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Hind Textiles Ltd had a turnover of Rs 400 crore, net worth of Rs 300 crore and net profit of Rs 6 crore in the immediately preceding financial year. Which statement is correct about the applicability of the CSR provisions of section 135 to it for the current year?

Section 135 applies to Hind Textiles because meeting any one threshold is enough, and its net profit of Rs 6 crore exceeds the Rs 5 crore limit in the immediately preceding year. Missing the net worth and turnover thresholds is irrelevant, since the three tests are alternatives.

  1. ASection 135(1) applies because its net profit is Rs 5 crore or moreCorrect
  2. BIt is exempt because turnover is below Rs 1,000 crore
  3. CIt is exempt because net worth is below Rs 500 crore
  4. DApplicability depends on net profit of the three preceding years averaged

Explanation

Section 135(1) applies if any one of three 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. Net profit of Rs 6 crore meets the third threshold. The other thresholds are alternatives, so missing them does not exempt the company. The three-year average is used only to compute the spending amount.

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