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CS Professional · Compliance Management, Audit and Due Diligence · Non-Compliances, Penalties and Adjudications

Zenith Agro Pvt Ltd is a small company. A section provides a penalty of rupees five lakh on the company and rupees three lakh on each officer in default for a non-compliance. Applying the lesser-penalty provision, what is the maximum penalty on the company and on each officer in default?

The company's maximum penalty is two lakh rupees and each officer's is one lakh rupees. Half of the specified amounts would be 2.5 lakh and 1.5 lakh, but section 446B caps them at two lakh for the company and one lakh for an officer.

  1. ACompany 2,50,000; officer 1,50,000
  2. BCompany 2,00,000; officer 1,00,000Correct
  3. CCompany 2,00,000; officer 1,50,000
  4. DCompany 2,50,000; officer 1,00,000

Explanation

Section 446B caps the penalty at one-half of the specified penalty, subject to a maximum of two lakh rupees for a company and one lakh rupees for an officer. Company: half of 5,00,000 is 2,50,000, capped at 2,00,000. Officer: half of 3,00,000 is 1,50,000, capped at 1,00,000. Options using the uncapped halves ignore the ceiling.

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