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

Meridian Pharma Ltd has an average net profit of Rs 30 crore, so its CSR obligation is Rs 60 lakh. It spent only Rs 20 lakh on ongoing projects, and the remaining Rs 40 lakh relates to those ongoing projects. It failed to spend the remaining Rs 40 lakh. What must the company do?

Meridian must transfer the Rs 40 lakh to the Unspent CSR Account in a scheduled bank within thirty days of year end and spend it within three financial years. Failing that, it goes to a Schedule VII Fund within thirty days after the third year.

  1. ATransfer Rs 40 lakh to a Schedule VII Fund within six months of year end
  2. BCarry Rs 40 lakh forward with no transfer, noting reasons in the Board report
  3. CTransfer Rs 40 lakh to the Unspent CSR Account within thirty days of year end, and spend it within three financial yearsCorrect
  4. DPay a penalty of Rs 80 lakh immediately

Explanation

Under section 135(6), unspent amounts relating to an ongoing project go to a special Unspent CSR Account in a scheduled bank within thirty days of the financial year end, to be spent within three financial years. Otherwise it goes to a Schedule VII Fund. The six-month Fund route applies to non-ongoing amounts.

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