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

Orchid Steels Ltd's Board is computing the net profit used to determine CSR spending. Which statement about the computation is correct under section 135?

Net profit for CSR is calculated in accordance with section 198 of the Companies Act, and it excludes such sums as may be prescribed. It is not simply book profit after tax or a figure computed under income-tax law.

  1. ANet profit is the profit after tax shown in the books, without any statutory adjustment
  2. BNet profit is calculated in accordance with section 198 and excludes such sums as may be prescribedCorrect
  3. CNet profit is the gross receipts less the CSR expenditure of the year
  4. DNet profit is calculated only under the Income-tax law

Explanation

The Explanation to section 135 states that net profit is calculated in accordance with section 198 and shall not include such sums as may be prescribed. Book profit or tax profit is not the stated basis.

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