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

Kaveri Foods Ltd's CSR obligation for the year was Rs 60 lakh, but it spent Rs 75 lakh on eligible activities. The Board asks about the excess Rs 15 lakh. Which statement is correct under section 135(5)?

Kaveri Foods may set off the excess Rs 15 lakh against its CSR requirement for succeeding financial years in the prescribed manner. The third proviso to section 135(5) allows this, so the excess neither lapses nor has to be transferred to a Fund.

  1. AThe excess must be transferred to a Schedule VII Fund
  2. BThe excess is taxed as a penalty
  3. CThe company may set off the excess against the requirement for succeeding financial years, in the prescribed mannerCorrect
  4. DThe excess lapses and cannot be used again

Explanation

The third proviso to section 135(5) permits a company that spends more than required to set off the excess against the spending requirement of succeeding financial years, as prescribed. It is neither lapsed nor transferred.

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