CA Inter P2 · Chapter 8 · Question 8 of 10
Verdant Ltd is required to comply with section 135. Its net profits computed under section 198 for the three immediately preceding financial years were ₹12 crore, ₹15 crore and ₹18 crore. What is the minimum CSR expenditure for the current financial year?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) ₹30 lakh
Explanation
Section 135(5) requires the Board to ensure that the company spends at least two per cent of its average net profits made during the three immediately preceding financial years. Average = (12 + 15 + 18) / 3 = ₹15 crore. CSR obligation = 2% x ₹15 crore = ₹0.30 crore = ₹30 lakh. Using only the latest year's profit would give ₹36 lakh, which is wrong.
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