To The Members of TAJGVK Hotels & Resorts Limited
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of TAJGVK Hotels &Resorts Limited ("the Company") which comprise the Balance Sheet as at March31 2019 the Statement of Profit and Loss (including Other Comprehensive Income) theStatement of Changes in Equity and the Statement of Cash Flows for the year ended on thatdate and a summary of the significant accounting policies and other explanatoryinformation (hereinafter referred to as "the standalone financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the accounting principles generally accepted in India ofthe state of affairs of the Company as at March 31 2019 the profit and totalcomprehensive income changes in equity and its cash flows for the year ended on thatdate.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing specified under section 143(10) of the Act (SAs). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India (ICAI) together with the independencerequirements that are relevant to our audit of the standalone financial statements underthe provisions of the Act and the Rules made thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the ICAI's Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our audit opinion on the standalone financial statements.
Emphasis of matter
Without qualifying our opinion we draw attention to Note No.23 to the FinancialStatements about the excess remuneration paid to the Managing Director during the yearpending approval of the Shareholders.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificancein our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report.
|Key Audit Matter ||Auditor's Response |
|Revenue Recognition ||Principal Audit Procedures |
|To ensure accuracy of recognition measurement presentation and disclosures of revenues and related accounts || We have assessed the Company's internal controls surrounding its revenue transactions; |
| ||We tested the key controls identified |
| || We performed substantive detail testing by selecting a sample of revenue transactions that we considered appropriate to test the evidence of effectiveness of the internal controls and adherence to accounting policies in recognising the revenue and the rebates and discounts thereagainst. |
|2 Fees and reimbursements to the ||Principal Audit Procedures |
|Operating Company ||Our audit approach was as follows: |
|To ensure accounting of the expenses comprising the Basic Fee Incentive Fee and reimbursement of expenses based on the terms of the Agreements entered into with the Operating Company and on the operating results of the respective Hotel properties under Agreement || Review of each of the Hotel operating agreements entered into. Validation of the Gross Income the Gross Operating profit of each of the property from the books and records of the property. |
| ||Verification of the calculation of the Fees and reimbursement of expenses as per the terms of the aforesaid Agreements. |
|3 Renovation expenses incurred during the year ||Principal Audit Procedures |
|To establish proper categorisation of expenses and appropriate recognition thereof including the consequential ||Our audit approach was a combination of test of internal controls and substantive procedures which included the following: |
| || Review of works carried out under the renovation and the expenses thereagainst. |
|derecognition of the carrying amounts of the existing assets appropriately. ||Review of the Fixed assets identified for replacement and the carrying amounts thereof to the extent ascertainable from the Register of Fixed Assets. |
| ||Verification of the carrying amounts if any to be considered for derecognition |
| ||Validation of the entries in the Register of Fixed Assets to confirm the derecognition and recognition of the assets arising from the renovation |
| || Review of the terms of the contracts entered into for the renovation and compliance with the terms thereof. |
|4 Tax liabilities including MAT Credit ||Principal Audit Procedures |
|Evaluation of uncertain tax positions || Obtained details of completed tax assessments demands and appeals |
|The Company has material uncertain tax positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes. ||thereagainst as at March 31 2019. Review the management's underlying assumptions in estimating the tax provision and the possible outcome of the disputes based on legal and other precedents in evaluating management's position on these uncertain tax positions. |
Information Other than the Standalone Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the preparation of the otherinformation. The other information comprises the information included in the ManagementDiscussion and Analysis Board's Report including Annexures to Board's Report Business
Responsibility Report Corporate Governance and Shareholder's Information but does notinclude the standalone financial statements and our auditor's report thereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.If based on the work we have performed we conclude that there is a material misstatementof this other information we are required to report that fact. We have nothing to reportin this regard.
Management's Responsibility for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the financial position financial performance totalcomprehensive income changes in equity and cash flows of the Company in accordance withthe Ind AS and other accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
The Board of Directors are responsible for overseeing the Company's financial reportingprocess.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalone financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient basis for our opinion. Therisk of not detecting a material misstatement resulting from fraud is higher than for oneresulting from error as fraud may involve collusion forgery intentional omissionsmisrepresentations or the override of internal control.
Obtain an understanding of internal financial controls relevant to the audit in orderto design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has an adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalone financialstatements including the disclosures and whether the standalone financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in (i) planning the scope of our auditwork and in evaluating the results of our work; and
(ii) to evaluate the effect of any identified misstatements in the financialstatements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by Section 143(3) of the Act based on our audit we report that: a) Wehave sought and obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes of our audit. b) In our opinionproper books of account as required by law have been kept by the Company so far as itappears from our examination of those books. c) The Balance Sheet the Statement of Profitand Loss including Other Comprehensive Income Statement of Changes in Equity and theStatement of Cash Flow dealt with by this Report are in agreement with the relevant booksof account. d) In our opinion the aforesaid standalone financial statements comply withthe Ind AS specified under Section 133 of the Act read with the Rules made thereunder andin force for the time being. e) On the basis of the written representations received fromthe Directors as on March 31 2019 taken on record by the Board of
Directors of the Company none of the directors is disqualified as on March 31 2019from being appointed as a director in terms of Section 164 (2) of the Act. f) With respectto the adequacy of the internal financial controls over financial reporting of the Companyand the operating effectiveness of such controls refer to our separate Report in"Annexure A". Our report expresses an unmodified opinion on the adequacy andoperating effectiveness of the Company's internal financial controls over financialreporting. g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended: We report thatthe excess over minimum remuneration paid to the Managing Director for the year 2018-19and also the excess remuneration to the Managing Director and Executive Director in someof the earlier years is being presented to the ensuing AGM for its approval in accordancewith the amended provisions of the Companies Act 2013. h) With respect to the othermatters to be included in the Auditor's Report in accordance with Rule 11 of the Companies(Audit and Auditors) Rules 2014 as amended in our opinion and to the best of ourinformation and according to the explanations given to us: i. The Company has disclosedthe impact of pending litigations on its financial position in its standalone financialstatements. ii. The Company has made provision as required under the applicable law oraccounting standards for material foreseeable losses if any on long-term contractsincluding derivative contracts. iii. There has been no delay in transferring amountsrequired to be transferred to the Investor Education and Protection Fund by the Company.
2. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section
143(11) of the Act we give in "Annexure B" a statement on the mattersspecified in paragraphs 3 and 4 of the Order.
| ||For M BHASKARA RAO & Co |
| ||Chartered Accountants |
| ||(Firm's Registration No. 000459S) |
| ||M. BHASKARA RAO |
| ||Partner |
| ||(Membership No.5176) |
|Place: Hyderabad || |
|Date: May 15 2019 || |
ANNEXURE "A" TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 1(f) under Report on Other Legal and RegulatoryRequirements' section of our report to the Members of TAJGVK Hotels & Resorts Limitedof even date) Report on the Internal Financial Controls Over Financial Reporting underClause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 ("theAct")
We have audited the internal financial controls over financial reporting of TAJGVKHotels & Resorts Limited ("the Company") as of March 31 2019 in conjunctionwith our audit of the standalone financial statements of the Company for the year ended onthat date.
Management's Responsibility for Internal Financial Controls
The Board of Directors of the Company is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to respective company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013.
Our responsibility is to express an opinion on the internal financial controls overfinancialreporting of the Company based on our audit.
We conducted our audit in accordance with the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting (the "Guidance Note") issued by theInstitute of Chartered Accountants of India and the Standards on Auditing prescribed underSection 143(10) of the Companies Act 2013 to the extent applicable to an audit ofinternal financialcontrols. Those Standards and the
Guidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsover financial reporting was established and maintained and if such controls operatedeffectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficientand appropriate toprovide a basis for our audit opinion on the internal financial controls system overfinancial reporting of the Company.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial financialreporting includesthose policies and procedures that control over (1) pertain to the maintenance of recordsthat in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the are being made only in accordance with authorisations of managementand directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorised acquisition use or disposition of the company's assetsthat could have a material effect on the financial statements.
Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or management override of controlsmaterial misstatements due to error or fraud may occur and not be detected. Alsoprojections of any evaluation of the internal financialcontrols over financialreporting tofuture periods are subject to the risk that the internal financial control overfinancialreporting may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.
Without qualifying our opinion we report that the company noticed a breach of some ofthe internal financial employees of the company resulting in a loss of Rs.126 Lakhs asexplained in foot note to Note No.21 to the financial statements. The said internalfinancial controls have since been restored at the date of the Balance Sheet.
In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financialcontrolssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at March 31 2019 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.
| ||For M BHASKARA RAO & Co |
| ||Chartered Accountants |
| ||(Firm's Registration No. 000459S) |
| ||M. Bhaskara Rao |
|Place: Hyderabad ||Partner |
|Date: May 15 2019 ||(Membership No.5176) |
ANNEXURE B' TO THE INDEPENDENT AUDITOR'S REPORT
(Referred to in paragraph 2 under Report on Other Legal and RegulatoryRequirements' section of our report to the Members of TAJGVK Hotels & Resorts Limitedof even date)
i. In respect of the Company's fixed assets:
(a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a program of verification to cover all the items of fixed assets ina phased manner which in our opinion is reasonable having regard to the size of theCompany and the nature of its assets. Pursuant to the program some of the fixed assetswere physically verified by the management during the year. According to the informationand explanations given to us no material discrepancies were noticed on such verification.
(c) According to the information and explanations furnished to us and based on therecords examined by us the title deeds of immovable properties included in the fixedassets register are held in the name of the Company.
ii. According to the information and explanations furnished to us the Company'sManagement has physically verified its inventories of stores consumables and spares. Inour opinion having regard to the nature of its business and location of its stocks thefrequency of verification is reasonable. As per the information and explanations furnishedto us the discrepancies noticed on such verification were not material and have beenproperly dealt with in the books of account.
iii. According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the Register maintained under Section 189 of the
Companies Act 2013. Accordingly the provisions of Clause 3 (iii) (iii) (a) (iii)(b) and (iii) (c) of the said Order are not applicable to the Company. iv. In our opinionand according to the information and explanations furnished to us the Company has notgranted any loans or made any investments or provided any guarantees or security duringthe year to any of the parties specified
186 of the Companies Act 2013. Accordingly the provisions of Clause 3 (iv) of thesaid Order are not applicable to the Company. v. In our opinion and according to theinformation and explanations given to us the Company has not accepted any deposits frompublic within the meaning of Sections 73 74 75 and 76 of the Act and the Rules framedthereunder to the extent notified.
Accordingly reporting under provisions of paragraph 3(v) of the Order does not arise.vi. According to the information furnished to us maintenance of Cost Records has not beenspecified by the Central Government under Section 148(1) of the Companies Act 2013 forthe business carried out by the company. Thus reporting under Clause 3(vi) of the Orderdoes not arise. vii. According to the information and explanations furnished to us (a)The Company has generally been regular in depositing undisputed statutory dues includingProvident Fund Employees' State Insurance Income-tax Sales Tax Wealth Tax ServiceTax Customs Duty Excise Duty Value Added Tax Cess and other all statutory duesapplicable to it with the appropriate authorities and there were no such dues on thedate of the Balance Sheet (b) Details of disputed dues of Income Tax Sales Tax ServiceTax Customs Duty Excise Duty Value added Tax which have not been deposited as on March31 2019 are as below:
|Name of the Statute ||Nature of Dues ||Amount Rs. In Lakhs ||Period to which the amount relates ||Forum where the dispute is pending |
|Income Tax Act 1961 ||Income Tax ||7.60 ||2009-10 ||Assessing officer |
| || ||51.57 ||2006-07 ||CIT (Appeals) |
| || ||151.08 ||2012-13 ||ITAT Hyderabad |
|AP VAT Act ||VAT ||294.04 ||2008-09 to 2010-11 ||Hon'ble High Court of Andhra Pradesh |
| || ||13.36 ||2008-09 ||Sales Tax Tribunal |
|Service Tax ||Service Tax ||0.57 ||2005-06 to 2008-09 ||Commissioner of Appeals Chandigarh |
| || ||2477.10 ||2006 to 2011 ||CESTAT Hyderabad |
| || ||64.08 ||2009-10 to 2011-12 ||CESTAT Hyderabad |
viii. According to the information and explanations given to us and based on therecords examined by us the Company has not defaulted in respect of repayment of loans orborrowings to financial institutions banks and government. The Company has not issueddebentures.
ix. According to the information furnished to us during the year under report thecompany did not have any moneys raised from Initial Public Offering or Further PublicOffering that remained to be applied for the purposes for which they were raised. Thusreporting under Clause 3(ix) of the Order does not arise.
x. To the best of our knowledge and according to the information and explanationsfurnished to us no fraud by the Company and no material fraud on the Company by itsofficers or employees has been noticed or reported during the year. However attention isdrawn to foot note to Note No 21 of the financial statements about the misappropriation offunds estimated at Rs.126 Lakhs by some of the employees of the company.
xi. According to the information and explanations given to us and based on the recordsexamined by us we report that Excess over Minimum Remuneration paid to the ManagingDirector for the year 2018-19 and also the excess remuneration to the Managing Directorand Executive Director in some of the earlier years is being presented to the ensuing AGMfor its approval in accordance with the amended provisions of the Companies Act 2013.
xii. The Company is not a Nidhi Company and hence reporting under clause 3 (xii) of theOrder does not arise. xiii. In our opinion and according to the information andexplanations given to us the Company is in compliance with Section 177 and 188 of theCompanies Act 2013 where applicable for all transactions with the related parties andthe details of related party transactions have been disclosed in the Standalone Ind ASFinancial Statements as required by the applicable Accounting Standards. xiv. During theyear the Company has not made any preferential allotment or private placement of sharesor fully or partly paid convertible debentures and hence reporting under clause 3 (xiv) ofthe Order does not arise.
xv. In our opinion and according to the information and explanations furnished to usduring the year the Company has not entered into any non-cash transactions to which theprovisions of Section 192 0f the Companies Act 2013 apply with its directors or personsconnected with them.
xvi. In our opinion based on the information and explanations furnished to us theCompany is not required to be registered under section 45-IA of the Reserve Bank of IndiaAct 1934.
| ||For M BHASKARA RAO & Co |
| ||Chartered Accountants |
| ||(Firm's Registration No. 000459S) |
| ||M. Bhaskara Rao |
|Place: Hyderabad ||Partner |
|Date: May 15 2019 ||(Membership No.5176) |