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CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Corporate and Economic Laws

Case: Sahyadri Textiles Ltd, a listed company, has a net worth of Rs 600 crore, turnover of Rs 1,800 crore and net profit of Rs 4 crore in the preceding year. Its board is deciding whether it must constitute a Corporate Social Responsibility Committee. Under section 135 of the Companies Act, 2013, which test applies?

Section 135 applies when any one of three thresholds is met in the immediately preceding financial year: net worth of Rs 500 crore, turnover of Rs 1,000 crore, or net profit of Rs 5 crore. Sahyadri meets net worth and turnover, so the CSR provisions apply despite its lower profit.

  1. ANet worth of Rs 500 crore or more, or turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more, in the immediately preceding financial yearCorrect
  2. BNet worth, turnover and net profit thresholds must all be satisfied together
  3. COnly net profit of Rs 5 crore or more in any of the preceding three years
  4. DOnly a listed company with a paid-up capital above Rs 100 crore

Explanation

Section 135 applies if any one of the thresholds is met in the immediately preceding financial year: net worth Rs 500 crore or more, turnover Rs 1,000 crore or more, or net profit Rs 5 crore or more. Sahyadri meets net worth and turnover even though its profit is only Rs 4 crore. The conditions are alternative, not cumulative.

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