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CS Professional · CSR and Social Governance · Corporate Social Responsibility

Kaveri Textiles Ltd had a net worth of Rs 320 crore, turnover of Rs 740 crore and net profit of Rs 5.4 crore in the immediately preceding financial year. Does Section 135 apply to it for the current year?

Section 135 applies because the three thresholds are alternatives. Net profit of Rs 5.4 crore in the immediately preceding year is above Rs 5 crore, so the company must comply even though its net worth and turnover are below the limits.

  1. ANo, because net worth is below Rs 500 crore and turnover is below Rs 1,000 crore
  2. BYes, because net profit of Rs 5 crore or more meets one of the three thresholdsCorrect
  3. CNo, because all three thresholds must be met together
  4. DYes, but only if the average net profit of three years exceeds Rs 5 crore

Explanation

Section 135(1) applies if the company has net 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 year. The thresholds are alternative. Net profit of Rs 5.4 crore satisfies the third one. The option requiring all three is wrong because the test is 'or'.

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