Page 8 - 31. COMPILER QB - CSR

● a net profit of Rs. 5 crore or more
during the immediately preceding financial year shall constitute a Corporate Social Responsibility (CSR)
Committee.

In the given case, the average net profits of immediate preceding financial year of Sun Shine Limited is Rs.
1,80,00,000 (i.e. Rs. 1.80 crore). Hence, net profit criteria is not met.
Company is covered under the ambit of CSR rules (assuming that net worth or turnover criteria is met):
Since it is given in the question that the company seems to be covered under the ambit of CSR rules, it is
assumed that either the net worth of Sun Shine Limited might have exceeded Rs. 500 crore or more, or

turnover might have exceeded Rs. 1,000 crore or more during immediate preceding financial year. Accordingly,
CSR provisions are applicable to Sun Shine Limited irrespective of the fact that the company is in its second
year of operations.
If the company meets any one of the thresholds in the immediately preceding previous year, then the
contention of the accountant is incorrect that CSR provisions will not be applicable to the company as it is

only one year old.
The accountant wants to carry forward the excess amount spent on account of CSR activities to future years
which is Rs. 1,20,000 [Rs. 40,000 x 12 - (Rs. 1,80,00,000 x 2%)]. The excess CSR spending can be set off
against the required 2% CSR expenditure up to the immediately succeeding 3 financial years subject to
compliance with the conditions mentioned under Rule 7(3) of Companies (CSR Policy) Rules, 2014. However,
the excess amount spent on CSR activities can be set off from 22 January 2021. No carry forward in financial

years before FY 2020-21.

Q8 (July 21 – 4 Marks)

st
Nice Limited is a company incorporated on 1 April 2019. The Company has a net worth of Rs. 350 crore. The
business of the company was affected due to low demand of its products. The following financial data is

st
available as on 31 March 2021:
Rs. in crore
31 March 2020 31 March 2020
st
st
Audited Provisional
Net Profit 7.10 4.80
Turnover 550.00 1,050.00
During the financial year 2020-2021:

 The Company has spent Rs. 55,000 per month for developing vocational skills of local youth;
 The Company has also provided its products at a considerable discount for the benefit of the

under-privileged, the cost of which to the Company is Rs. 3,50,000.
The Company wants to carry forward its entire expenditure to next year as it is of the opinion that
it does not have to spend anything on CSR activities during the current year.

Comment on the Company's applicability under Corporate Social Responsibility as per section 135 of
the Companies Act, 2013 for the financial year 2020 -2021. Does it have any obligation to transfer
any amount to any fund?

31. 7