the Companies Act, 2013 ('the Act') and the rules made there under, but they were regularised by payment of additional fees under the Act.
b) Company has not appointed Independent directors pursuant to sub-section 4 of section 149 of Companies Act, 2013 , hence no meeting of independent directors could be held during the period under audit. Since, the company has not appointed independent directors , the company has not complied with the provisions of section 177(2) and 178 of Companies Act, 2013 read with Rule 6 of Companies( Meetings of Board and its Power) Rules, 2014 as regard the appointment of Independent directors in composition of the Audit Committee.
c) Company has not constituted Remuneration and Nomination Committee of the Board pursuant to 178of Companies Act, 2013 read with Rule 6 of Companies( Meetings of Board and its Power) Rules, 2014 as it meets the prescribe criteria as mentioned in Rule 6.
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27
Queries raised by Statutory auditors of the company in Audit Observations in relation to compliance of Companies Act, 2013 which has been replied by the Management in Directors Report have not been reproduced here.
B. In aviation sector, following laws are specifically applicable to the Company:
l Aircraft Act, 1934
l Carriage by Air Act, 1972
l Tokyo Convention Act, 1975
l Anti-Hijacking Act, 1982
l Suppression of Unlawful Acts against Safety of Civil Aviation Act, 1982
l Civil Aviation Requirements issued by DGCA
Director General of Civil Aviation vide circular dated 21.12.2011 in connection with regulatory audit policy and programme under which regulatory audit are being carried out with an aim to carry out to ascertain the internal control of a organisation in its activities and to ensure compliance of regulatory requirements. It is explained by the company that the Regulatory audit of the company is done by the audit team of DGCA as per the audit programme and audit procedure as prescribed under regulatory audit policy of DGCA .
The Regulatory Audit Program (RAP) has been developed to promote conformance with the aviation regulations and standards that collectively prescribe an acceptable level of aviation safety. It also ensures that Civil Aviation audit policies and procedures are applied uniformly.
Regulatory Audits are conducted for the grant of approvals for Initial Certification, Additional Approval, Routine Conformance and Special Purpose Audit pursuant to the Aircraft Act1934. The Director General of Civil Aviation or any other officer specially empowered in his behalf by the Central Government shall perform the safety oversight functions in respect of matters specified in this Act or the Rules made there under.
The Joint Director General Civil Aviation nominated by the Director General is responsible for all regulatory audits and inspections and is normally the Convening Authority.
The type of audits are Initial Certification Audit , Additional Approval Audit, Routine Conformance Audit and Special-Purpose Audit and is determined by the circumstances under which the audit is convened.
Regulatory audit includes Check Lists for of Airworthiness Audit policy and procedures and Operations audit policy and procedures .
DGCA has issued Civil Aviation Requirements ( CAR ) under section 4 of Aircraft Act, 1934 read with Rule 133A of Aircraft Rules, 1937 and the company is required to comply such requirements under DGCA check systems . While the broad principles of law are contained in the Aircraft Rules, 1937, Civil Aviation Requirements are issued to specify the detailed requirements and compliance procedures.
I further report, that the company is generally regular in compliance of aforesaid aviation laws and the compliance by the Company of such aviation laws have not been reviewed in this Audit which have been subject to review by DGCA and other designated professionals/authorities.
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C. I have also examined compliance with the applicable clauses of the following:
(i) Secretarial Standards issued by The Institute of Company Secretaries of India. and
D) I have examined the framework, processes and procedures of compliance with respect to following laws applicable to the company on test basis.
Apprentices Act, 1961; Employees State Insurance Act, 1948; Payment of Wages Act,1948; Minimum Wages Act, 1948; Industrial Disputes Act, 1947; Payment of Bonus Act, 1965; Payment of Gratuity Act, 1972; Contract Labour (Regulation and Abolition) Act, 1970; Maternity Benefit Act, 1961; The Child Labour (Prohibition & Regulation) Act, 1986; Equal RemunerationAct,1976; The Employment Exchange (Compulsory Notification of Vacancies) Act,1956,
Company has created separate Trusts to administer Provident Fund Contributions named Airline Allied Services Employees Provident Fund Trust Regulations, 1996.
Sexual Harassment of Women at Workplace( Prevention, Prohibition and Regulation ) Act, 2013: The Company has in place an Anti Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment.
In connection with aforesaid laws, adequate systems and processes are in place to monitor and ensure compliance with such laws .
During the audit, it is observed that the Compliance Management System needs to be further strengthen by taking the following actions:
a) To establish Corporate Compliance Committee and designate a Chief Compliance officer and maintain centralised mechanism to ensure compliance with all applicable laws;
b) To establish and maintain effective co-ordination of functional units and the compliance department under the overall supervision of the Board;
c) To establish mechanisms to prevent, detect, report and to respond to non-compliances;
d) To present Quarterly compliance Report to the Board;
e) Identification and classification of various compliance risks;
f) Organisation of compliance Check list, Audit, feed back, remedies.
E) I further report, that the compliance by the Company of applicable financial laws, like direct and indirect tax laws, has not been reviewed in this Audit since the same have been subject to review by statutory financial audit and other designated professionals.
During the period under review and as per the explanations and clarifications given to me and there presentations made by the Management, the Company has generally complied with the provisions of the Act, Rules, Regulations, Guidelines, etc. mentioned above subject to the observation made therein.
I further report that:
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29
The Board of Directors of the Company is duly constituted with proper balance of Executive Directors, Non-Executive Directors and Nominee Directors. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Act.
Adequate notice is given to all directors to schedule the Board Meetings at least seven days in advance and where the Board meetings are called at shorter notice ,presence of at least one Nominee director is ensured, agenda and detailed notes on agenda were sent and a system exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting.
Decisions at the Board Meetings, as represented by the management, were taken unanimously.
I further report that as per the explanations given to me and the representations made by the Management and relied upon by me there are adequate systems and processes in the Company commensurate with the size and operations of the Company to monitor and ensure compliance with applicable laws, rules, regulations and guidelines. It is informed that the Company has responded to notices for demands, claims, penalties etc. levied by various statutory / regulatory authorities and initiated actions for corrective measures, wherever necessary.
I further report that during the audit period the company has:
i) During the financial year, the company has allotted 4,00,00,000 (Four Crores) Equity Shares of Rs. 100/- each at par, aggregating to Rs. 4,00,00,00,000 (Four Hundred Crores) to Air India Ltd vide Board Meeting dated22.09.2015.
Sd/-(Jiwan Parkash Saini)
Company Secretary in practice
December21, 2016FCS No: 3671 CP No: 2100
Note-1: Specific non compliances / observations / audit qualification, reservation or adverse remarks has been reported in respect of the above at appropriate place .
Note-2: This Report is to be read with my letter of even date which is annexed as Annexure A and forms an integral part of this report.
'Annexure A’
To,The Members,Airline Allied Services LimitedOld Lufthansa Hanger Building, (Adjacent To Ed-Nr Office), IGI Airport, T-1,New Delhi – 110037.
I report of even date is to be read along with this letter.
1. Maintenance of Secretarial record is the responsibility of the management of the Company. My responsibility is to express an opinion on these secretarial records based on my audit.
2. I have followed the audit practices and process as were appropriate to obtain reasonable assurance about the correctness of the contents of the Secretarial records. The verification was done on test basis to ensure that correct facts are reflected in Secretarial records. I believe that the process and practices, we followed provide a reasonable basis for my opinion.
3. I have not verified the correctness and appropriateness of financial records and Books of Accounts of the Company.
4. Where ever required, I have obtained the Management representation about the Compliance of laws, rules and regulations and happening of events etc.
5. The Compliance of the provisions of Corporate and other applicable laws, rules, regulations, standards is the responsibility of management. My examination was limited to the verification of procedure on test basis.
6. The Secretarial Audit report is neither an assurance as to the future viability of the Company nor of the efficacy or effectiveness with which the management has conducted the affairs of the Company.
Sd/-(Jiwan Parkash Saini)
Company Secretary in practice
December 21, 2016FCS No: 3671 CP No: 2100
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31
COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 143(6)(b) OF THE COMPANIES ACT, 2013 ON THE FINANCIAL STATEMENTS OF THE AIRLINES ALLIED SERVICES LIMITED FOR THE YEAR ENDED 31 MARCH 2016
The preparation of financial statements of the Airlines Allied Services Limited for the year ended 31 March 2016 in accordance with the financial reporting framework prescribed under the Companies Act, 2013 (Act) is the responsibility of the management of the company. The statutory auditor appointed by the Comptroller and Auditor General of India under section 139(5) of the Act is responsible for expressing opinion on the financial statements under section 143 of the Act based on independent audit in accordance with the standards on auditing prescribed under section 143(10) of the Act. This is stated to have been done by them vide their Audit Report dated 21 December 2016.
I, on the behalf of the Comptroller and Auditor General of India, have decided not to conduct the supplementary audit of the financial statements of Airline Allied Services Limited for the year ended 31 March 2016 under section 143(6)(a) of the Act.
For and on the behalf of the Comptroller & Auditor General of India
Sd/-Place : New Delhi (Neelesh Kumar Sah)Dated : 20 February 2017 Principal Director of Commercial Audit
& ex-officio Member, Audit Board-I, New Delhi.
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32
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF AIRLINE ALLIED SERVICES LIMITED
Report on the Financial Statements
We have audited the accompanying financial statements of M/s Airline Allied Services Limited, (the “Company”), which comprises the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.
Management's Responsibility for the Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.
We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Company's Directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.
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Basis for Qualied Opinion
(i) The nancial statements of the Company under report are drawn up on a 'Going concern basis'. thThe company has informed vide Board Meeting dated 11 April, 2016, the Revenue and Capital
Budget Estimates for the year 2016-17. The Assumptions are made on the budget estimates of 2016-17 though not satisfactory yet the contention of the company is accepted since Air India Ltd., the holding company of the AASL has assured its nancial support to the Company and had converted ̀ 40,000 lakhs of amount advanced to the Company into equity.
(ii) Statement of Prot and Loss includes Trafc Revenue of ̀ 20,912.86 lakhs of current year and ̀ 9.04 lakhs pertain to previous year. (other than grant from NEC Shilong and Agati) accounted for on the basis of ledger account of Air India Limited and expenditure on Service charges of ` 170.37 Lakhs and Other Operating and Administration expenses of ̀ 11913.15 lakhs [which includes ` 265.09 lakhs on account of delayed payments to oil companies] accounted for only on the basis of credit and debit notes raised by Air India Limited. The Company is annually providing liability in respect of delayed payments to OIL companies on the basis of advice given by Air India Ltd. In absence of basic records / vouchers / supporting documents and relevant details, the revenue and expenditure stated above remained unveried to that extent.
(iii) System of Inventory Accounting followed by the company is not proper/complete. In this respect our observations are as below -
a) In respect of ATR / CRJ aircraft inventories, procurement is made by Air India Limited and later transferred to the company without any invoice and charging of applicable sales tax (VAT) - amount and its impact on accounts is unascertainable. Moreover, sufcient control does not exist to ensure that all inventory transactions are authorized, processed and accounted completely.
b) Custom Duty and Freight on aircraft spare parts which form part of aircraft inventories, comprise of freight, duties, incidentals etc. on aircraft inventories owned by the company as well as those taken on lease from the manufacturers and also include freight, incidentals etc. on aircraft components and spares exported for repairs. In the absence of its item wise segregation and loading, the balance of custom duty and freight on aircraft spares amounting to ̀ 522.20 lakhs lying at the end of the year under Current Assets and ` 36.79 lakhs charged to material consumed during the year remained unveried and hence correctness of these amounts and their impact on nancials could not be commented upon.
c) The company is not maintaining any record of Inventories at its stores in Delhi, Hyderabad and Kolkata and the nancial gures are incorporated in its books at the year end on the basis of abstract received from Air India Limited showing the values of different categories of inventories. In absence of details, correctness of Inventory could not be veried and its impact on accounts could not be commented upon. Further in absence of complete details, adequacy of obsolence provision for aircraft stores and spares cannot be commented upon.
d) The consumption of inventory is booked at the year end on the basis of balance arrived at from opening stock plus purchases made during the year less closing stock (advised by Air India Limited) at the end of the year instead of accounting on the basis of actual consumption and disclosing the shortages or excesses, if any, separately. Thus, it is not in accordance with the accepted inventory accounting practices and AS-2 (revised) on valuation norms issued by the ICAI. Hence, the consumption of inventory amounting to
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`416.44 lakhs could not be veried and impact on accounts for variance, if any, cannot be commented.
e) Non-compliance of Accounting Standard AS-2 (Revised) on "Valuation of Inventories"-
(i) Inventories have been valued without complete identication and allocation of freight, duties, incidentals etc. with respect to individual items (also refer sub-para (b) above).
(ii) Further, inventories have been valued at cost as against lower of cost and net realizable value.
Impact of the above on the accounts remained unascertained.
(iv) The accounts with the Airport Authority of India Ltd., HPCL and Air India Engineers Services Limited (AIESL) are unconrmed and unreconciled which may impact elements of
stexpenditure/income as well. In absence of conrmation and reconciliation as on 31 March, 2016, we are unable to comment on the impact thereon.
(v) Accounting of certain transactions on settlement basis (Refer Accounting Policy disclosed in Note No. 1.4 and 1.11 are not in accordance with accrual method of accounting prescribed under the Act, Accounting Standard AS-I on "Disclosure of Accounting Policies" and AS-6 (Revised) on "Net Prot or Loss for the period, prior period items and changes in Accounting Policies" issued by ICAI. Amount and impact on accounts unascertained by the Company.
(vi) Accounting policy of the company with respect to accounting of prior period items and prepaid / accrued expenses upto ̀ 10,000/- for Individual items(refer Accounting Policy disclosed in Note No. 1.8 in the year of receipt / payment is not in accordance with accrual method of accounting prescribed under the Act and Accounting Standards AS-1 and AS-5 (Revised)Issued by the ICAI. Amount and impact on accounts is unascertained by the Company.
(vii) The company has not provided liability for leave encashment to the employees for year-end leave balance as required by AS-15 (revised) issued by the ICAI (Refer Accounting Policy disclosed in Note No 1.6). Amount and impact on accounts unascertained by the Company.
(viii) Non-conrmation of balances in respect of Other Long Term Liabilities, Trade Payables, Other Current Liabilities, Long Term. Loans & Advances, Other Noncurrent Assets, Trade Receivables, Short Term Loans & Advances and Other Current Assets. We are unable to comment on the impact of adjustments arising out of non-conrmation of such balances on the nancial statements.
(ix) The company has shown contingent liability amounting to ` 33,612.54 lakhs in respect of income tax demands and ` 62.63 Lakh stowards unsettled legal claims, for which no provision has been made as these demands are said to be disputed by the company in appeals (refer Note No. 25 (I)), In view of pending appeals and legal opinion obtained by the company, we are unable to comment upon the liability of the company and its impact on accounts currently is not ascertainable. Further, based on information available there is an additional liability of tax, interest & penalty on account of TDS ̀ 75.88 lakhs.
(x) Debtors include ̀ 2940.35 lakhs recoverable from M/s Gati Limited outstanding since Feb'2009 for aircrafts operated by the Company. Air India Limited had invoked their bank guarantee and recovered ̀ 3000 Lakhs which was transferred to the Company and the same has been kept by the Company in a separate account of “Security Deposit - Gati” under 'Other Long Term
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Liabilities'. The matter is stated to be in dispute between Air India Limited and M/s Gati Ltd. wherein the Arbitral Tribunal has given award of ̀ 2672.95 lakhs (including interest etc.) against Air India Limited. An appeal has been led by Air India Limited before the Hon'ble Delhi High Court against the arbitral award which also upheld the decision of Arbitral Tribunal. To le an appeal in Delhi High court (double bench) against the order, AIL has deposited ` 2200 Lakhs with Hon'ble High Court as deposit money on 17.11.2015 and same has been debited by AIL. Accordingly, we are unable to express our opinion on the impact on the company's accounts for non-recoverability of outstanding dues or amount to be refunded for guarantee invoked or payment of awarded amount.
(xi) The physical verication of assets for the biennial period ended 2014-15 was done in 2015-16. The verication report has reported shortage of ` 96.73 lakhs. The shortage in verication report has been sent to stations/regions for verication. The necessary adjustments will be passed on conrmation from the regions/stations. The adjustment on account of said shortage has not been accounted for in books.
(xii) Company is not accounting for TDS on expenses accounted for on provisional basis. The company is also not accounting for TDS on interest paid to Air India Limited. The same is accounted for at the time of providing of actual expenses. The tax and interest liability on the same have not been accounted for in the books.
(xiii) The company has accounted for interest expense amounting to ̀ 11,131.80 lakhs on account of delayed payment of amount payable to Air India Limited and accounted interest income of ` 243.24 lakhs on account of delayed receipts from AIESL. The company has failed to provide any agreement, and justication for providing the said interest.
We are unable to comment on the impact on the financial statements referred to in this report for paras stated in 'Basis for Qualified Opinion' herein above for the reasons given in each paragraph.
Qualified Opinion
In our opinion and to the best of our information and according to the explanations given to us, except for the effect of the matters described in the Basis for Qualified Opinion paragraph, the aforesaid financial statements read together with the significant accounting policies and notes thereon give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
sta) in the case of the Balance Sheet, of the state of affairs of the Company as at 31 March'2016;
b) in the case of the Statement of Profit and Loss, of the “Loss” of the Company for the year ended on that date; and
c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date,
Report on Other Legal and Regulatory Requirements
1. As required by 'the Companies (Auditor's Report) Order, 2016 (“the Order”) issued by the Central Government of India in term of section 143(11) of the Act, we give in the Annexure “A” a statement on the matters specified in paragraph 3 and 4 of the order.
2. We are enclosing our report in terms of Section 143(5) of the Companies Act, 2013, on the basis of such checks of the books and records of the Company as we considered appropriate and according to the
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information and explanations given to us, in the Annexure “B” on the directions/ sub-directions issued by the Comptroller and Auditor- General of India.
3. 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 best of our knowledge and belief were necessary for the purpose of our audit.
b. Except for the effects/possible effects of matters described in the “Basis for qualied opinion” paragraph, in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.
c. The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of account.
d. In our opinion, except for the effects/possible effects of matters described in the “Basis for qualied opinion” paragraph, the aforesaid Standalone financial statements comply with the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.
e. As informed by the Company, Section 164(2) of the Companies Act ,2013 is not applicable to a thGovernment Company, vide Notification F No 1/2/2014-CL.V. dated 5 June, 2015.
f. With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure C”. Our report express qualified opinion on the adequacy and operating effectiveness of the Company's internal financial controls over financial reporting.
g. With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact, if any, of pending litigations as at March 31, 2016 on its financial position as per Note 25 & Note 41 in its financial statement.
ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.
iii. There has been no delay in transferring amounts, required to be transferred to the Investor Education and Protection Fund by the Company.
For and on behalf ofChandra Gupta & Associates
Chartered Accountants(Firm Reg No:-000259N)
Sd/-(Gunjan Aggarwal)
PartnerM. No. 061893
Place: New DelhiDate : 21.12.2016
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“Annexure A” to the Auditors' Report
Referred to paragraph 1 under “Report on Other Legal and Regulatory Requirements” section our report of even date to the members of M/s Airline Allied Services Limited on the accounts of the company for the year
stended 31 March, 2016).
i) In respect of its fixed assets:
(a) The records maintained by the Company in respect of its fixed assets are not considered to be proper in so far as these do not give full particulars of quantitative assets identification numbers and situation of Fixed Assets.
(b) According to information and explanation given to us, physical verification of fixed assets has been conducted on biennial basis as required by the accounting policy no 1.2. However, we are informed that the physical verification of fixed assets was last conducted for financial year 2014-15, shortage of ̀ 96.73 Lakhs was identified but the same is yet to be accounted for.
(c) According to the information and explanation given by the management, there is no title/lease deeds for lease hold or freehold with the Company and accordingly the same is not applicable.
ii) In respect of inventories:
(a) According to the information and explanation given to us, physical verification of inventories has not been conducted by the Company during the year. Accordingly, we are of the opinion that the frequency of verification is not reasonable.
(b) In view of sub-para (a) above, we are unable to comment on the reasonableness and adequacy of procedures of verification followed by the management in relation to the size of the company and the nature of its business. As reported, valuation are taken as book value.
(c) As explained to us, inventories for ATR/CRJ aircrafts are procured by Air India Ltd. and records relating to receipts, issues and closing stock are maintained by Air India Ltd. Further accounting entries by the Company are made for receipt on the basis of advice from Air India Ltd., which is delayed in almost all cases and accounting entries for issue is done at the year-end only. Accordingly, we are unable to comment whether the company has maintained proper records of inventory.
iii) As explained to us, the company had not granted any loans, secured or unsecured, to any companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under section 189 of the Act. Accordingly, the provisions of clause 3(b) & 3(c) of the said order are not applicable to the Company.
iv) In our opinion & according to information & explanations given to us, the company has not given any loans, investments guarantees, and securities granted in respect of provision of section 185 and 186 of the Companies Act 2013.
v) According to the information and explanations given to us, the company has not accepted any deposits from the public. Hence the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other provisions of the Companies Act, 2013 and the rules framed there under are not applicable.
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vi) We are informed that since no manufacturing activities were carried out, maintenance of cost records were not required by the company prescribed by the Central Government under clause (d) of sub section (1) of section 148 of the Companies Act, 2013. As provisions of the section are not applicable to the company.
vii) In respect of Statutory dues:
(a) According to the information and explanations given to us and according to the books and records produced before us, the company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees' state insurance, income tax, sales tax, custom duty, excise duty, cess and other material statutory dues applicable to it with the appropriate authorities except as stated below:
i. The company has generally delayed in depositing the Service Tax & TDS.
ii. The Company is yet to be implement a process of reconciliation of Service tax recoverable and Service Tax payable.
(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, employees' state insurance, income tax, sales tax, duty of custom, duty of excise, value added tax, cess and other material statutory dues were outstanding, at the year end, for a period of more than six months from the date they become payable, except as stated in points mentioned above vii(a).
(c) According to the information and explanations given to us and as per our verification of the records of the company, there are no disputed statutory dues against the company in income tax/ sales tax/ wealth tax/ service tax/ custom duty / excise duty / value added tax/ Cess Department except as stated below:
S No Name of Status Amount Nature of Year Forum where Outstanding Dues dispute is pending (` in Lakhs)
1 Finance Act, 1994 140.44 Income Tax 1997-98 ITAT
2 Finance Act, 1994 174.31 Income Tax 2000-01 ITAT
3 Finance Act, 1994 31.99 Income Tax 2004-05 CIT(A)
4 Finance Act, 1994 14851.53 Income Tax 2008-09 ITAT
5 Finance Act, 1994 17293.27 Income Tax 2010-11 ITAT
6 Finance Act, 1994 1121.00 Income Tax 2011-12 CIT(A)
viii) Based on our audit procedures and according to the information and explanations given to us, we are of the opinion, the company has not defaulted in repayment of dues to a financial institution, bank, Government or dues to debenture holders.
ix) The company has not raised moneys by way of initial public offer or further public offer (including debt instrument) or term loans and hence reporting under clause (ix) of paragraph 3 of the order is not applicable.
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x) To the best of our knowledge and belief and according to information and explanations given to us, no fraud by the company or any fraud on the company by its officers or employees has been noticed or reported during the year.
xi) As informed, the provisions of section 197 relating to managerial remuneration are not applicable to the th
Company, being a Government Company, in terms of MCA Notification no. G.S.R. 463(E) dated 5 June, 2015.
xii) The company is not a Nidhi Company. Therefore, the provision of clause 3(xii) of the order are not applicable to the Company and hence not commented upon.
xiii) Based upon the audit procedures performed and according to the information and explanations given to us, all transactions with related parties are in compliance with sections 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in the Financial statements etc. as required by the applicable accounting standards.
xiv) According to the information and explanations given to us and an overall examination of the balance sheet, the company has not made preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review and hence, reporting requirement under clause 3(xiv) are not applicable to the company and, not commented upon.
xv) The company has not entered into any non-cash transactions with directors or persons connected with him as referred to in section 192 of the Companies Act, 2013.
xvi) According to the information and explanation given to us, the provision of section 45-IA of the Reserve Bank of India Act, 1934 are not applicable to the Company.
For and on behalf ofChandra Gupta & Associates
Chartered Accountants(Firm Reg No:-000259N)
Sd/-(Gunjan Aggarwal)
PartnerM. No. 061893
Place: New DelhiDate : 21.12.2016
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ANNEXURE “B” TO THE INDEPENDENT AUDITORS' REPORT OF EVEN DATE ON THE FINANCIAL STATEMENTS OF AIRLINE ALLIED SERVICES LIMITED
Referred to paragraph 2 under “Report on Other Legal and Regulatory Requirements” section our report of even date to the members of M/s Airline Allied Services Limited on the accounts of the company for the year
stended 31 March, 2016.
Based on the verification of records of the Company and according to information and explanation given to us, we give below a report on the directions issued by the Comptroller and Auditor-General of India in terms of Section 143(5) of the act in respect of M/s Airline Allied Services Limited:
The same is not applicable as no freehold/ leasehold land is with Airline Allied Services Limited.
There is no case where any of waiver/write off debts/loans/ interest etc. taken place during the year.
Inventories for ATR/CRJ aircrafts are procured by Air India Ltd. and records relating to receipts, issues and closing stock are maintained by Air India Ltd. Further accounting entries by the Company are made for receipt on the basis of advice from Air India Ltd., which is delayed in almost all cases and accounting entries for issue is done at the year-end only. Accordingly, we are unable to comment whether the company has maintained proper records of inventory .
Further, no assets was received as gift/ grant from the Govt. during the year 2015-16.
1 Whether the company has clear title/lease deeds for freehold and leasehold land respectively? If not please state, the area of freehold and leasehold land for which title/lease deeds are not available.
2 Whether there are any cases of waiver/ write off debts/loans/interest etc., if yes, the reasons there for and the amount involved.
3 Whether proper records are maintained for inventories lying with third parties & assets received as gift/grant(s) from Government or other authorities.
S.No. Areas to be examined Observation/Findings
For and on behalf ofChandra Gupta & Associates
Chartered Accountants(Firm Reg No:-000259N)
Sd/-(Gunjan Aggarwal)
PartnerM. No. 061893
Place : New DelhiDate : 21.12.2016
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ANNEXURE “C” TO THE INDEPENDENT AUDITORS' REPORT OF EVEN DATE ON THE FINANCIAL STATEMENTS OF AIRLINE ALLIED SERVICES LIMITED
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)
We have audited the internal financial controls over financial reporting of AIRLINE ALLIED SERVICES LIMITED (“the Company”) as of March 31, 2016 in conjunction with our audit of the financial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.
Auditors' Responsibility
Our responsibility is to express an opinion on the Company's internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) and the Standards on Auditing, to the extent applicable to an audit of internal financial controls, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness.
Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the Company's internal financial controls system over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial control over financial reporting includes those policies and procedures that
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1. Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
2. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subjectto the risk thatthe internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Basis for Qualied Opinion
In our opinion according to the information and explanations given to us and based on our audit, the following material weaknesses have been identied as at March 31, 2016. The Company did not have appropriate internal nancial controls in undermentioned processes:
(i) The Company did not have an interface between various functional software relating to Sales/Revenue and Inventory Management with the accounting software resulting in accounting entries made manually.
(ii) The Company did not have an appropriate internal control system for reconciliation of Control Accounts in relation to the Sales/Revenue.
(iii) The Company did not have an appropriate internal control system for deduction, deposits and reconciliation of statutory dues.
(iv) The Company did not have effective internal audit system commensurate with the size, nature and complexities of business.
(v) The Company did not have an appropriate internal audit control system for obtaining conrmation of balances on a periodic basis and reconciliation of unmatched Receivables and Payables.
(vi) The Company did not have an effective Information system audit to evaluate and test the IT general controls, which may affect the completeness, accuracy and reliability of the reports generated from IT System.
(vii) The Company did not have an appropriate internal control towards user access right to create & modify master data and modication in accounting entries.
(viii) The Company does not have proper internal control for procuring goods and process of invoice/expenses.
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(ix) The Company does not have proper internal control/process of segregation of duties and following maker checker concept.
A 'material weakness' is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.
Qualified opinion
In our opinion, except for the effects of material weaknesses described in “basis of qualified opinion” paragraph above, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.
We have considered the material weaknesses identified and reported above in determining the nature, timing, and extent of audit tests applied in our audit of the March 31, 2016 standalone financial statements of the Company, and these material weaknesses have affected our opinion on the financial statements of the Company we have issued a qualified opinion on the financial statements.
For and on behalf ofChandra Gupta & Associates
Chartered Accountants(Firm Reg No: -000259N)
Sd/-(Gunjan Aggarwal)
PartnerM. No. 061893
Place : New DelhiDate : 21.12.2016
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MANAGEMENT REPLIES TO THE INDEPENDENT AUDITOR'S REPORT OF THE STATUTORY AUDITORS FOR THE FINANCIAL YEAR 2015-16
The Company is a wholly owned subsidiary of Air India Ltd (AIL). The parent Company, AIL has been supporting the operations of Alliance Air to full extent in terms of infrastructure, manpower and funds since its operationalisation.
The Turn Round Plan (TAP) approved by the Govt. of India which entails both operational & financial turnaround, covers AIL & its subsidiaries including AASL covering 10 years period from 2011 to 2020. According to the TAP, the Govt. of India has already approved infusion of additional equity over the years and financial restructuring of AIL in improving its net worth/liquidity, which would also have impact on continued financial support to the subsidiaries including AASL. In the year 2015-16 Rs. 400 Crores due to Air India Ltd. has been converted into equity capital.
In view of the foregoing & the continued support of the GOI to AIL and assurance for operational / financial support from the parent company, accounts are being prepared on going concern basis.
The company has taken major expansion plans and Budgets for the last two years have been raised on the planned induction of the new aircraft. These budgets have been drawn keeping in view the growth in the airline industry in the country and thrust being given by the Government of India on the regional connectivity. Thus, the management is keen to keep the company running and thus drawn the accounts on going concern.
In terms of the MOU between Air India and AASL, Air India provides sales, marketing, booking facilities and other support services for the AASL operations.
Further, as explained in detail during audit, the computerized revenue accounting system introduced by AIL for its and AASL flights, the revenue for passengers flown, excess baggage and cargo carried on AASL flights are segregated flight-wise for AASL flights based on flight coupons, EBTs & AWBs. The revenue earnings for passenger revenue, excess baggage & freight are
(i) The financial statements of the Company under report are drawn up on a 'Going concern basis'. The company has informed
thvide Board Meeting dated 11 April, 2016, the Revenue and Capital Budget Estimates for the year 2016-17. The Assumptions are made on the budget estimates of 2016-17 though not satisfactory yet the contention of the company is accepted since Air India Ltd., the holding company of the AASL has assured its financial support to the Company had converted Rs. 40,000 lakhs of amount advanced to the Company into equity.
(ii) Statement of Profit and Loss includes Traffic Revenue of Rs. 20,912.86 lakhs of current year and Rs. 9.04 lakhs pertain to previous year. (other than grant from NEC Shillong and Agatti) accounted for on the basis of ledger account of Air India Limited and expenditure on Service charges of Rs.170.37 Lakhs and Other Operating and Administration expenses of Rs. 11913.15 lakhs [which includes Rs. 265.09 lakhs on account of delayed payments to oil companies] accounted for only on the basis of credit and debit notes raised by Air
Sl.No. Audit Observation Management Comments
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Sl.No. Audit Observation Management Comments
India Limited. The Company is annually providing liability in respect of delayed payments to OIL companies on the basis of advice given by Air India Ltd. In absence of basic records / vouchers / supporting documents and relevant details, the revenue and expenditure stated above remained unverified to that extent.
therefore segregated and credited by AIL to AASL on the basis of flight wise monthly revenue reports generated on said elaborate computerized revenue accounting system.
Further, revenue earnings of AASL flights accounted as per Para 1.4 of Note 1 (Accounting Policy), are supported by monthly revenue reports. As per terms of MoU between AIL & AASL, AASL flights are captured on the said elaborate common revenue accounting system with segregated detailed reports for AASL flights, thus avoiding parallel system.
Service Charges (Commission to agents on sales) of Rs.170.37 Lakhs are reimbursed to Air India as revenue system is maintained by AI, for which relevant records are maintained by AI.
The Air India was making payment to Oil Companies on behalf of AASL and advise AASL on account of amount payable for compensation for delayed payments till 31.03.2016. The amount for Rs. 265.09 Lakhs has been duly accounted by AASL and Air India in their respective accounts. Duly signed reconciliation statement with Air India & Oil Companies except HPCL, is available.
stHowever, from 1 April 2016 onwards AASL is accounting compensation for delay payment and is making payment to Oil Companies directly.
Out of the amount pertaining to “Other Operating and Administrative expenses”, the amount of Rs. 11131.80 Lakhs has been debited towards interest charged by AI for which clarification is given in reply to Point no. (xii). And for the debited amount of Rs. 715.87 Lakhs, the supporting documents and relevant details are available with AASL for verification. Also Rs. 596.19 Lakhs has been credited by AI towards excess interest which is accounted as prior period and supporting is available.
However, only for Rs. 396.58 Lakhs the supporting documents is maintained by AI, which is accessible to AASL. Further AI is also subject to three tier audit, thereby maintaining audit trail and 100% accuracy in the Dr./Cr. Of these transactions
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(iii) System of Inventory Accounting followed by the company is not proper/complete. In this respect our observations are as below -
a) In respect of ATR / CRJ aircraft inventories, procurement is made by Air India Limited and later transferred to the company without any invoice and charging of applicable sales tax (VAT) - amount and its impact on accounts is unascertainable. Moreover, sufficient control does not exist to ensure that all inventory transactions are authorized, processed and accounted completely.
b) Custom Duty and Freight on aircraft spare parts which form part of aircraft inventories, comprise of freight, duties, incidentals etc. on aircraft inventories owned by the company as well as those taken on lease from the manufacturers and also include freight, incidentals etc. on aircraft components and spares exported for repairs. In the absence of its item wise segregation and loading, the balance of custom duty and freight on aircraft spares amounting to Rs. 522.20 lakhs lying at the end of the year under Current Assets and Rs. 36.79 lakhs charged to material consumed during the year remained unverified and hence correctness of these amounts and their impact on financials could not be commented upon.
c) The company is not maintaining any record of Inventories at its stores in Delhi, Hyderabad and Kolkata and the financial figures are incorporated in its books at the year end on the basis of abstract received from Air India Limited showing the values of different categories of inventories. In absence of
Air India provides administrative support in procurement & stocking of the aircraft inventory in terms of MoU. However, the payments to the vendors are mostly made by AASL itself, hence, no sale is involved. Suitable disclosure made in Notes No. 27 (i)
Monthly computerized statements of inventory showing opening stock, closing stock and consumptions i.r.o. AASL fleet are received from AIL, as reflected in RAMCO system, which are used for accounting of inventory and consumption.
AIL systems have elaborate and adequate control and internal check procedures for procurement, issue, stocking, segregation etc. for all inventory which is subject to physical checks by internal audit and stock verification. Such controls are applied on AASL inventory also.
Custom Duty, Freight and incidentals have been allocated on pro-rata basis on year end values of closing stock of aircraft spares, rotables and on their consumption. FDI cannot be segregated item wise as Freight and incidental expenses are incurred on a group of items and not item wise. Therefore, these have to be allocated on pro-rata basis. The same policy is also being followed in the Holding company, AIL.
Suitable disclosures have been made in Notes No. 27 (iii) and reference may also be made to reply to para (a) above.
Since, AASL inventory is procured and managed by AIL, suitable records are maintained for AASL inventory at all the inventory locations
The company is maintaining adequate records of the inventories at Delhi, Hyderabad and Kolkata and based on the records claims, exchanges /
AASL
47
Sl.No. Audit Observation Management Comments
details, correctness of Inventory could not be verified and its impact on accounts could not be commented upon. Further in absence of complete details, adequacy of obsolescence provision for aircraft stores and spares cannot be commented upon.
d) The consumption of inventory is booked at the year end on the basis of balance arrived at from opening stock plus purchases made during the year less closing stock (advised by Air India Limited) at the end of the year instead of accounting on the basis of actual consumption and disclosing the shortages or excesses, if any, separately. Thus, it is not in accordance with the accepted inventory accounting practices and AS-2 (revised) on valuation norms issued by the ICAI. Hence, the consumption of inventory amounting to Rs. 416.44lakhs could not be verified and impact on accounts for variance, if any, cannot be commented.
e) Non-compliance of Accounting Standard AS-2 (Revised) on "Valuation of Inventories"-
(i) Inventories have been valued without complete identification and allocation of freight, duties, incidentals etc. with respect to individual items (also refer sub-para (b) above).
(ii) Further, inventories have been valued at cost as against lower of cost and net realizable value.
Impact of the above on the accounts remained unascertained.
(iv) The accounts with the Airport Authority of India Ltd., HPCL and Air India Engineers Services Limited (AIESL) are unconfirmed and unreconciled which may impact elements of expenditure/income as well. In absence of
stconfirmation and reconciliation as on 31
storage were identified at Kolkata and appropriate provision for write off amount has been made in the book of 2015-16.
However, the details of monthly closing inventory which have been received from AIL are available in AASL.
Suitable disclosure made in Notes No. 27 (i) and reference may also be made to reply to para (a) above.
The consumption of inventory is booked on monthly basis, based on RAMCO generated monthly inventory reports received from AIL. Suitable disclosure has been made in Notes No. 27 (I).
As per the policy of the company which is also being followed in AIL, inventories are valued at weighted average cost, as disclosed in the Notes No. 1.9.
Suitable disclosure has also been made in Notes No. 27 (iii)
Reconciliation is an ongoing process with regular parties like Oil Companies and AAI.
Reconciliation with all Oil companies has been stcompleted upto 31 March 2016 except for HPCL
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48
Sl.No. Audit Observation Management Comments
March, 2016, we are unable to comment on the impact thereon.
(v) Accounting of certain transactions on settlement basis (Refer Accounting Policy disclosed in Note No. 1.4 and 1.11 are not in accordance wi th accrua l method of accounting prescribed under the Act, Accounting Standard AS-I on "Disclosure of Accounting Policies" and AS-6 (Revised) on "Net Profit or Loss for the period, prior period items and changes in Accounting Policies" issued by ICAI. Amount and impact on accounts unascertained by the Company.
(vi) Accounting policy of the company with respect to accounting of prior period items and prepaid / accrued expenses upto Rs. 10,000/- for Individual items(refer Accounting Policy disclosed in Note No. 1.8 in the year of receipt / payment is not in accordance with accrual method of accounting prescribed under the Act and Accounting Standards AS-1 and AS-5 (Revised)Issued by the ICAI. Amount and impact on accounts is unascertained by the Company.
(vii) The company has not provided liability for leave encashment to the employees for year-end leave balance as required by AS-15 (revised) issued by the ICAI (Refer Accounting Policy disclosed in Note No 1.6). A m o u n t a n d i m p a c t o n a c c o u n t s unascertained by the Company.
The payments to AAI and HPCL are being made by our Holding company i.e. AIL, with whom the
streconciliation is completed upto 31 March 2016. Although concerted efforts are being made to reconcile these accounts with AAI and HPCL, as early as possible.
AIESL is also a subsidiary company of AIL. AASL is following up with AIESL to get the balance confirmation.
Further, Suitable disclosures have been also been made in Notes No. 37(a) and 37 (b).
This policy is being consistently followed over the years in AASL. It may be mentioned here that same policy is also being followed in our Holding company.
The Prior period and pre-paid expenses have been accounted for as per Note No 1.8 & 1.11 of its Accounting policy which has consistently been followed in the company over the years, which is same as being followed in AIL.
AASL employees are entitled to PL encashment up to a maximum of 15 days in a financial year subject to the rules laid down in this regard. It is further subject to prior approval of the Competent Authority and cannot be claimed as a right. The employees are under FTEA and any unused balance at the time of cessation of service before the age of 60 years (including resignation) in this regard lapses automatically.
AASL
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Sl.No. Audit Observation Management Comments
(viii) Non-confirmation of balances in respect of Other Long Term Liabilities, Trade Payables, Other Current Liabilities, Long Term. Loans & Advances, Other Noncurrent Assets, Trade Receivables, Short Term Loans & Advances and Other Current Assets. We are unable to comment on the impact of adjustments arising out of non-confirmation of such balances on the financial statements.
(ix) The company has shown contingent liability amounting to Rs. 33,612.54 lakhs in respect of income tax demands and Rs. 62.63 Lakhs towards unsettled legal claims, for which no provision has been made as these demands are said to be disputed by the company in appeals (refer Note No. 25 (I)), In view of pending appeals and legal opinion obtained by the company, we are unable to comment upon the liability of the company and its impact on accounts current ly is not ascertainable. Further, based on information available there is an additional liability of tax, interest& penalty on account of TDS Rs. 75.88 lakhs.
(x) Debtors inc lude Rs. 2940.35 lakhs recoverab le f rom M/s Ga t i L im i ted outstanding since Feb'2009 for aircrafts operated by the Company. Air India Limited had invoked their bank guarantee and recovered Rs. 3000 Lakhs which was transferred to the Company and the same has been kept by the Company in a separate account of “Security Deposit - Gati” under 'Other Long Term Liabilities'. The matter is stated to be in dispute between Air India Limited and M/s Gati Ltd. wherein the Arbitral Tribunal has given award of Rs. 2672.95 lakhs (including interest etc.) against Air India Limited. An appeal has been filed by Air India Limited before the Hon'ble Delhi High Court against the arbitral award which also upheld the decision of Arbitral Tribunal. To file an appeal in Delhi High court (double bench) against the order, AIL has deposited Rs. 2200 Lakhs with Hon'ble High Court as deposit money on 17.11.2015 and same has been debited by AIL. Accordingly, we are unable to
The reconciliation is a continuous process. The reconciliation with Holding company, AIL is completed upto 31st March 2016. Reconciliation with Oil companies except HPCL has been completed upto 31st March 2016. Concrete effort are been made to reconcile account with all such parties.
Disclosed as Contingent liability in Notes No 25 (C) & 26. The income tax demands amounting to Rs. 33612.54 lakhs has been contested by the company, out of this amount Rs. 300 lakhs has been deposited with Income Tax Department during the year 2015-16.
Further, the proceedings are being held at various departments of Income Tax and company hopes to get favourable decision. Regarding the remaining claim of Rs. 62.68 lakhs towards unsettled legal claim, it is also likely to get decision in the favour of the company.
Appropriately disclosed in Note No. 41.
This agreement was between Air India & GATI and the matter is subjudice.
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Sl.No. Audit Observation Management Comments
express our opinion on the impact on the company's accounts for non-recoverability of outstanding dues or amount to be refunded for guarantee invoked or payment of awarded amount.
(xi) The physical verification of assets for the biennial period ended 2014-15 was done in 2015-16. The verification report has reported shortage of Rs. 96.73 lakhs. The shortage in ver ificat ion report has been sent to stat ions/regions for ver ificat ion. The necessary adjustments will be passed on confirmation from the regions/stations. The adjustment on account of said shortage has not been accounted for in books.
(xii) Company is not accounting for TDS on expenses accounted for on provisional basis. The company is also not accounting for TDS on interest paid to Air India Limited. The same is accounted for at the time of providing of actual expenses. The tax and interest liability on the same have not been accounted for in the books.
The verification report has been sent to stations / regions for verification. Continuous follow up is being done. Necessary adjustment on account of shortage will be passed in 2016-17.
Airline Allied Services Ltd. (AASL) is having centralized accounting at Delhi having operations all over India. There is time gap between receipts of actual bills at Delhi. At the time of closing of the books of accounts, the bills for various expenditure like Landing, Parking, RNFC, TNLC, Catering, Hotel Accommodation and certain aircraft repairs bills not received. To adhere with Matching Concept wherein “Expenses are recognized in the same accounting period as the related revenue are recognized”, it is required to account for these expenses. For this, ad-hoc provisions for these expenses are made through following journal entry:
Dr. Expense HeadCr. Provision Account
As actual bills are not available and provision is based on estimated, the correlation between party name and expense head is not ascertainable, thus, deduction of TDS on these provisions is not feasible as individual PAN for these expense cannot be ascertained.
It is further stated that at the time of computation of income for filing of Income Tax Return, these provisions are added back. It means that expenditure booked through provisions has not been claimed as expense in Income Tax Return.
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51
Sl.No. Audit Observation Management Comments
(xiii) The company has accounted for interest expense amounting to Rs. 11,131.80 lakhs on account of delayed payment of amount payable to Air India Limited and accounted interest income of Rs. 243.24 lakhs on account of delayed receipts from AIESL. The company has fa i led to prov ide any agreement, and justification for providing the said interest.
Further, provision account is also affected due to ad-hoc provisions made for redelivery of aircraft, provisions for obsolescence of stores and spares, provision for gratuity liability, provision for bonus wherein there is not TDS liability. The expenses booked through these provisions are also added back in profit for the year to calculate taxable income for the relevant year.
The TDS on interest paid to AIL has not been deducted as opinion from Independent Chartered Accountant has been obtained by AASL in this regard.
Air India has been providing funds to AASL to meet its working capital requirements since the sale proceeds from the tickets sold on AASL are received in Air India. However, the average monthly deficit (Revenue minus Expenses) is approx. Rs 15 to 20 Crores per month which is funded by Air India.
As per Para No. 75 of the Notes on the Accounts of Air India Ltd. for the Financial Year 2014-15, which was duly approved by its Board, it was mentioned that Air India Ltd. had been forced to borrow higher amounts on account of dues from Subsidiary companies resulting in additional interest costs, hence, it was decided that from Financial Year 2013-14, the interest paid by Air India Ltd. on its Working Capital Loans will be apportioned to the Subsidiary Companies for appropriation to the outstanding recoverable balances of the Subsidiary companies.
Since Air India is also borrowing its Working Capital and paying interest at an average rate of 11.08% per annum, it was decided to debit AASL Current Account with an equal amount of interest. Air India is under FRP and there is no avenue for funding the losses of the subsidiary companies under the TAP/FRP. Hence, it is necessary to reimburse this interest cost on account of owing from the subsidiary companies.
In view of above, for the Year 2015-16 , Air India has also specifically shown amount recoverable from AASL on account of Interest on Advance to
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Sl.No. Audit Observation Management Comments
Subsidiary Companies under Air India Ltd. Note No.12-” Other Assets.” Alliance Air has been debited with an amount of Rs. 11131.80 lakhs towards reimbursements / sharing of interest cost on its outstanding dues, which was duly approved by its Board. Out of this, during the year 2015-16, AASL has apportioned Rs. 243.24 lakhs to AIESL on the average outstanding balance of 2014-15 and 2015-16.
The Board has approved to recover interest from 2014-15 from AIESL accordingly.
The physical verification of assets has been conducted during the year 2014-15, and the report was submitted in 2015-16. The Management will take necessary action for correcting/adjusting any discrepancies noticed on the Physical verification report with the approval of the competent authority.
Concrete efforts have been made in the current year 2016-17 to ensure timely deposit of service tax and monthly reconciliation of service tax.
Ever since Airline Allied Services Ltd. got into existence as a wholly owned subsidiary of its parent company Air India Ltd., revenue including sales is being directly controlled and maintained through Air India Ltd.'s inventory i.e. the stock. The sectors flown by Alliance Air is configured as an add on network to the main network of its parent company Air India Ltd., hence, the accounting of sales / revenue and inventory management is being done in the parent company, which is outsourced to M/s Accelya Kale. The sales / revenue and inventory management is being handled manually based on the periodic reports generated and verified by the concerned competent authority of AASL.
The company does have an internal control system for reconciliation of control accounts in relation to sales and revenue, which is based on the periodic reports from the processing company of AIL as well
(xiv) Shortage in physical verification of fixed assets is yet to be accounted.
Physical verification of fixed assets was last conducted for financial year 2014-15, shortage of 96.73 lakhs was identified and yet to be accounted.
(xv) Service tax payable on income. The same
are not fully reconciled.
(xvi) Internal Financial Control. The Company did not have appropriate internal financial controls in under mentioned processes :
(a) The company did not have an interface between various financial software relating to Sales / Revenue and Inventory Management with the accounting software resulting in accounting entries made manually.
(b) The Company did not have an appropriate internal control system for reconciliation of Control Accounts in relation to the Sales / Revenue.
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Sl.No. Audit Observation Management Comments
(c) The Company did not have an appropriate internal control system for deduction, deposits and reconciliation of statutory dues.
(d) The Company did not have effective audit system commensurate with the size, nature and complexities of the business.
(e) The Company did not have an appropriate internal control system for obtaining confirmation of balances on a periodic basis and reconciliation of unmatched Receivables and Payables.
(f) The company did not have an effective Information system audit to evaluate and test the IT general controls, which may affect the completeness, accuracy and reliability of the reports generated from IT System.
as AASL. The reports are periodically matched with the SAP control account before finalising the Trial.
Accounting entries for all the statutory deductions based on the invoices received from various vendors including payroll are duly accounted through SAP system of accounting under various tax s labs. The month ly s ta tements are downloaded, cross checked with the invoices and paid to respective authorities on due dates and accordingly returns are filed periodically as per due dates, which are audited by Internal Auditors, Statutory Auditors and Govt. Auditors.
AASL d.b.a Alliance Air is a wholly owned subsidiary of AIL, which is a Government company and is exposed to all the Statutory Audits applicable as a private l imited company. Accordingly, the company has undergone Internal Audit, Tax Audit and is also subject to audit by CAG. All these audits are commensurate with the size, nature and complexities of the business of the company.
To have effective internal control system for obtaining confirmation of balances on periodic basis, the balance confirmation letters are supposed to have been generated from SAP. The company is in the process of completion of the module in in-use accounting software (SAP) and will adhere to in the current year. However, the company did send balance confirmation letters to parties. The company generates age-wise debtors outstanding statements in the year end, which are reconciled and provisions are made in the final accounts.
The company is in the process of migrating its Accounts Receivable and Payable through SAP software, for which necessary trainings are being imparted to its employees and required SAP modules are being done by service provider i.e. IBM.
Thereafter, the SAP system will be enabled and any system audit as desired can also be adhered to.
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Sl.No. Audit Observation Management Comments
The SAP module for expenditure system is internally located at Mumbai and controlled by specific authorised team. Any creation or modification of / in master data as per the requirement of the company is being sent to them after authorisation by the competent authority for necessary modifications as desired.
Since the procurement module in SAP is only enabled in the parent company, AIL through which AASL is also procuring the goods and services as per the requirement. The invoices are generated from SAP system is debited by AIL to AASL.
While, the major goods and services are procured from the parent company, all other small expenses are being approved by competent authority by adhering to MMD procedure. The company has proper internal control for procurement of goods.
The maker –checker is not there in the SAP as the SAP system is not fully migrated and modules are not enabled in AASL. Once, all the modules are enabled including taxation and pay-roll, the segregation of all the duties will also be in place including that of maker-checker.
(g) The Company did not have an appropriate internal control towards user access right to create & modify master data and modification in accounting entries.
(h) The Company does not have proper internal control for procuring goods and process of invoice / expenses.
(i) The Company does not have proper internal control / process of segregating of duties and following maker checker concept.
We are unable to comment on the impact on the financial statements referred to in this report for paras stated in 'Basis for Qualified Opinion' herein above for the reasons give in each paragraph.
AASL
55
BALANCE SHEET AS AT 31ST MARCH 2016 (Amount in Rupees)
Particulars Note No As at March 31, 2016 As at March 31, 2015
I. EQUITY AND LIABILITIES (1) Shareholder's Funds (a) Share Capital 2 4,022,500,000 22,500,000 (b) Reserves and Surplus 3 (14,631,234,348) (12,643,369,185) (c) Money received against share warrants - - (2) Share application money pending allotment - - (3) Non-Current Liabilities (a) Long-term borrowings - - (b) Other Long term liabilities 4 322,882,214 322,548,326 (c) Long term provisions 5 47,750,926 38,770,264 (4) Current Liabilities (a) Short-term borrowings 6 10,584,577,250 10,551,004,433 (b) Trade payables 7 1,690,132,679 3,182,184,733 (c) Other current liabilities 8 917,206,580 496,046,830 (d) Short-term provisions - -
Total 2,953,815,301 1,969,685,401
II. Assets (1) Non-current assets (a) Fixed assets (i) Tangible assets 9 4,911,899 3,699,542 (ii) Intangible assets - - (iii) Capital work-in-progress - - (iv) Intangible assets under development - - (b) Non-current investments - - (c) Deferred tax assets - - (d) Long term loans and advances 10 126,641,590 87,363,257 (2) Current assets (a) Current investments - - (b) Inventories 11 169,339,628 81,373,458 (c) Trade receivables 12 1,279,796,982 1,085,320,339 (d) Cash and cash equivalents 13 441,697,015 308,216,686 (e) Short-term loans and advances 14 568,128,639 275,445,419 (f) Other current assets 15 363,299,548 128,266,700
Total 2,953,815,301 1,969,685,401
Significant Accounting Policies in Note no. 1 and notes refered to above form an integral part of these Financial Statements.
As per our report of even date attached
For and on behalf of For and on behalf of the Board Chandra Gupta & Associates Sd/- Sd/- Sd/- Chartered Accountants Ashwani Lohani Vinod Hejmadi C.S. SubbiahFRN No 000259N Chairman Director CEO DIN 01023747 DIN 07346490 Sd/- Sd/- Sd/-Gunjan Aggarwal Gagan Batra Kamal RoulPartner Company Secretary Chief Financial Officer Membership No. : 061893 Place: New Delhi Date: 21.12.2016
AASL
5656
STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31ST MARCH 2016(Amount in Rupees)
Particulars Note No 2015-2016 2014-2015
Significant Accounting Policies in Note no. 1 and notes refered to above form an integral part of these Financial Statements.
As per our report of even date attached
For and on behalf of For and on behalf of the Board Chandra Gupta & Associates Sd/- Sd/- Sd/- Chartered Accountants Ashwani Lohani Vinod Hejmadi C.S. SubbiahFRN No 000259N Chairman Director CEO DIN 01023747 DIN 07346490 Sd/- Sd/- Sd/-Gunjan Aggarwal Gagan Batra Kamal RoulPartner Company Secretary Chief Financial Officer Membership No. : 061893 Place: New Delhi Date: 21.12.2016
I. Revenue from operations 16 2,682,024,779 2,266,292,372II. Other Income 17 56,556,438 13,229,832
III. Total Revenue (I +II) 2,738,581,217 2,279,522,204 IV. Expenses:
Cost of materials consumed/Operational Expense 18 2,874,426,798 2,329,068,115 Employee benefit expense 19 347,993,844 377,530,564 Financial costs 20 1,121,456,378 1,039,946,514 Depreciation and amortization expense 874,368 2,146,476 Other expenses 21 426,441,933 319,653,447 Prior Period Expenses 22 (8,678,442) 95,824,639 Total Expenses 4,762,514,879 4,164,169,755
V. Profit before exceptional and extraordinary items and tax (III - IV) (2,023,933,662) (1,884,647,551)
VI. Exceptional Items 23 36,424,232 45,433,293
VII. Profit before extraordinary items and tax (V + VI) (1,987,509,430) (1,839,214,258)
VIII. Extraordinary Items - -
IX. Profit before tax (VII - VIII) (1,987,509,430) (1,839,214,258)
X. Tax expense:
(a) Current tax expense for current year - - (b) Current tax expense relating to prior years - - (c) Deferred tax Asset/ (Liability) - -
XI. Profit(Loss) from the period from continuing operations (1,987,509,430) (1,839,214,258)
XII. Profit/(Loss) for the period (1,987,509,430) (1,839,214,258)
XIII. Earning per equity share: 24
(1) Basic (49) (8,174) (2) Diluted (49) (8,174)
AASL
575757
CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2016(Amount in Rupees)
Particulars 2015-2016 2014-2015
Note :- The above Cash Flow Statement has been prepared under the 'Indirect Method' as set out in the AS-3 (Revised 1997) on "Cash Flow Statements" issued by ICAI. Previous year figures have been regrouped /rearranged whereever necessaryAs per our report of even date attachedFor and on behalf of For and on behalf of the Board Chandra Gupta & Associates Sd/- Sd/- Sd/- Chartered Accountants Ashwani Lohani Vinod Hejmadi C.S. SubbiahFRN No 000259N Chairman Director CEO DIN 01023747 DIN 07346490 Sd/- Sd/- Sd/-Gunjan Aggarwal Gagan Batra Kamal RoulPartner Company Secretary Chief Financial Officer Membership No. : 061893
Place: New Delhi Date: 21.12.2016
a) Profit/(Loss) before tax for the year as per Profit & Loss A/C (1,987,509,430) (1,839,214,258)
b) Add:- Adjustment for :1 Depreciation and amortisation expenses 874,368 2,146,476 2 Provisions/Un-claimed Liabilities Written Back (36,424,232) (45,433,293)3 Fixed Assets Written Off 1,149,288,599 1,083,435,192 4 Interest Paid 56,551,202 13,229,832 5 Interest Earned (8,678,441) 95,824,639 6 Prior Period Adjustments (Net) (15,113,171) 21,078,135 7 Provision for obsolescence of spares 46,764 - 8 Excess Depreciation written Back 355,733 (836,328) 9 Provision for Doubtful debts & advances (Net) -
1,146,900,822 1169444653
c) Operating Profit/(Loss) before Changes in working capital: (840,608,607) (669,769,606)
ADD: Adjustments for (increase) / decrease in operating assets: Other non-current assets - 11,310,875 Inventories (72,852,998) (100,589,947) Trade receivables (194,476,643) (214,978,487) Short-term loans and advances (292,683,220) (35,039,842) Long-term loans and advances (39,278,333) (1,780,053) Other current assets (235,032,849) (9,950,373) Other non-current assets - 58,955
ADD: Adjustments for increase / (decrease) in operating liabilities: Trade payables (1,455,983,555) 489,940,484 Other current liabilities 421,159,750 1,974,183,086 Short-term borrowing 33,572,817 - Other long-term liabilities 8,980,662 - Short-term provisions - - Long-term provisions 333,888 3,914,631 (1,826,260,481) 2,117,069,329 d) Cash generated from operations Prior Period Adjustments (Net) 8,678,441 (95,824,639)e) Net Cash from Operating Activities (2,658,190,647) 1351475084B. CASH FLOW FROM INVESTING ACTIVITES a) Purchase of Fixed Assets (2,489,222) (1,122,171) b) Transfer of Fixed Asets to Air India Limited - - c) Interest Income (56,551,202) (59,040,424) (59,040,424) (13,229,832) (14,352,003) (14,352,003)C. CASH FLOW FROM FINANCING ACTIVITES a) Conversion of Current Liability into Equity 4,000,000,000 b) Interest Paid (1,149,288,600) 2,850,711,400 2,850,711,400 (1,083,435,192) (1,083,435,192) (1,083,435,192)D. NET INCREASE IN CASH & CASH EQUIVALENTS (A+B+C) 133,480,329 253,687,890E. CASH & CASH EQUIVALENTS AT BEGINNING OF THE YEAR 308,216,686 54,528,795F. CASH & CASH EQUIVALENTS AT THE END OF THE YEAR (E + D) 441,697,015 308,216,686
AASL
58
stNotes forming part of the Financial Statements for the year ended on 31 March 2016
NOTE-SIGNIFICANT ACCOUNTING POLICIES
1.1 Accounting Convention and Basis of accounting
These Financial statements have been prepared in accordance with the generally accepted accounting principles in India under the historical cost convention on accrual basis. Pursuant to section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014. Consequently, these financial statements have been prepared to comply in all material aspects with the accounting standards notified under Section 211 (3C) [Companies (Accounting Standards) Rules, 2006, as amended] and other relevant provisions of the Companies Act, 2013.
All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013.Based on the nature of services, the Company has ascertained its normal operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.
1.2 Fixed Assets
The company is having aircrafts on operating lease under Dry Lease arrangement.
Other assets have been accounted for on the acquisition price basis. The assets transferred by Air India Ltd. has been capitalized on the charge debited.
Physical verification of the assets is done over a period of two years i.e. on biennial basis. The discrepancies observed in the course of the verification are adjusted in the year in which report is submitted.
1.3 Depreciation
a) Depreciation is provided on all assets on the straight line method ('SLM') over the useful life of the assets as prescribed in the Schedule II of the Companies Act, 2013, keeping the residual value of 5% of the original cost.
b) The life of assets adopted are in accordance with the manner prescribed under schedule II of the Companies Act, 2013, except for the Ground Support Equipment (GSE). The life of these assets, except for GSE, have been determined by qualified persons and approved by Board of Directors, keeping a residual value of 5% of the original cost.
c) The detail of life of assets is as under:
S.No. Type of Asset Life taken as per Schedule-II
1. Plant and Equipment 15 years
2. Furniture and Fixtures 10 years
3. Vehicles 8 years
4. Data Processing Equipment 3 years
5. Ground Support Equipment As per company policy*
6. Medical Equipment 15 years
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*Depreciation on Ground Support Equipment (GSE) specific to leased CRJ & ATR aircraft is provided based on the completed aircraft lease months over the total aircraft lease months from the date of use with realizable value at end of lease taken as NIL.
1.4 Revenue Recognition
Passenger revenue is accounted for on the basis of flown coupons report for passengers travelled, reflecting realized revenue. Revenue for Passengers, Excess Baggage, Mail and Cargo is accounted for on the basis of revenue credited by Air India Ltd. Freighter and Charter revenue is accounted for on accrual basis as per the Freighter/Charter hours except for claims on parties which are accounted on settlement basis.
1.5 Provision for Doubtful Debts
Provision in respect to Trade Receivables pertaining to the Government, Government Departments and Public Sector Undertakings is provided for only when specifically known to be doubtful. All other Trade Receivables are provided for, if they are outstanding for either more than three years or specifically known to be doubtful.
1.6 Gratuity and Leave Encashment
� Provision for gratuity is made on accrual/actuarial basis by the management for contractual employees on the basis of 15 days, basic salary for each completed year of service or part thereof exceeding 6 months. Employees are entitled for encashment up to a maximum of 30 days, privilege leave once in a financial year for Cockpit crew and maximum of 15 days for other employees
1.7 Training charges
Re-conversion and training charges are charged to the revenue in the year of incurrence of expenditure.
1.8 Prior Period Transaction
Transactions above Rs 10,000/- for individual items related to the earlier period are accounted for in the year of transaction as per Accounting Standard 5 of ICAI.
1.9 Inventory
(a) Inventories are valued at weighted average cost except for ATF in aircraft as at the year-end.
(b) Expendables/consumables are charged off at the time of initial issue except those meant for repairs of repairable which are expensed when the work order is closed. At the year-end estimated cost of expendables/consumables required for restoration of repairable are provided for in respect of open work orders.
(c) Obsolescence provision for aircraft stores and spare parts:
i) Provision is made for the non-moving inventory exceeding a period of five years (net of realizable value of 5%) except for (ii) & (iii) and netted off from the value of inventory.
ii) Inventory of Aircraft Fleet which has been phased out, is shown at estimated realizable value unless the same can be used in other Aircraft.
iii) Obsolescence provision in respect of inventories including Rotables and Special Tools relating to aircraft on dry lease, is made on the basis of the completed lease period compared to the total lease period as at the year-end.
(d) Obsolescence provision for non-aircraft stores and spares is made for non-moving inventory exceeding a period of five years.
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1.10 Impairment of Assets
The Company assesses at each Balance Sheet date whether there is any indication that an asset has been impaired. If any such indication exists, the provision for impairment is made in accordance with AS-28.
1.11 Accounting on Settlement Basis.
Settlement basis of accounting has been followed in the following cases: -
(a) For prepaid / accrued expenses up to Rs 10,000/- for individual items.
(b) For arrears payable arising out of wage settlements for employees of Air India Ltd. on deputation and other deputations.
(c) For interest and other claims on / from suppliers and other parties.
1.12 Foreign Currency Transactions:
Foreign currency Expenditure transactions are recorded at established monthly rates (based on published IATA rates).
Foreign currency monetary items other than those identified as long term at the year-end are converted at the year-end exchange rate circulated by Foreign Exchange Dealers Association of India (FEDAI), and the gains/losses arising out of fluctuations in exchange rates are recognized in the Statement of Profit and loss.
1.13 Accounting for Grants /Validity Gap Funding (VGF)
The Grants are accounted as Other Income on pro-rata basis over the agreed period of aircraft lease months. Viability Gap Funding (VGF) is accounted for difference between revenue and cost of operation (on the basis of the Block Hours operated), on accrual basis.
1.14 Provisions, Contingent Liabilities and Contingent Assets
(a) Provisions involving a substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be outflow of resources.
(b) Contingent liabilities in each case are disclosed in respect of possible obligations that arise from past events but their existence confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company.
(c) Contingent Assets are neither recognized nor disclosed in the financial statements.
1.15 Lease / Supplier credits
Lessor's / Suppliers Credits received which are not arising out of normal Lease and Maintenance Agreement are accounted as Income in the year of receipt.
1.16 Other Liabilities
Liabilities, which are more than three years old are written back under the head “Exceptional Items” unless such liabilities are specifically known to be payable in the future.
1.17 Operating Lease
Leases where the lessor effectively retains all the risks and rewards of ownership of the leased assets are classified as operating lease and lease rental payable for the year is charged to Profit & Loss Account, Company is operating Aircraft under Dry Lease.
Contributions made to lessors on account of Maintenance Reserve for which, maintenance is expected to arise during the lease period is treated as Expense.
NOTE “02” : SHARE CAPITAL (Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
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(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
Authorised Share Capital500,00,000 Equity Shares of Rs.100/- each 50000,00,000 50,000,000(Previous Year 5,00,000 Equity Shares of Rs. 100/- each) 50000,00,000 50,000,000
Issued, Subscribed & Paid up Share Capital 402,25,000 Equity Shares of Rs.100/- each, fully paid-up 4,022,500,000 22,500,000 (Previous Year 2,25,000 Equity Shares of Rs. 100/- each) 4,022,500,000 22,500,000
2 (a) Reconciliation of no. of shares
No. of equity shares at the beginning of year 225,000 225,000 Add No. of equity shares issued 40,000,000 - Less No. of equity shares redeemed - - No. of equity shares at the closing of the year 40,225,000 225,000
Name of Shareholder As at March 31, 2016 As at March 31, 2015
Air India Limited, Holding Company and its nominees (on behalf of holding company) No. of Share 40,225,000 225,000 Percentage of Holding 100% 100%
2 (b) Equity Shares
The company has only one class of equity shares having a par value of Rs. 100 per share. Each shareholder is eligible for one vote per share held. There is no restriction of payment of dividend. In the liquidation, the equity shareholders are eligible to receive the remaining assets of the company after distribution of all preferential amounts proportionate of their shareholding. 2,25,000 Equity Shares (Previous Year 2,25,000 equity shares) are held by Air India Limited, the holding company and its nominees (on behalf of holding company).
2( c ) Equity Shares held by its Holding Company
402,25,000 Equity Shares (Previous Year 2,25,000 equity shares) are held by Air India Limited, the holding company and its nominees (on behalf of holding company).
Following are the Shareholders who hold more than 5% shares in share capital of company.
Company has only one class of equity shares having a par value of Rs. 100/-. Each holder of equity shares is entitiled to one vote per share.
2 (d) Details of shareholder holding more than 5% of Equity Shares:
TOTAL
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NOTE “03” : RESERVE & SURPLUS (Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
Surplus /(Deficit) in statement of profit & loss
Opening balance (12,643,369,185) (10,804,154,927)
Add:Profit / (Loss) for the year (1,987,509,430) (1,839,214,258)
Less: Depreciation adjustment 355,733
Closing balance (14,631,234,348) (12,643,369,185)
(14,631,234,348) (12,643,369,185)
NOTE “04” : OTHER LOAN TERM LIABILITIES(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
Security Deposits 322,882,214 322,548,326 322,882,214 322,548,326
NOTE “05” : LONG TERM PROVISION(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
Provision for Gratuity Liability 47,750,926 38,770,264
47,750,926 38,770,264
TOTAL
TOTAL
TOTAL
NOTE “06” : SHORT TERM BORROWINGS(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
Air India Ltd. (Holding Company) Net 10,584,577,250 10,551,004,433
10,584,577,250 10,551,004,433 TOTAL
NOTE “07” : TRADE PAYABLES(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
Provision for Expenses - Fuel & Oil 527,901 827,552 Provision for Expenses - Landing & Parking 209,759,166 205,628,179 Provision for Expenses - Stores & Spares 71,410,257 60,056,961 Provision for Expenses - Others (Trade) 86,109,935 123,329,175 Vendor - India - Reconciliation Account 806,968,180 2,415,643,622 Vendor - Outside India- Reconciliation Acct. 486,033,684 368,049,703 Supplier Suspense MRO - PBH 29,323,556 8,649,541
1,690,132,679 3,182,184,733TOTAL
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NOTE “09” : FIXED ASSETS & DEPRECIATION SCHEDULE(Amount in Rupees)
Useful Gross Additions Sold/ Gross Accum- Depreci- Depreci- Effective Cumul- Net Block Net BlockParticulars of Assets Life as Block During Discarded Block ulated ation for ation Depreci- atives As on As on Per As on 2015-16 During As on Dep. the year Discarded ation adj. as on 31.03.2016 31.03.2015 Sche- 31.03.2015 2015-16 31.03.2016 upto 2015-16 During for the 31.03.2016 dule-II 01.04.2015 Year the year Year
1 2 3 4 5 6 7 8 9 10 11 12
PLANT & EQUIPMENT 15 Years 6579667.58 279273 0 6858941 4767207 195037 0 315787 5278031 1,580,910 1812460
FURNITURE & FIXTURES 10 years 5848621.43 65216 0 5913837 5429193 30860 0 29558 5489611 424,227 419428
VEHICLE 8 Years 4533679.71 1460807 935275 5059212 4306997 149299 888511 0 3567785 1,491,427 226683
DATA PROCESSING EQUIPMENT 3 Years 9317030.34 683926 0 10000956 8317618 304974 0 10389 8632981 1,367,976 999412
GROUND SUPPORT EQUIPMENT(ATR) (as per policy) 15261820.00 0 0 15261820 15067620 194198 0 0 15261819 0 194200
MEDICAL EQUIPMENT 15 Years 271500.00 0 0 271500 224141 0 0 0 224141 47,359 47359
F.A Pending Disposal - 0.0 0 0 0 0 0 0 0 0 - 0
TOTAL 41812319 2489222 935275 43366266 38112777 874368 888511 355734 38454367 4911899 3699542
1. The Motor vehicles include one car, original cost Rs.1,72,127/- and W.D.V Rs. NIL for which Registration is in the name of Indian Airlines.
2. Gross Block as on 31.03.2016 includes Rs. 24,89,222 which were purchased during the year and the depreciation on these assets has been calculated on the basis of days in accordance with their useful life.
3. Fixed Assets includes items procured by IA , accounted on the basis of debits.
4. Assets purchased during 2015-16 under Rs.5000 have been depreciated on normal basis as per Schedule-II of Co. Act 2013.
NOTE “10” : LONG TERM LOANS & ADVANCES(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
Advance Payment of Income Tax and TDS (net of Provision for taxation) 120,705,468 85,583,204
Balances with Statutory / Govt AuthoritiesIncome Tax Deducted At Source-India 5,936,122 1,780,053
TOTAL 126,641,590 87,363,257
NOTE “08” : OTHER CURRENT LIABLITIES(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
TOTAL
Advance from Customers 103,038,638 91,553,558 Other (Net) 811,792,500 403,715,795 Provision for Gratuity Liability 2,375,442 777,477 917,206,580 496,046,830
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NOTE “11” : INVENTORIES(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
Stores and Spare Parts 524,807,999 452,751,763
Loose Tools 239,565 239,564
Goods in Transit 20,589,106 4,234,690
Less: Provision for Obsolescence (360,739,388) (375,852,559)
Less: Provision For Inventory Shortages (15,557,654) -
169,339,628 81,373,458
NOTE “12” : TRADE RECEIVABLES(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
Trade receivables outstanding for a period exceeding
six months from the date they were due for payment
Secured, considered good - -
Unsecured, considered good 965,883,987 863,832,106
Doubtful - -
Less: Provision for doubtful trade receivables (2,731,196) (2,731,196)
963,152,791 861,100,910
Other Trade receivablesSecured, considered good - -
Unsecured, considered good 316,644,191 224,219,429
Doubtful - -
Less: Provision for doubtful trade receivables - - 316,644,191 224,219,429
1,279,796,982 1,085,320,339
NOTE “13” : CASH AND CASH EQUIVALENTS(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
(i) Balance with Banks In Current Accounts 1,490,984 37,864,908
(ii) Cash in hand 400,843 189,071 Imprest Cash Floats With Staff
(iii) Fixed Deposits with Bank 439,805,188 270,162,707 (under lien against SBLC) 441,697,015 308,216.686
TOTAL
TOTAL
TOTAL
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NOTE “14” : SHORT TERM LOAN & ADVANCES(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
Security Deposits 253,793,530 20,028,608Advances Recoverable in Cash or Kind 272,073,497 192,748,243Advances to Employee 1,083,356 406,729Prepaid Exp. Others 41,178,256 62,261,839
TOTAL 568,128,639 275,445,419
NOTE “15” : OTHER CURRENT ASSETS(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
Other Non Trade Receivables 335,356,538 64,037,849
Secured Considered Good
Outstanding Recoveries -Financial Accts/Foreign Parties 27,943,010 64,228,851
TOTAL 363,299,548 128,266,700
NOTE “16” : REVENUE FROM OPERATIONS(Amount in Rupees)
Particulars As at March 31, 2016 As at March 31, 2015
1. Operational Revenue
i) Scheduled Traffic Services
a) Passenger 2,077,093,367 1,780,914,797
b) Excess Baggage 11,085,584 15,209,128
c) Mail 911,745 288,554
d) Cargo 3,099,727 2,905,386 2,092,190,423 1,799,317,865
Less- Related to Previous Year 904,326 - 2,091,286,097 1,799,317,865
ii) Non-Schedule Traffic Services
a) Charter 23,508,000 32,980,000
b) Subsidy for Operation from Government 562,949,398 343,393,806
586,457,398 376,373,806
2. Handling, Servicing and Incidental Revenue
a) Handling and Servicing - -
b) Manufacturers Credit - -
a) Incidental 4,281,284 90,600,701
4,281,284 90,600,701
TOTAL 2,682,024,779 2,266,292,372
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NOTE “17” : OTHER INCOME(Amount in Rupees)
Particulars 2015-16 2014-15
1. Interest Income from i) Bank Interest Interest on Call & Fixed Deposit-India 32,226,888 13,229,832 ii) Others Interest on Other Sundry Accounts 24,324,314 -2. Profit on Sale of Fixed Asset (Net) Loss or Gain on Assets held for disposal 5,236 -
TOTAL 56,556,438 13,229,832
NOTE “18” : COST OF MATERIAL CONSUMED/OPERATIONAL EXPENSES(Amount in Rupees)
Particulars 2015-16 2014-15
Aircraft Fuel & Oil :Fuel (Ops) - Aircraft - Duty Paid 506,320,009 769,402,213
InsuranceInsurance - Aircraft 29,254,564 19,267,822Insurance General 21,199 75,737 29,275,763 19,343,559
Material Consumed-Aircraft 41,644,250 13,655,194 Provision for Obsolescence (Net) (15,113,171) 21,078,135
Aircraft Lease, Handling & Maintenance chargesLease 1,175,102,754 738,799,609 Handling 39,692,970 87,832,998 Maintenance 915,481,709 540,740,288 2,130,277,432 1,367,372,895Navigation, Landing, Housing & ParkingLanding Fees - Scheduled & Other Ops 45,292,218 40,776,093Housing & Parking Fees 15,025,849 10,262,207Flight Comm & Navigation Charges 74,389,971 58,184,322 134,708,038 109,222,622Passenger AmenitiesInflight & Hotel Consumables Consumption - -Pax Amenities - Catering On Ground 6,878,668 9,119,666Pax Amenities - Catering On Board 20,863,958 4,584,306Pax Amenities - Hotel Expenses - - Pax Amenities - Inflight Programme - - Pax Amenities - News Paper & Magazines 653,644 825,215 28,396,270 14,529,187Other Communication ChargesTelephone Equipment Rental 25,854 -Postage Telegram & Courier Charges 26,919 38,804Telephone & Trunk Call Charges 1,275,112 1,401,134 1,327,885 1,439,938Service chargeMisc. Taxes paid on Revenue Items - PO Based Inv 17,590,321 13,024,372 17,590,321 13,024,372 TOTAL 2,874,426,798 2,329,068,115
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NOTE “19” : EMPLOYEE BENEFIT EXPENSES(Amount in Rupees)
Particulars 2015-16 2014-15
1. Salary, Wages and Bonus
Salaries - Staff In India 196,086,213 295,327,068
Bonus Expense 6,258,679 1,965,160
202,344,892 297,292,228
2. Crew Allowances
Hourly Payments 5,437,693 1,898,883
Foreign Contract Pilots Fees & Claims 91,702,519 41,969,645
97,140,212 43,868,528
3. Contribution to Provident and Other Funds
CC Provident Fund-Staff in India 6,244,016 8,566,607
6,244,016 8,566,607
4. Staff Welfare Expenses (Net)
Other Staff Welfare Expenses 2,552,226 2,345,376
Staff Uniforms - Consumption - 740
Staff Training Expenses 27,406,937 20,392,440 29,959,163 22,738,556
5. Gratuity 12,305,561 5,064,645
TOTAL 347,993,844 377,530,564
NOTE “20” : FINANCIAL COSTS(Amount in Rupees)
Particulars 2015-16 2015-16
(i) Interest on Loans:
Interest on AI Loan (Holding Company) 1,113,180,356 1,034,711,099
Bank Charges 8,276,022 5,235,415
Interest Charges - Others - -
1,121,456,378 1,039,946,514
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NOTE “21” : OTHER EXPENSES(Amount in Rupees)
Particulars 2015-16 2014-15
Travelling Expenses 39,419,941 40,925,619 Rent 11,952,454 12,014,419 Repair Charges 545,937 139,263 Hire of Transport 17,204,352 15,578,638 Electricity / Heating & Fuel Charges 2,606,081 1,981,785 Water Charges 114,500 100,000 Printing and Stationary 1,355,987 1,107,202 Legal Charges 3,277,771 26,913 Audit & Other Fees- Audit Fees 517,500 561,800 - Reimbursement of Expenses - 85,000 Provision for Redelivery & other charges 224,337,510 156,435,369 Provision for Obsolescence (Net) - - Exchange Variation (Net) 13,466,270 6,787,226 Professional / Consultation Fees & Expenses 6,337,225 3,860,037 Fees to DGCA 2,605,500 1,207,500 Office Cleaning Expenses 35,363,211 30,644,907 Entertainment Expenses - General 501,425 360,349 Books & Periodicals - Jeppesen / Technical 4,234,055 2,424,875 Other Misc. Expenses 34,769,993 1,923,867 Delayed Payment Charges to Fuel Companies 26,508,922 31,085,252 Interest on delayed payment of TDS 31,373 231,848 Interest on delayed payment of Service Tax 1,291,926 12,171,578 TOTAL 426,441,933 319,653,447
NOTE “22” : PRIOR PERIOD EXPENSES(Amount in Rupees)
Particulars 2015-16 2014-15
Prior Period Expenses (7,774,116) 92,880,135
Prior Period Revenue (904,326) 2,944,504 - - - -
TOTAL (8,678,442) 95,824,639
NOTE “23” : EXCEPTIONAL ITEM(Amount in Rupees)
Particulars 2015-16 2014-15
Inventory Migration Surplus
Aircraft Inventory Written Back - -
Inventory Migration Account - MRO 15,557,654 -
Provision for Inventory Reconciliation (Expenses) - -
Provisions No Longer Required (51,981,886) (45,433,293)
TOTAL (36,424,232) (45,433,293)
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NOTE “24” : DISCLOSURE OF EARNING PER SHARE(Amount in Rupees)
Particulars 2015-16 2014-15
a) Weighted average number of shares at the beginning of year 40,225,000 225,000
b) Weighted average number of shares at the end of year 40,225,000 225,000
c) Net profit after tax available for equity shareholders (Rupees) (1,987,509,430) (1,839,214,258)
d) Basic and Diluted Earning Per Share (Rupees) (49) (8,174)
e) Par Value of Share (Rupees) 100 100
25. I. CONTINGENT LIABILITY: (to the extent not provided for): -
(Rs. In Lakhs)
A. Standby Letter of Credits under Aircraft Lease and Maintenance Support Agreement for ATR and CRJ operations Rs. 5757.78 (Based on guarantee given by Air India Ltd. the parent company) (Rs 3902.15) B. Claims against the company not acknowledged as debts: a.) LIBOR (rate of interest on delay in foreign remittance is taken as Rs. 539.36 per contract with the parties) (Rs 304.09) b.) Miscellaneous claims (including for unsettled legal claims of Rs. 62.63 lakhs) Rs. 256.09 (Rs. 48.47 lakhs) (Rs. 48.47) C. Income Tax demand for A.Y. 1997-98 Appeal dismissed by ITAT in absence of COD approval (Total amount deposited under protest, application filed for Rs. 140.44 restoration of Appeal). (Rs. 140.44)
Income Tax demand for A.Y. 2000-01 Rs. 174.31 Under appeal with ITAT. Miscellaneous Application filed for reopen. (Rs. 174.31)
Income Tax demand for A.Y. 2004-05 Rs. 31.99 Under appeal before CIT (A) (Rs. 31.99)
Income Tax demand for A.Y. 2008-09 Rs.14851.53 Under appeal with ITAT (Rs.14851.53)
Income Tax demand for A.Y. 2010-11 Rs. 17293.27 Under appeal with ITAT. (Rs. 17293.27)
Income Tax demand for A.Y. 2011-12 Rs. 1121.00 Under appeal before CIT (A) (Rs. 1121.00)
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(All income tax demands shown above are excluding interest after the date of order and before adjustment of Rs.300 lakhs recovered adhoc against the said demands from the accounts of the company directly).
D. Income Tax Demand on account of TDS defaults amounting Rs. 75.88 (Rs. 75.88)
II. CAPITAL COMMITMENT Rs. NIL ( Rs. Nil)
Estimated amount of contracts remaining to be executed on capital account and not provided for.
26. No provision has been considered necessary in respect of disputed demand of Income tax amounting Rs. 33312.54 lakhs (Rs. 33612.54 lakhs) in view of company's appeals pending with appellate authorities. However, the same is shown above under contingent Liabilities. (The disputed demands shown above are excluding interest on demand).
27. Aircraft Inventories:
i) The inventories mainly include Aircraft spares, rotables, consumables and tools of ATR and CRJ aircrafts. The procurement is made by AIL on behalf of the company. Inventory of the company are maintained/ controlled by AIL. The consumption and closing stock therefore is on the basis of records and details derived from the store records maintained/ controlled by Air India Ltd. at Kolkata, Delhi and Hyderabad.
ii) Goods in transit amounting to Rs. 205.89 lakhs (Rs. 42.35 lakhs) include items at High Seas, items lying with Customs and items under inspection based on certification by Air India Ltd.
iii) Custom Duties, Freight & Incidentals have been allocated on pro-rata basis on year end value of closing Aircraft spares, rotables and consumption. Unallocated custom duty paid on aircraft spares and rotables is shown under advance recoverable in cash or kind instead of forming value of inventory.
iv) Consolidated Provision for Obsolescence of aircraft spares, rotables and special tools in respect of ATR and CRJ aircraft up to 31.03.2016 stands at Rs. 3607.39 lakhs (Rs.3758.52 lakhs), during the year there is write back in provision of Rs. 151.13 lakhs. There are no non-moving spares, as per advices received by AIL.
v) No physical verification of stores has been carried out in 2015-16. Physical verification report of only Kolkata for the year ended 31.03.2015 was received during the year. During the physical verification of stores for Kolkata for year ended 31.03.2015, shortage of Rs. 155.57 lakhs was reported. Necessary provision for the shortages has been made in the books for 2015-16. Final write off action will be taken on confirmation from the respective regions.
28. Fixed Assets
The physical verification of assets for the biennial period ended 2014-15 was done in 2015-16. The verification report has reported shortage of Rs. 96.73 lakhs. The shortage in verification report has been sent to stations/regions for confirmation. The necessary adjustments will be passed on confirmation from the regions/stations.
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29. Other current asset Other current assets include amount of Rs. 3353.57 lakhs ( Rs. 640.38 lakhs) receivable from Air India
Engineering Services Ltd (AIESL). The Company charged, interest on the average outstanding balance of AIESL as per decision of management interest would be recovered at the same rate as charged by Air India Limited (Holding Company of both the companies). The Board has approved to recover interest from 2014-15 accordingly, the Company has accounted for Rs 243.24 lakhs in 2015-16 as other income.
30. Short Term Borrowings
Short term borrowings amounting Rs. 105845.77 lakhs ( Rs. 105510.04 lakhs) due to Air India Ltd, representing net of transfers/disbursements of funds to/for the company after adjusting revenue earnings from flight operations.
The Holding Company, Air India Limited debited a sum of Rs. 11,131.80 lakhs (Rs. 10,347.11 lakhs) towards interest on account of delayed payment on the average of opening balance as on 01.04.2015 and closing balance as on 31.03.2016. The above interest has been calculated @ 11.08% (10.86%) per annum.
Further no TDS has been deducted on the said interest as per legal opinion obtained by Management.
31. Other Current Liabilities:
Based on the information available with the Company, the balances outstanding as at the Balance Sheet date is Nil (Nil) with regard to Micro, Small and Medium Enterprises as defined under the Micro, Small and Medium Enterprises Development Act, 2006.
32. The proportionate expenditure for redelivery cost for leased ATR and CRJ aircraft has been worked out for Rs. 3551.32 lakhs (Rs. 2217.55 lakhs) up to 31.03.2016 on the basis of aircraft months in terms of the agreements executed with the parties and provision made for the same in the accounts.
Employee benefits
33. The salaries of deputationists from Air India Ltd. are as per the terms of deputation and are accounted on the basis of the debits received from Air India Ltd. Retirement benefits including PF to the deputationists are accounted by Air India Ltd. The debit from Air India Ltd. for its employees on deputation includes charge for Provident Fund & Gratuity.
34. For the employees on contract, the company has its own Employees Provident Fund Trust to which contributions are regular.
35. As per TAP, the engineering staff was to be hived off to separate Companies. According engineering staff of the Company is in the process of transfer to Air India Engineers Services Limited (AIESL). The Company had accordingly debited the salary and other day to day expenses to AIESL. However till the hiving process is complete Gratuity provision is booked and accounted for in the books of the Company.
36. Gratuity
In accordance with the Revised AS 15 (Revised), the Company is using the Projected Unit Credit Method and the other assumptions as per the Market.
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For determination of the gratuity liability of the Company, the following actuarial assumptions were used
Particulars 31.03.2016 31.03.2015
Discount rate 8.00% per annum 8.00% per annum
Future salary increase 8.00% per annum 8.00% per annum
Movement in the liability recognized in the balance sheet is as under:(Rs. in Lakhs)
Particulars 31.03.2016 31.03.2015
Present value of defined benefit obligation as at the start of the period 395.48 356.33
Current service cost 41.98 34.75
Interest cost 31.63 28.50
Actuarial (gain)/loss recognized during the period 49.36 (12.61)
Benefit Paid (17.19) (11.50)
Present value of defined benefit obligation as at the Year End 501.26 395.47
Particulars 31.03.2016 31.03.2015
Current liability (Amount due within one year) 23.75 7.77
Non-current liability (Amount due over one year) 477.51 3,87.70
Total 501.26 395.48
Expense recognized in the statement of profit and loss is as under:
Particulars 31.03.2016 31.03.2015
Current service cost 41.98 34.75
Interest cost 31.63 28.51
Acturial (gain) recognised during the year 49.36 (12.61)
Total (income)/expense recognized 122.98 50.65
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Disclosure for the last 5 Years
Particulars 31.03.2016 31.03.2015 31.03.2014 31.03.2013 31.03.2012 Present Value of defined obligation as at the end of the period 501.26 395.48 356.33 316.75 295.84
Plan assets at the end of the period 0 0 0 0 0
Net liability recognized in the balance sheet 501.26 395.48 356.33 316.75 295.84
Experience adjustment on actuarial gain/loss 49.55 (16.18) (21.14) (22.16) (13.80)
37. a. The Expenses/ Liability towards Landing and Parking charges, Navigation charges, License Fee, Electricity and other miscellaneous charges payable to Airport Authority of India (AAI) are provided on best possible estimates based on available information. The outstanding balance as per books is Rs.3502.46 lakhs (Rs. 2842.28 lakhs) and a provision of Rs.1721.92 lakhs (Rs. 1715.42 lakhs) (total Liability booked as on 31.03.2016 is Rs.5224.28 lakhs) (Rs. 4557.70 lakhs). The account with Airport Authority of India is under reconciliation.
b. The outstanding balances with Oil Companies viz. Indian Oil Corporation Ltd. is Rs. 1896.12 lakhs, Bharat Petroleum Corporation Ltd. Rs. 365.20 lakhs, Hindustan Petroleum Corporation Ltd. Rs. 266.69 lakhs, Reliance Industries Ltd. Rs. 71.40 lakhs and Shell MRPL Aviation Ltd. Rs. 2.26 lakhs. The accounts of IOCL, RIL, BPCL and Shell-MRPL have been reconciled till 31.03.2016 and the accounts with HPCL is pending for reconciliation.
38. a) The grant receivable from NEC for ATR North East operations was accounted for as income sttaking into account the operations of ATR for the year ending 31 December 2012 amounting
Rs. 4954.43 lakhs. NEC contested the claim of Grant support for the year 2012, however, the committee set up under Planning Commission to resolve the issue, has recommended for Rs. 6091.00 lakhs based on actual deficit that MoCA may provide budgetary support to meet the VGF for the year 2012. However, the company as a prudence, has continued to account for Rs. 4954.43 lacs as originally accounted since the same is also disputed.
b) The North-East Council has signed a MOU for VGF for operating flights in North East Sector effective August 2014 which is still continuing. The Union Territory of Lakshadweep (UTL) has continued to sanction VGF for Agatti operations for the year 2015-16.
c) Union Territory of Daman & Diu has signed a MOU for VGF for operating flights in Mumbai-Diu-th th
Mumbai Sector for the period 25 October, 2015 to 24 October, 2016.
d) AASL has operated flight under VGF arrangements with Govt. of Puducehrry on Bengaluru-th thPuducherry-Bengaluru sector from 14 April,15 to 15 October,15.
AASL has operated flight under VGF arrangements with Govt. of Karnataka on Bengaluru-rd thMysuru-Bengaluru sector from 3 Sept'15 to 17 November15.
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AASL has operated flight under VGF arrangements with Bengal Aerotropolis Projects Ltd. on th
Kolkata-Durgapur-Kolkata sector from 15 May,15 to 21st December,15.
39. Segment Reporting (As required by the AS -17 of ICAI):
i) The company is engaged in airline business, which is considered as a single whole business segment. All incomes are incidental to the above business. Details of the revenue earned from various activities related to airline business are given in Note-16 to the Accounts.
ii) The Company operates flights on domestic routes including charters on demand.
iii) The revenue earning is from the aircraft, which are on operating lease. These are deployed in various sectors. There is no appropriate basis for allocating the assets and related liabilities in geographical segments.
iv) Presentation of the Annual Accounts read with Directors' Report enables better understanding of the performance of the business, better assessment of risk and returns and makes more informed judgment about the activities of the Company as a whole.
40. The company operated leased aircraft, directly leased from Lessors. Air India Ltd. provides marketing, sales and reservations services for Alliance Air fights. While the work related to other support services like ground handling and engineering services are being done by the other subsidiaries companies of
th thAIL, i.e. AIATSL (Arrangement dated 7 Nov 2014) and AIESL (Arrangement 29 July 2013) respectively for AASL flights. For these services, the rates of charges have been laid down and have been signed with these companies.
41. The Company had undertaken freighter charter operations with freighter B737 aircraft on lease from Air India Ltd. under the agreements for the freighter charters exclusively between AIR INDIA LTD. and concerned parties. The agreement between AIR INDIA LTD. and M/s GATI was terminated by GATI in March 2009. Consequently, the Bank Guarantee of Rs. 30 Crores deposited by GATI with AIR INDIA LTD. under the agreement was invoked by AIR INDIA LTD. for freighter dues. Accordingly, the amount realised from Bank Guarantee has been kept in a separate account in the books of the company (AASL) without adjusting against freighter due. The matter has been in dispute between GATI and AIR INDIA LTD. The Arbitral Tribunal has given award and an appeal has been filed by Air India Limited before the Hon'ble Delhi High Court against the Arbitral Award which also upheld the decision of Arbitral Tribunal. To file an appeal in Delhi High court (double bench) against the order, AIL has deposited Rs. 22 crores with Hon'ble High Court as deposit money on 17.11.2015 and the same has been debited to AASL by AIL. The amount of security deposit with Hon'ble High court has been shown under security deposit. Other Long Term Liabilities. The claims / counter claims are exclusively for / against Air India Ltd. and M/s GATI being the parties to the agreement. No provision has been made for debtors of Rs. 29.40 crore though the same is more than 3 years, since an appeal has been filled which double bench and the matter is subjudiced and management is hopeful for favorable judgement and guarantee invoked amount is lying with us.
42. The aircraft VT-ABO MSN-406 of the Company met with an accident on 22nd December, 2015, while it was parked in Kolkata Airport and was hit by passenger coach of Jet Airways and was badly damaged.
stThough the lease was due up to 31 March, 2017, however negotiation was held with the lessor for early thcancellation of lease. The negotiated settlement was reached with the lessor on 16 August, 2016 for
Rs. 2287.18 lakhs (US $3.36 Million) and accordingly being an extraordinary event under AS-4, st
necessary provision has been made in books of account as on 31 March, 2016 after adjustment of our share of insurance claim of 1.4 Million dollars ( Rs. 952 lakhs). Accordingly, the company has made provision of Rs. 1335.18 lakhs as on 31.3.2016 towards the said loss and accounted for as redelivery
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and other charges under other expenses. The Company is also contesting with Jet Airways for necessary claims. The claim with Jet Airways will be accounted for on settlement basis.
43. Related Party Disclosures (As required by the AS- 18 of ICAI):
a. Holding Company AIR INDIA LTD.
b. Subsidiaries/Fellow Subsidiaries/Associates Not applicable
c. Key Management Personnel Chairman, (Shri. Ashwani Lohani), (as on 31.03.2016) CMD, Air India Ltd.
Director (Shri Vinod S. Hejmadi)
Director (Shri Pankaj Srivastava)
Director (Capt. Arvind Kathpalia)
Director (Smt Meenakshi Dua)
Director (Smt (Dr.) Shefali Juneja)
Director (Ms Puja Jindal)
C F O (Sunil Dua)
Company Secretary (Gagan Batra)
d. Relatives of Key Management NIL
e. Transactions with related parties during the year:
i. Holding Company (Rs. in Lakhs)
As on 31.03.2016 As on 31.03.2015
BALANCE PAYABLE AT THE YEAR END TO AIL 105845.77 105510.04
Equity Infusion during the year 40000.00 - Credits for Services Rendered (Salary of AASL Personnel working for AIL) 1089.11 2346.78
Debits for Services Received
Labour charges on Maintenance (as per MOU) 22.20 49.46
SAP Maintenance charges 67.47 82.17 89.66 131.63
Debits for Funds and Payments made through AIL
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As on 31.03.2016 As on 31.03.2015
Funds Transfer Through Bank 23751.00 22104.52
Payments made to Oil Companies 22745.20 5651.68
Payments made to Foreign Vendors 2094.65 1907.54
Payments made to Foreign Vendors (Stores) 597.01 -
Payments made to Vendors (AI SATS) - 500.00
Payments made to Indian Vendors 186.69 361.91
Payments made to Ground Handling Agent - 46.73
Deposit with High Court 2200.00 -
51574.55 30572.39
Agencies Arrangement:
Traffic Revenue (Gross) 20921.90 17993.18
JN TAX (Service tax on passenger Revenue) 868.59 659.47
Less: Misc. Taxes paid on revenue items 170.37 130.24
Net Traffic Revenue 21620.13 18522.41
Interest Charged by AIL 11131.80 10347.11
Leasing Arrangements : Management Contract inclu. (Pay & Allow. of AIL employees) 248.95 219.05
Items pending acceptance by Air India (Debited By AASL) 233.54 288.74
Items pending acceptance by Air India (Credited by AASL) - -
Guarantees Standby Letter of Credits for ATR and CRJ Operations However, Air India Ltd. Has also provided corporate guarantees for the aircraft lease. 5757.78 3902.15
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No Loans or credit transactions were outstanding with Directors or officers of the Company or their relatives at the end of the year which is required to be disclosed.
ii. Key Managerial Remuneration (Rs. in Lakhs)
S No Particulars 2015-16 2014-15
1 Chief Financial Officer th (with effect from 24 June,2015)
Sunil Dua 15.14 NIL
44. Lease Accounting (As required by the AS- 19 of ICAI):
a) The company has taken aircraft on non-cancelable operating lease as under:
Aircraft Type Lessor Valid upto
Ø ATR 42-320 ABRIC Leasing Limited VT-ABA Sep 17 VT-ABB Sep 17 VT-ABO Sep 17 (However agreement terminated in August-16)
Ø ATR 72-600 AVAP Leasing (Asia) Ltd. VT-AII Dec,26 VT-AIT Feb,27 Celestial Aviation Trading 68 Ltd VT-AIU May,25 VT-AIV June,25 VT-AIW Oct ,25
Ø CRJ 700 EiC Ireland Leasing No. Two Limited VT-RJB Sep, 2016 VT-RJE Jan, 2017
CILAN MSN 10048 Ltd., Ireland Nov, 2016 VT-RJD
(b) The minimum lease payment under non-cancelable lease in terms of the agreements with lessors for future are as follows:
Aircraft Rotable/ Engine Maintenance & Lease rent* Lease Charges* Other charges* ( Rs. /lakhs) ( Rs. /lakhs) ( Rs. /lakhs)
Not Later than one year 11020.27 826.55 4419.29 (5700.89) (376.53) (1540.62)
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Aircraft Rotable/ Engine Maintenance & Lease rent* Lease Charges* Other charges* ( Rs. /lakhs) ( Rs. /lakhs) ( Rs. /lakhs)
Later than one year but 30565.06 00.00 11118.12 not later than 5 years (12436.71) (39.84) (4458.65)
Later than 5 years. 37987.95 0.00 13826.25 (20925.51) (0.00) (7593.83)
*These amounts are taken as per the prevailing rates and are subject to annual reconciliation. The conversion rate used for the above purpose is the closing USD rate as at 31.03.2016.
(c) Aircraft Lease rental, other lease and maintenance charges recognised in Statement of Profit and Loss in the current year in respect of the aircraft lease:
Aircraft Aircraft Lease Other Charges & Maintenance Rs. Lakhs charges Rs. Lakhs ATR and CRJ 19891.93 396.93 (12130.79) (878.32)
(d) The lease rental payable for ATR and CRJ aircraft are fixed lease rentals payable monthly. There is no option for purchase of the aircraft at the end of the lease period. The aircraft are permitted to be subleased with prior consent of the lessors.
45. The company has registered charges of Rs. 34370.59 lakhs the company's assets towards dues against leased aircraft.
46. Earning per share :
(Calculation of EPS - Basic and Diluted) 2015-16 2014-15
i) Net Profit/ (Loss) after tax for the year (Rs.) (1987509430) (1839214258)
ii) Number of Equity Shares o/s at the end of the year 40225000 225000
iii) Nominal value per Eq. Share (Rs.) 100 100
iv) EPS Basic and diluted (Rs.) (49) (8174)
Since the company does not have any dilutive securities, the basic and diluted earnings per share are the same.
47. The Company has a process whereby periodically all long term contracts (Lease arrangements) are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that adequate provision as required under any law/ accounting standards for material foreseeable losses on such long term contracts has been made in the books of accounts.
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48. Deferred Taxation Accounting (As required by the AS-22 of ICAI) :
In view of the history of losses of the Company, there is no virtual certainty that sufficient future taxable income and will be available against which the deferred tax assets can be realized. Hence the same have not been accounted for in the books.
49. Impairment of Assets (AS-28) : The company does not own any cash generating asset. The major revenue earning asset of the company is the aircraft fleet, which is taken on operating lease. As per the assessment of the company, there has been no impairment loss during the year. In respect of other Fixed Assets, the biennial verification of other Fixed assets are conducted and accordingly adjustments are made in the books.
50. In opinion of the Management, any of the assets other than fixed assets have a value on realization in the ordinary course of business at least equal to the amount at which they are stated, unless specified otherwise.
51. The accounts with parties are subject to reconciliation and confirmation.
52. ADDITIONAL INFORMATION
Information given below include amounts debited by Air India Ltd. and also include deemed expenditure and earnings in foreign currency.
CURRENT YEAR PREVIOUS YEAR (Rs.In lakhs) (Rs. In lacs)
A. Expenditure on Imports (CIF) during the year ended 31st March 2016
- Aircraft Spares Parts & Tools 1102.25 609.00
- Capital Items-Ground Support Equipment Nil Nil
B. Expenditure on Consumption during the year ended 31st March,2016
- Imported Spares & Components 406.43 116.97 - Indigenous Spares Nil Nil
C. Earnings in Foreign Currency
- Interline Revenue Nil Nil
D. Expenditure in Foreign Currency
- Aircraft Lease & Maintenance Charges 15411.83 13009.11- Purchase of Stores & Equipment 1102.25 609.00- Technical Literature 21.70 24.25- Training & Travelling 299.81 377.29- Legal charges 26.54 NIL
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53. Foreign currency exposures recognized by the company that have not been hedged by a derivative instrument or otherwise as under:-
st st Particulars Currency Type As at 31 Mar 2016 As at 31 Mar 2015
Trade Payables US DOLLAR 7335804 5249639
AMOUNT IN INR 486033687 328102425
54. In order to improve its Operational & Financial performance, parent company Air India Limited has formulated a Turn Around Plan (TAP). Being a Government Company, the Government of India has all the intension to revive it along with the parent company. TAP was approved by Government in February 2012. It is envisaged that Alliance Air would become profitable over period of time by acquiring new Air-crafts. Due to support of Air India Limited as well as various measures taken towards improving its operational and financial positions, it is expected its financial position of company would improve in future. During the year Air India Limited has converted an amount of Rs. 40,000 lakhs, out of the amount outstanding from AASL in its books into equity.
55. The figures have been rounded off to the nearest rupee.
56. Previous year figures are indicated in the Notes within brackets.
57. The previous year figures have been re-grouped/re-classified wherever considered necessary to make them comparable.
Audit Report :
Significant Accounting Policies in Note no. 1 and notes refered to above form an integral part of these Financial Statements.
As per our report of even date attached
For and on behalf of For and on behalf of the Board Chandra Gupta & Associates Sd/- Sd/- Sd/-
Chartered Accountants Ashwani Lohani Vinod Hejmadi C.S. Subbiah
FRN No 000259N Chairman Director CEO DIN 01023747 DIN 07346490 Sd/- Sd/- Sd/-Gunjan Aggarwal Gagan Batra Kamal RoulPartner Company Secretary Chief Financial Officer
Membership No. : 061893 Place: New Delhi Date: 21.12.2016
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