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Veda Textiles Ltd has a net worth of Rs 120 crore and a turnover of Rs 640 crore in the immediately preceding financial year. Its net profit for that year was Rs 5.4 crore. Under section 135, is the company required to constitute a CSR Committee and comply with the CSR provisions?

Yes. Section 135 applies when any one of the three thresholds is met: net worth of Rs 500 crore, turnover of Rs 1000 crore, or net profit of Rs 5 crore in the immediately preceding financial year. Veda's net profit of Rs 5.4 crore meets the profit limit, so the provisions apply.

  1. ANo, because net worth and turnover are both below the prescribed limits
  2. BYes, because its net profit is Rs 5 crore or more, and meeting any one threshold is enoughCorrect
  3. CNo, because all three thresholds must be met together
  4. DYes, but only if its net profit has been Rs 5 crore or more for three consecutive years

Explanation

Section 135(1) applies to a company having net worth of Rs 500 crore or more, or turnover of Rs 1000 crore or more, or net profit of Rs 5 crore or more in the immediately preceding financial year. The thresholds are alternative. Veda's net profit of Rs 5.4 crore satisfies one, so the section applies. The three-year test applies only to computing the spend, not to applicability.

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