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CS Professional · CSR and Social Governance · Corporate Social Responsibility

Sundaram Textiles Ltd, an Indian company, had a net worth of Rs 320 crore, turnover of Rs 850 crore and net profit of Rs 5 crore in the immediately preceding financial year. Which statement is correct about the applicability of Section 135 to the company for the current year?

Section 135 applies because the three thresholds are alternatives, and net profit of Rs 5 crore or more in the immediately preceding financial year is sufficient. The company must constitute a CSR Committee, unless the amount it must spend does not exceed Rs 50 lakh, in which case the Board performs the committee functions.

  1. ASection 135 applies, because net profit of Rs 5 crore meets the threshold, and a CSR Committee must be constituted unless the amount to be spent is Rs 50 lakh or lessCorrect
  2. BSection 135 does not apply, because all three thresholds must be met together
  3. CSection 135 does not apply, because net profit must exceed Rs 5 crore
  4. DSection 135 applies only if the company is also listed on a stock exchange

Explanation

Section 135(1) applies to a company having net worth of Rs 500 crore or more, OR turnover of Rs 1,000 crore or more, OR net profit of Rs 5 crore or more. The thresholds are alternative, and net profit of Rs 5 crore is enough. Here the two-per-cent spend is on average profit of three years, so the committee can be dispensed with only if that amount is Rs 50 lakh or less. The 'all three together' option wrongly treats the tests as cumulative.

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