CSEET · Economic and Business Environment · Elements of Corporate Governance
A company in default of section 135(5) in respect of an amount of Rs 20 lakh required to be transferred to a Schedule VII Fund. What is the penalty on the company under section 135(7)?
The company is liable to a penalty of Rs 40 lakh. Section 135(7) imposes twice the amount required to be transferred or one crore rupees, whichever is less, and twice Rs 20 lakh is Rs 40 lakh, which is lower than Rs 1 crore.
- ARs 40 lakh, being twice the amount, as it is less than one crore rupeesCorrect
- BRs 20 lakh
- CRs 1 crore
- DRs 2 lakh
Explanation
The company's penalty is twice the amount required to be transferred or one crore rupees, whichever is less. Twice Rs 20 lakh is Rs 40 lakh, which is below Rs 1 crore, so Rs 40 lakh applies. Rs 1 crore ignores the 'whichever is less' test.
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