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Ranjit Foods Ltd, an Indian company, had a net worth of Rs 300 crore, turnover of Rs 800 crore and net profit of Rs 6 crore in the immediately preceding financial year. Which statement correctly describes the applicability of Section 135 to the company for the current year?

Section 135 applies to Ranjit Foods because the thresholds are alternative. A net profit of Rs 5 crore or more in the immediately preceding financial year is enough, and Rs 6 crore satisfies it, even though net worth and turnover are below their limits.

  1. ASection 135 applies because its net profit in the immediately preceding year is Rs 5 crore or moreCorrect
  2. BSection 135 does not apply because net worth is below Rs 500 crore
  3. CSection 135 does not apply because turnover is below Rs 1,000 crore
  4. DSection 135 applies only if all three thresholds are met

Explanation

Section 135(1) applies if any one of the thresholds is met: net worth of Rs 500 crore or more, turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more in the immediately preceding financial year. Net profit of Rs 6 crore meets the profit test. The options saying that net worth or turnover alone must be met, or that all three are needed, wrongly treat the thresholds as cumulative.

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