TaxTMI 
TaxTMI 
Frequently Asked Questions (FAQs) with regard to Corporate Social Responsibility under section 135 of the Companies Act, 2013
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....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 ....
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....3 shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession. 4. WHETHER THE 'AVERAGE NET PROFIT' CRITERIA FOR SECTION 135(5) IS NET PROFIT BEFORE TAX OR NET PROFIT AFTER TAX? Computation of net profit for section 135 is as per section 198 of the Companies Act, 2013 which is primarily PROFIT BEFORE TAX (PBT). 5. CAN THE CSR EXPENDITURE BE SPENT ON THE ACTIVITIES BEYOND SCHEDULE VII? General Circular No. 21/2014 dated June 18, 2014 of MCA has clarified that the statutory provision and provisions of CSR Rules, 2014, is to ensure that activities undertaken in pursuance of the CSR policy must be relatable to Schedule VII of the Companies Act, 2013.....
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....ther Act/ Statue of regulations (such as Labour Laws, Land Acquisition Act, 2013, Apprentice Act, 2013, Apprentice Act, 1961 etc.) • 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. Holding or subsidiary of a company does not have to comply with section 135(1) unless the holding or subsidiary itself fulfills th....
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....ort 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? (May please refer point no. 7 to the annexure to General Circular dated 18.06.2014 issued by Ministry of Corporate Affairs). 15. WHETHE....
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.... the country. 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? Government has no role to play in engaging external experts for monitoring the quality and efficacy of CSR expenditure of companies. Boards / CSR Committees are fully competent to engage third parties to have an impact asse....
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....orate 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. Therefore, all CSR programmes/ 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 / Board. 22. HOW CAN COMPANIES WITH SMALL CSR FUNDS TAKE UP CSR ACTIVITIES IN A PROJECT/ PROGRAMME MODE? A well designed CSR project or programme can be managed with even small fund. Further, there is a provision in the CSR policy Rules, 2014 that such companies can combine their CSR programs with ....