Consolidated financial statement of JSW S.A. Capital Group for 2012

27. Disputed property tax on underground mine workings

The table below presents items of the consolidated statement of financial position, where the assets or liabilities relating to the disputed property tax are recognized:

	31 Dec 2012	31 Dec 2011
Provision for property tax	103.1	73.3
of which:
provision for the disputed property tax on underground mine workings	83.4	33.6
Liabilities for social security contributions and other taxes	440.6	458
of which:
liabilities for disputed property tax	64.2	31.6
Contingent assets	14.6	36.5
of which:
contingent assets on account of the disputed property tax	-	-
Other receivables	199.3	186.8
of which:
gross receivables on account of the disputed property tax	204.8	204.9
revaluation charge on account of the disputed property tax	(41.0)	(41.0)
receivables from municipalities on account of the disputed property tax	163.8	163.9

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Since 2008, JSW S.A. has become a party to administrative court proceedings regarding real property tax on mine workings. Accordingly, the Parent Company established a provision for property tax, while the liability was recognized after tax authorities issued administrative decisions. After the liabilities were paid, JSW S.A. treated the amounts paid as contingent assets.

In 2011 the Constitutional Tribunal unambiguously excluded underground mine workings (tunnel costs) from the property tax base and ruled that the taxation of plant and facilities situated in these workings depends on their classification as structures within the meaning of the Construction Law. As a result, JSW S.A. dissolved part of its provisions for underground mine workings in the net amount of PLN 195.8 million and recognized a receivable on overpaid disputed property tax in the net amount of PLN 163.9 million.

Taking into account the Constitutional Tribunal's judgment and the course of administrative proceedings in this matter, in 2012 the Parent Company re-estimated the provision for the disputed property tax and re-evaluated collectibility of the receivables on account of the disputed property tax, updating the level of provisions for long-term proceedings for disputed property tax by PLN 48.5 million.

The table below presents the effect of the disputed property tax on underground mine workings on pre-tax profit.

	2012	2011
Current year costs associated with the settlement of the disputed property tax with interest	(30.7)	(66.1)
(Costs)/income associated with the disputed property tax captured in the ledgers for the current financial year, which were incurred in the previous years or updated in the current year, including:	(48.5)	359.7
- net dissolution of the provision for the disputed property tax	-	195.8
- recalculation of the provision for the disputed property tax with interest	(48.5)	-
- recognized receivables from municipalities on account of the disputed property tax	-	163.9
Impact on pre-tax profit	(79.2)	293.6

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