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CSEET · Economic and Business Environment · Elements of Corporate Governance

A company's CSR obligation for the year is Rs 80 lakh. It fails to spend Rs 20 lakh, and this amount does not relate to any ongoing project. According to Section 135, what must the Board do about the Rs 20 lakh?

For unspent CSR money not linked to an ongoing project, the Board must state the reasons in its report and transfer the amount to a Fund specified in Schedule VII within six months of the end of the financial year. The Unspent CSR Account applies only to ongoing projects.

  1. ACarry it forward to next year's CSR budget without any transfer
  2. BSpecify the reasons in the Board's report and transfer it to a Fund specified in Schedule VII within six months of the expiry of the financial yearCorrect
  3. CTransfer it to the Unspent CSR Account within thirty days and spend it within three years
  4. DCredit it to general reserves after disclosing reasons

Explanation

Under the second proviso to section 135(5), the Board gives reasons in its report and, unless the amount relates to an ongoing project, transfers it to a Schedule VII Fund within six months of the end of the year. The Unspent CSR Account route in the third option applies only to ongoing projects.

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