Whether the average net profit criteria in section 135(5) is Net profit before tax or Net profit after tax?

Question

A private company is not required to appoint an independent director, whereas Section 135(1) states that the CSR Committee should have at least one independent director. Do private companies need to appoint an independent director to comply with this section?

Answer 1

Net profit before tax
The explanation to section 135(5) states that “average net profit” shall be calculated in accordance with section 198 of the Companies Act, 2013. In terms of section 198(5) (a) in making computation of net profits, income-tax and super-tax payable by the company under the Income-tax Act, 1961 shall not be deducted. Therefore, the net profit criterion in section 135(5) is net profit before tax.