1.  We have audited the attached Balance Sheet of U.P. Hotels Limited
 (the Company) as at 31st March, 2011 and also the Profit & Loss
 Account and the Cash Flow Statement for the year ended on that date
 annexed thereto. These financial statements are the responsibility of
 the Company''s management. Our responsibility is to express an opinion
 on these financial statements based on our audit.
 
 2.  We conducted our audit in accordance with auditing standards
 generally accepted in India. Those Standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatement. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by management, as well as evaluating the overall financial statement
 presentation. We believe that our audit provides a reasonable basis for
 our opinion.
 
 3.  As required by the Companies (Auditor''s Report) Order 2003 (‘the
 Order'') as amended by Companies (Auditor''s Report) (Amendment) issued
 by the Central Government in terms of sub - section (4A) of Section 227
 of the Companies Act, 1956 (“the Act”)and on the basis of such checks
 as we considered appropriate and according to the information and
 explanations given to us, we enclose in the Annexure a statement on the
 matters specified in paragraphs 4 & 5 of the said Order.
 
 4.  Further to our comments in the Annexure referred to in paragraph 3
 above, we report that:
 
 (i) we have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purposes of our
 audit;
 
 (ii) in our opinion, proper books of account as required by law have
 been kept by the Company so far as appears from our examination of
 those books;
 
 (iii) the Balance Sheet, Profit and Loss Account and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 (iv) in our opinion, the Balance Sheet, Profit and Loss Account and
 Cash Flow Statement dealt with by this report comply with the
 Accounting Standards referred to in sub-section (3C) of Section 211 of
 the Companies Act, 1956;
 
 (v) on the basis of written representations received from the directors
 as on 31st March, 2011, and taken on record by the Board of Directors,
 we report that none of the directors is disqualified as on 31st March,
 2011 from being appointed as a director in terms of clause (g) of
 sub-section (1) of section 274 of the Companies Act, 1956;
 
 (vi) in our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read in conjunction
 with Schedules 1 to 23 and subject to Note 21 (iv) as regards Hotel
 Earnings in foreign exchange not verified by us contained in Schedule
 23 of Notes to the Account, give the information required by the
 Companies Act, 1956, in the manner so required and give a true and fair
 view in conformity with the accounting principles generally accepted in
 India;
 
 (a) in the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2011;
 
 (b) in the case of the Profit and Loss Account, of the Profit of the
 Company for the year ended on that date; and
 
 (c) in the case of the Cash Flow Statement, of the Cash Flows of the
 Company for the year ended on that date.
 
 ANNEXURE REFERRED TO IN PARAGRAPH 3 OF THE AUDITORS'' REPORT OF U.P.
 HOTELS LIMITED OF EVEN DATE.
 
 1.  a) The Company has generally maintained proper records showing full
 particulars regarding valuation of different type of assets including
 quantitative details and situation of fixed assets. The Company is in
 the process of updating its records on a new software.
 
 b) According to the informations and explanations given to us, the
 Company physically verified its assets over a two year period. In our
 opinion, this periodicity of physical verification is reasonable having
 regard to the size of the Company and the nature of its assets. In
 accordance with this policy, the Company has physically verified
 certain assets during the year. According to the explanations given to
 us, the discrepancies noticed on physical verification were not
 material and these have been properly dealt with in the books of
 account.
 
 c) The fixed assets disposed off during the year, in our opinion, do
 not constitute a substantial part of the fixed assets of the Company
 and such disposal has, in our opinion, not affected the going concern
 status of the Company.
 
 2.  a) As explained to us, inventories are physically verified by the
 Management during the year at reasonable intervals. In our opinion, the
 frequency of verification is reasonable.
 
 b) In our opinion and according to the information and explanations
 given to us, the procedures for physical verification of inventories
 followed by the Management were reasonable and adequate in relation to
 the size of the Company and the nature of its business.
 
 c) On the basis of our examination of inventory records of the Company,
 the Company is maintaining proper records of its inventory. The
 discrepancies noticed on verification between physical stock and book
 records were not material and have been properly dealt with in the
 books of account.
 
 3.  a) The Company has not granted any loans, secured or unsecured, to
 companies, firms or other parties covered in the Register maintained
 under Section 301 of the Act.
 
 b) In view of our comments in paragraph 3 (a) above, the provisions of
 Clauses iii (b), iii (c) and iii (d) of paragraph 4 of the aforesaid
 Order are not applicable to the Company.
 
 c) The Company has not taken any loan, secured or unsecured, from
 companies, firms or other parties covered in the Register maintained
 under Section 301 of the Act.
 
 d) In view of our comment in paragraph 3 (c) above, clauses iii (f) and
 iii (g) of paragraph 4 of the aforesaid Order are not applicable to the
 Company.
 
 4.  In our opinion and according to the information and explanations
 given to us and having regard to the explanation that for some items
 purchased for which comparable alternative quotations are not available
 because of the nature / quality of such items and delivery schedules
 and also sale of services for which suitable alternative sources are
 not available to obtain comparable quotations, there are generally
 adequate internal control system commensurate with the size of the
 company and nature of its business with regard to purchase of
 inventories, fixed assets and sale of goods and services. Further,
 during the course of our audit, we have neither come across nor have we
 been informed of any continuing failure to correct major weakness in
 internal control system.
 
 5.  a) On the basis of the audit procedures performed by us, and
 according to the information, explanation and representations given to
 us, we are of opinion that, the particulars of contracts or
 arrangements in which directors were interested as contemplated under
 Section 297 and sub section (6) of Section 299 of the Companies Act,
 1956 and which were required to be entered in the register maintained
 under Section 301 of the said Act, have been so entered.
 
 b) In our opinion, and according to the information and explanations
 given to us, there are no transactions made in pursuance of contracts
 and arrangements referred to in (a) above and exceeding the value of
 Rs. 5 lacs with any party during the year. However, the other
 transactions have been made at prices which are reasonable having
 regard to the prevailing market prices at the relevant time.
 
 6.  The Company has not accepted any deposits from the public and
 consequently, the directives issued by the Reserve Bank of India and
 the provisions of Section 58A and 58AA or any other relevant provisions
 of the Act and the rules framed there under are not applicable.
 Further, during the course of our audit, we have neither come across
 nor have we been informed of any order passed under the aforesaid
 sections by Company Law Board or National Company Law Tribunal (as
 applicable) or Reserve Bank of India or any Court or any other
 Tribunal.
 
 7.  In our opinion, the Company has an internal audit system
 commensurate with the size of the Company and nature of its business.
 
 8.  The Central Government has not prescribed the maintenance of cost
 records under clause (d) of sub section (1) of Section 209 of the
 Companies Act, 1956 in respect of services carried out by the Company.
 
 9.  a) According to records of the Company, and subject to comments in
 para 9 (b) below the Company is generally regular in depositing
 undisputed statutory dues including provident fund, investor education
 and protection fund, employees'' state insurance, income tax, sales tax,
 wealth tax, service tax, custom duty, excise duty, cess and other
 statutory dues applicable to it with the appropriate authorities though
 there have been delays in few cases.
 
 Further, since the Central Government has till date not prescribed the
 amount of cess payable under section 441A of the Companies Act, 1956,
 we are not in a position to comment upon the regularity or otherwise of
 the Company in depositing the same.
 
 b) According to information and explanations given to us, except for
 the cases stated below, there are no other undisputed amount payable in
 respect of provident fund, investor education & protection fund, income
 tax, employees state insurance, wealth tax, sales tax, custom duty,
 service tax, excise duty, cess and other statutory dues which were
 outstanding at the year end for period of more than six months from the
 date they become payable.
 
                                                    Amount (Rs.) 
 
 House Tax/ Municipal Tax & Water tax                  2,075,582
 
 Purchase Tax / VAT/Entry tax etc.                       328,324
 
 Service Tax                                             283,198
 
 Employees State Insurance Dues                           36,290
 
 Wealth Tax                                               37,777
 
 c) According to the information and explanations given to us, there are
 no dues outstanding of sales tax, custom duty, excise duty, income tax,
 wealth tax and cess on account of any dispute which have not been
 deposited except for:
 
 Reference is also invited to Note 2 (b) in Schedule 23, as regards the
 Income Tax Department having appealed to the Hon''ble High court,
 Allahabad against the Order of the Income Tax Appellate Tribunal
 upholding the views of the Company in respect of the claim of deduction
 regarding earnings in convertible foreign exchange under Section 80 HHD
 (Assessment year 1989- 90 to 1991 – 92) and Luxury Tax Claimed under
 Section 43 B (Assessment Year 1987-88 to 1990-91). The total amount
 disputed (excluding interest & penalties) aggregated to Rs. 58.59 lacs.
 
 10.  The Company has no accumulated losses and has not incurred any
 cash losses during the financial year covered by our report and in the
 immediately preceding financial year.
 
 11.  As per books and records maintained by the Company and according
 to the information and explanations given to us, the Company has not
 defaulted in repayment of dues to the financial institution / bank. The
 Company has not issued any debentures.
 
 12.  The Company has not granted loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 Accordingly, clause 4 (xii) of the Order is not applicable to the
 Company.
 
 13.  In our opinion, the Company is not a chit fund or a nidhi / mutual
 benefit fund / society. Accordingly, clause 4 (xiii) of the Order is
 not applicable to the Company.
 
 14.  The Company has maintained proper record of transaction and
 contracts in respect of dealing or trading in securities and other
 investments viz. mutual funds. All other investments viz. mutual funds
 have been held by the Company in its own name.
 
 15.  According to the information and explanations given to us, the
 Company has not given any guarantee for loans taken by others from
 banks or financial institutions.  Accordingly, clause 4 (xv) of the
 Order is not applicable to the Company.
 
 16.  On the basis of the records examined by us, and relying on the
 information compiled by the Company for co-relating the funds raised to
 the end use of term loans, we have to state that, the company had,
 prima facie, applied the term loans for the purposes for which they
 were obtained. The Company did not have any term loans outstanding at
 the year end.
 
 17.  According to the information and explanations given to us and on
 an overall examination of the financial statements and after placing
 reliance on the reasonable assumptions made by Company for
 classification of long term and short term usages of funds, we are of
 the opinion that prima facie no funds raised on short term basis have
 been used for long term investments.
 
 18.  The Company has not made any preferential allotment of shares to
 parties and companies covered in the register maintained under section
 301 of the Companies Act, 1956. Accordingly, clause 4 (xviii) of the
 Order is not applicable to the Company.
 
 19.  The Company has not issued any debentures during the year.
 Accordingly, clause 4 (xix) of the Order is not applicable to the
 Company.
 
 20.  The Company has not raised any money by public issues during the
 year.  Accordingly, clause 4 (xx) of the Order is not applicable to the
 Company.
 
 21.  During the course of our audit of the books of accounts of the
 Company, we have neither come across any instance of fraud on or by the
 Company nor have we been informed of any such case by the Management.
 
 
 
 for RAY & RAY 
 Chartered Accountants
 
 Sd/-
 
 (A K SHARMA)
 Partner
 Membership No. 80085
 Firm Registration no. 301072 E
 
 New Delhi, the 30th May, 2011