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Meru Textiles Ltd, a company liable under section 135, had an average net profit of Rs 40 crore over its three immediately preceding financial years. It spent only Rs 50 lakh on CSR in the current year against the prescribed amount, and none of the unspent amount relates to an ongoing project. What must the Board do about the shortfall?

The Board must state the reasons for not spending in its report and transfer the unspent Rs 30 lakh to a Fund specified in Schedule VII within six months of the financial year's expiry, because the shortfall does not relate to an ongoing project.

  1. ACarry the shortfall forward to the next year without any transfer or disclosure
  2. BSpecify the reasons in the Board's report and transfer the unspent amount to a Schedule VII Fund within six months of the expiry of the financial yearCorrect
  3. CTransfer the unspent amount to the Unspent CSR Account within thirty days of the year end
  4. DPay a penalty and take no further action on the unspent amount

Explanation

The prescribed amount is 2% of Rs 40 crore = Rs 80 lakh, so Rs 30 lakh is unspent. Since it is not for an ongoing project, the Board must give reasons in its report and transfer it to a Schedule VII Fund within six months of the financial year end. The Unspent CSR Account route is only for ongoing projects.

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