Excel for
General Circular No. 01/2016
No.05/19/2015-CSR
5
th
Floor, 1A' Wing.
To Subject:-Frequently Asked Questions {FAQS) with regard to Corporate Social Responsibility under section 135 of the Companies Act, 2013. Sir, Section 135 of the Companies Act, 2013, Schedule VII of the Act and Companies CSR Policy Rules, 2014 read with General Circular dated 18.06.2014 issued by the Ministry of Corporate Affairs, provide the broad contour within which eligible Companies are required to formulate their CSR policies including activities to be undertaken and implement the same in the right earnest. While complying with the Corporate Social Responsibility (CSR) provisions of the Act, Board of the eligible companies are empowered to appraise and approve their CSR policy including CSR projects or programmes or activities to be undertaken. In this connection, Ministry has been receiving several queries and references seeking further clarifications on various issues relating to CSR provision of the Act. 2. In continuation to this Ministry's General Circular dated 18th June, 2014 and 17th September, 2014, a set of FAQs along with response of the Ministry is provided for facilitating effective implementation of CSR : FREQUENTLY ASKED QUESTIONS ON CORPORATE SOCIAL RESPOSIBITITIES 1. Whether CSR provisions of the Companies Act, 2013 is applicable to all companies? CSR provisions of the Companies Act 2013 is applicable to every company registered under the Companies Act 2013 and any other previous. Companies law having: · net worth of rupees five hundred crore or more, or · turnover of rupees one thousand crore or more or · a net profit of rupees five crore or more during any financial year
2. What is meaning of 'any financial year' mentioned above?
3. Whether CSR expenditure of a company can be claimed as a business expenditure?
4. Whether the 'average net profit' criteria for section 135(5) is Net profit before tax or Net profit after tax?
5. Can the CSR expenditure be spent on the activities beyond Schedule VII?
6. What tax benefits can be availed under CSR? 7. Which activities would not qualify as CSR? • The CSR projects or programs or activities that benefit only the employees of the company and their families. • One-off events such as marathons/awards/charitable contribution/ advertisement/sponsorships of TV programmes etc. • Expenses incurred by companies for the fulfillment of any other Act/ Statute of regulations (such as labour Laws, land Acquisition Act, 2013, Apprentice Act, 1961etc.) • Contribution of any amount directly or indirectly to any political party. • Activities undertaken by the company in pursuance of its normal course of business. • The project or programmes or activities undertaken outside India
8. Whether a holding or subsidiary of a company which fulfils the criteria under section 135(1) has to comply with section 135, even if the holding and subsidiary itself does not fulfill the criteria
9. Whether provisions of CSR are applicable on Section 8 Company, if it fulfills the criteria of section 135(1) of the Act
10. Can contribution of money to a trust/Society/Section 8 Companies by a company
be treated as CSR expenditure of the company? 11. Whether display of CSR policy of a company on website of the company is mandatory or not?
As per section 135(4) the Board of Directors of the company shall, after taking into account the recommendations of CSR Committee, approve the CSR Policy for the company and disclose contents of such policy in its report and the same shall be displayed on the company's website, if any (refer Rule 8 & 9 of CSR Policy, Rules 2014) 12. Whether reporting of CSR is mandatory in Board's Report?
The Bo rd's Report' of a company qualifying under section 135(1) pertaining to a financial year commencing on or after the 1
st
day of April, 2014 shall include an annual report on CSR containing particulars specified in Annexure (refer Rule 9 of CSR Policy, Rules 2014) 13. Whether it is mandatory for Foreign Company to give report on CSR activity?
In case of a foreign company, the balance sheet filed under sub-clause (b) of sub- section (1) of section 381 shall contain an Annexure regarding report on CSR
14. Whether contribution towards disaster relief qualifies as CSR or not?
15. Whether contribution ·in kind can be monetized to be shown as CSR expenditure?
16. If a company spends in excess of 2% of its average net profit of three preceding years on CSR in a particular year, can the excess amount spent be carried forward to the next year and be offset against the required 2% CSR expenditure of the next year?
17. Can the unspent amount from out of the minimum required CSR expenditure be carried forward to the next year?
18. What is the role of Government in monitoring implementation of CSR by companies under the provision of the Companies Act, 2013? The existing legal provisions like mandatory disclosures, accountability of the CSR Committee and the Board, provisions for audit of the accounts of the company etc., provide sufficient safeguards in -this regard. Government has no role to play in monitoring implementation of CSR by companies.
19. Whether government is proposing to establish any mechanism for third parties to monitor the quality and efficacy of CSR expenditure as well as to have an impact assessment of CSR by Companies?
20. Can CSR funds be utilized to fund Government Scheme? However, under CSR provision of the Act and rules made thereunder the board of the eligible company is competent to take decision on supplementing any Government Scheme provided the scheme permits corporates participation and all provisions of Section 135 of the Act and rules there under are compiled by the company.
21. Who is the appropriate authority for approving and implementation of the CSR programmes /projects of a Company? What is Government's role in this regard? Therefore, all CSR programmes I projects should be approved by the Boards on the recommendations of their CSR Committees. Changes, if any, in the programme project should also be undertaken only with the approval of the Committee I Board.
22. How can companies with small CSR funds take up CSR activities in a projectIprogramme mode?
23. Whether involvement of employees of the company in CSR project I programmes of a company can be monetized and accounted for under the head of 'CSR expenditure'? 3. This issues with the approval of the Competent Authority. Yours faithfully,
(Seema Rath)
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