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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Empowerment of the Company Secretary Profession

Ganga Pulses Producer Company Limited had turnover of Rs 4 crore, Rs 6 crore and Rs 8 crore in the last three consecutive financial years. The prescribed amount is Rs 5 crore. Which is correct regarding Section 378X(1)?

No obligation arises yet. Section 378X(1) requires average annual turnover above Rs 5 crore in each of three consecutive financial years. The first year's Rs 4 crore falls short, so the three-year condition is not met, even though later years exceeded the limit.

  1. AObligation arises, as turnover exceeded Rs 5 crore in the latest year
  2. BObligation arises, as turnover exceeded Rs 5 crore in two of the three years
  3. CNo obligation arises, because the average annual turnover in each year must exceed the limit in each of three consecutive years, and the first year did notCorrect
  4. DNo obligation arises, because turnover below Rs 10 crore is exempt

Explanation

The test requires turnover exceeding the limit in each of three consecutive financial years. In the first year, Rs 4 crore is below Rs 5 crore, so the condition fails. Exceeding the limit in only the latest two years does not satisfy it, and there is no Rs 10 crore threshold.

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