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

Kaveri Textiles Ltd had a net worth of Rs 320 crore, turnover of Rs 780 crore and net profit of Rs 6 crore in the immediately preceding financial year. Which statement about its CSR obligation under Section 135 is correct?

Section 135 applies because the tests are alternatives. Meeting any one of net worth of Rs 500 crore, turnover of Rs 1,000 crore or net profit of Rs 5 crore in the immediately preceding financial year is enough, and Kaveri Textiles has net profit of Rs 6 crore.

  1. ASection 135 does not apply because net worth and turnover are below the thresholds
  2. BSection 135 applies because the net profit is Rs 5 crore or more, even though the other two thresholds are not metCorrect
  3. CSection 135 applies only if all three thresholds are met
  4. DSection 135 applies only if net profit exceeds Rs 10 crore

Explanation

The thresholds are alternative (net worth Rs 500 crore or more, OR turnover Rs 1,000 crore or more, OR net profit Rs 5 crore or more) in the immediately preceding financial year. Net profit of Rs 6 crore meets the third limb, so the section applies. The option requiring all three limbs wrongly treats the tests as cumulative.

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