Total CSR Expenditure Limit of 5% on Capacity Building of Employees/Personnel to include administrative overheads also-Rule 4(6)

As per section 135 of the Companies Act, 2014, certain companies are required to expend at least two percent of average net profits on corporate social activities.

As per the Companies (Corporate Social Responsibility Policy) Rules, 2014, companies are allowed to expend up to five percent of total CSR activities in building CSR capacities of their own personnel or those of Implementing agencies.

Now by the notification dated 12-09-2014, Mac has amended the clause 6 of the relevant rule 4 related to CSR activities to include expenditure on administrative overheads also as part of total CSR expenditure and accordingly the limit of five percent as above shall be calculated on CSR expenditure including administrative overheads.

The Rule 4 is reproduced hereunder:

4. CSR Activities.-

(1)  The CSR activities shall be undertaken by the company, as  per its stated  CSR  Policy , as projects or programs or activities (either new or ongoing), excluding activities undertaken in pursuance of its normal course of business.

(2)  The Board of a company may decide to undertake its CSR activities approved by the CSR Committee , through a registered  trust or a registered society or a company established by the company or its holding or subsidiary or associate company under section8 of the Act or otherwise:

Provided that-

(i)    if such trust, society or company is not established by the company or its holding or subsidiary or associate company, it shall have an established track record of three  years in undertaking similar programs or projects;

(ii)    the company has specified the project or programs to be undertaken through these entities, the modalities of utilization of funds on such projects and programs and the monitoring and reporting mechanism.

(3)   A company may also collaborate with other companies for undertaking projects or programs or CSR activities in such a manner that the CSR Committees of  respective companies  are in a position to report separately on such projects or programs in accordance with these rules.

(4)   Subject to provisions of sub-section (5) of section 135 of the Act, the CSR projects or programs or activities undertaken in India only shall amount to CSR Expenditure.

(5)   The CSR projects or programs or activities that benefit only the employees of the company and their families shall not be considered as CSR activities in accordance with section 135 of the Act.

(6)  Companies may build CSR capacities of their own personnel as well as those of their Implementing agencies through Institutions with established track records of at least three financial years but such expenditure shall not exceed five percent of total CSR expenditure of the company in one financial year.

(7)   Contribution of any amount directly or indirectly to any political party under section 182 of the Act, shall not be considered as CSR activity.

 

The notification dated 12-09-2014 is as under:

 

[To be published in the Gazette of India, Extraordinary, Part D, section 3, sub­ section (i)]

MINISTRY OF CORPORATE AFFAIRS

NOTIFICATION

New Delhi, the 12 ^th September, 2014

 

G.S.R..... (E). - In exercise of the powers conferred under section 135 and sub- sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules to amend the Companies (Corporate Social Responsibility Policy) Rules, 2014, namely:-

1. (1)   These rules may be called the Companies (Corporate Social Responsibility Policy) Amendment  Rules, 2014.

    (2)   They shall come into force on the date of their publication in the Official Gazette.

2. In the Companies (Corporate Social Responsibility Policy) Rules, 2014, in rule 4, in sub-rule (6), after the words "but such expenditure" the words and comma "including expenditure on administrative overheads," shall be inserted.

[F.  No.l/ WCL-V-Part]
MANOJ KUMAR, Jt. Secy.

Note: The principal notification was published in the Gazette of India vtde No. G.S.R.
129(E),dated  27.02.2014.

Companies   (Corpor   ate   Social   Responsibility   Policy) Rules   ,   2014.  Click Here >>

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Note: MCA has clarified that consequent to this notification, clause (iv) of Circular 21/2014 dated 18-06-2014 stands omittedClick Here