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CS Professional · CSR and Social Governance · CSR Policy

Pragati Metals Ltd is covered by section 135(1). Based on its average net profits of the three preceding years, the amount it must spend under section 135(5) is Rs 40 lakh. Which statement is correct?

The Committee need not be constituted, because the amount to be spent is Rs 40 lakh, which does not exceed fifty lakh rupees. Under section 135(9), the Board of Directors discharges the Committee's functions instead, and the spending obligation continues.

  1. AIt must still constitute a CSR Committee of three or more directors
  2. BThe requirement to constitute the Committee is not applicable, and the Board of Directors discharges the Committee's functionsCorrect
  3. CThe requirement lapses and nobody need perform the Committee's functions
  4. DThe Committee must be constituted with two directors only

Explanation

Under section 135(9), where the amount to be spent under section 135(5) does not exceed fifty lakh rupees, the requirement of constituting the Committee does not apply. The Committee's functions are then discharged by the Board. Rs 40 lakh is below the limit. The spending obligation itself continues, so the functions are not dropped.

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