1.  We have audited the attached Balance Sheet of U.P. Hotels Limited
 (''the Company) as at 31st March, 2012 and also the Statement of
 Profit & Loss and the Cash Flow Statement for the year ended on that
 date annexed thereto (collectively referred as the ''financial
 statements''). 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), 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 financial statements dealt with by this report are in
 agreement with the books of account;
 
 (iv) in our opinion, the financial statements 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, 2012, and taken on record by the Board of Directors,
 we report that none of the directors is disqualified as on 31st March,
 2012 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 financial statements read in
 conjunction with Notes to the Account and subject to Note 46 as regards
 Hotel Earnings in foreign exchange not verified by us, 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, 2012;
 
 (b) in the case of the Statement of Profit and Loss, 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 ON THE FINANCIAL STATEMENTS FOR THE YEAR
 ENDED 31st MARCH, 2012.
 
 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
 still in the process of updating its records on the new software.
 
 b) The fixed assets have not been physically verified by the management
 during the year and we are therefore, unable to comment on the
 discrepancies, if any, which could have arisen on such verification. In
 our opinion, the frequency of verification of fixed assets is also not
 reasonable having regard to the size of the company and nature of its
 assets.
 
 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 except for
 internal control over purchase of provisions and decoration at one unit
 needs to be improved. 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, in respect of other
 transactions owing to the unique and specialized nature of items
 involved and in the absence of any comparable prices, we are unable to
 comment as to whether the transactions made in pursuance of such
 contracts or arrangements have been made at prevailing market price 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 instances of delay and non deposition.
 
 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                  2,341,575
 
 Purchase Tax/ VAT/Entry tax etc.                        275,924
 
 Service Tax                                             230,732
 
 Employees State Insurance Dues                          820,428
 
 c) According to the information and explanations given to us, there are
 no dues outstanding of custom duty, excise duty, income tax, wealth tax
 and cess on account of any dispute which have not been deposited except
 for:
 
 Name of statute    Nature of 
                    dues        Years     Forum where
                                          dispute is              Amount
                                                                  (Rs.)
                                          pending
 
 Value Added 
 Tax - UP           Value 
                    Added Tax   2006-07   Additional
                                          Commissioner          231,160
                                         (Appeals) - Agra
 
 Value Added 
 Tax - UP           Value 
                    Added Tax   2007-08   Additional 
                                          Commissioner        6,678,744
                                         (Appeals) - Agra
 
                                                              6,909,904 
 
 Reference is also invited to Note 28 A (i) (b) 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
 (Assessmentyear 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. 5,859,000.
 
 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, the Company has not
 availed any term loan during the year. Accordingly, clause 4(xvi) of
 the Order is not applicable to the Company.
 
 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/-
 
 (ANIL KUMAR SHARMA)
 
 Partner
 
 Membership No. 80085
 
 Firm Registration no. 301072 E
 
 New Delhi, the 29th May, 2012