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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Corporate Social Responsibility (CSR)

Kapoor Steels Ltd had a CSR obligation of Rs 2 crore for the year and spent only Rs 1.2 crore. The Rs 0.8 crore balance does not relate to any ongoing project, and the Board has explained the reasons in its report. Which action does the Companies Act, 2013 require for the unspent amount?

Because the unspent Rs 0.8 crore does not relate to an ongoing project, the company must disclose reasons in the Board's report and transfer the amount to a Fund specified in Schedule VII within six months of the end of the financial year.

  1. ACarry it forward indefinitely to next year's budget without any transfer
  2. BTransfer it to a Fund specified in Schedule VII within six months of the expiry of the financial yearCorrect
  3. CTransfer it to an Unspent CSR Account within thirty days and spend it over three years
  4. DPay it as a penalty to the Central Government immediately

Explanation

Under the second proviso to section 135(5), if the company fails to spend, the Board must specify reasons in its report and, unless the unspent amount relates to an ongoing project, transfer it to a Schedule VII Fund within six months of the expiry of the financial year. The Unspent CSR Account route under section 135(6) applies only to ongoing projects.

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