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CS Professional · CSR and Social Governance · Corporate Social Responsibility

Arjun Pharma Ltd is covered by Section 135 and fails to spend part of its CSR amount, Rs 30 lakh, in a year. The amount does not relate to any ongoing project, and the Board has given reasons in its report. By when must it transfer the unspent amount, and what is the maximum company penalty for default on this amount?

The amount must go to a Fund specified in Schedule VII within six months of the expiry of the financial year, since it is not for an ongoing project. The company's penalty is twice the amount or Rs 1 crore, whichever is less, so here it is Rs 60 lakh.

  1. AWithin thirty days of year end to the Unspent CSR Account; penalty up to Rs 60 lakh
  2. BWithin six months of the expiry of the financial year to a Fund specified in Schedule VII; penalty of Rs 60 lakh, being twice the amount, as it is less than Rs 1 croreCorrect
  3. CWithin six months of the expiry of the financial year to a Fund specified in Schedule VII; penalty of Rs 30 lakh
  4. DWithin three financial years to a Schedule VII Fund; penalty of Rs 1 crore

Explanation

The second proviso to Section 135(5) requires a non-ongoing unspent amount to be transferred to a Schedule VII Fund within six months of the expiry of the financial year. Under Section 135(7), the company's penalty is twice the amount required to be transferred or Rs 1 crore, whichever is less. Twice Rs 30 lakh is Rs 60 lakh, which is below Rs 1 crore. The thirty-day Unspent CSR Account route applies only to ongoing projects.

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