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CS Professional · CSR and Social Governance · Corporate Social Responsibility

Veda Textiles Ltd, a company covered by section 135, had average net profits of Rs 40 crore over its three immediately preceding financial years. In the current financial year it spent Rs 70 lakh on CSR activities and gave no reason for the shortfall. What is the minimum amount the Board was required to ensure was spent in that year?

The Board must ensure at least two per cent of the average net profits of the three immediately preceding financial years is spent. Two per cent of Rs 40 crore is Rs 80 lakh, so the actual spend of Rs 70 lakh falls short by Rs 10 lakh.

  1. ARs 60 lakh
  2. BRs 80 lakhCorrect
  3. CRs 1 crore
  4. DRs 40 lakh

Explanation

The minimum spend is two per cent of the average net profits of the three immediately preceding financial years. Two per cent of Rs 40 crore is Rs 0.80 crore, or Rs 80 lakh. Rs 60 lakh would be 1.5 per cent, which is the wrong rate. Rs 70 lakh is the amount actually spent, not the requirement.

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