S No
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Companies Act 2013
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Writer’s Views
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1
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CSR means, carrying on
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programs or projects relating to activities
specified in Schedule VII to the act or
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those activities specified in the CSR
Policy of the Company prepared in line with the Schedule VII activities.
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In short CSR does
not consider the activities that are not falling under Schedule VII of the
Act.
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2
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Criteria
to be fulfilled:
Net worth>=INR 500 Crores OR
Turnover>= INR 1000
Crores OR
Net Profit >=INR 5 Crores
Net
Profit (NP) means:
NP as per its
financial statement prepared in accordance with applicable provisions of the
Companies Act 2013.
However it does not
include:
a. any
profit arising from Overseas Branch or branches of the Company whether
operated as a Separate Company or Otherwise.
b. Dividend
received
from other companies in compliance with the provisions of sec 135 of the act.
Re-Calculation of Net Profit:
Indian Company: not
required if the profits were calculated as per the applicable provisions of
the act
Foreign Company: required to be re-calculated in
terms of sec 381 (1)(a) read with Sec 198 of the Act.
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The financials of the Company as on March
31, 2014 shall be taken in to consideration while analyzing the fulfilment of
the criteria.
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If the Company does not fulfil these
criteria for 3 consecutive years after the Section being applicable to the
Company then the Company need not spend such amount until the company fulfils
the required criteria again.
Does
Branch include
Subsidiary also?
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3
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On fulfilling the
Criteria the CSR Committee is to
be formulated.
· Composition of the Committee:
Ø Private Company : Min 2 Directors
Ø Unlisted Public Company : Min 3 Directors
Ø Listed Company: Min 3 Directors, out of which atleast 1
should be an Independent Director
Ø Foreign Company: Min 2 Directors
(1
shall be a person as specified u/s 380 (1)(d) ie. Resident of India and the
other person shall be nominated by the foreign company)
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4
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Role of Committee:
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Formulation of CSR Policy for Board’s
approval
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The Committee to recommend the amount of
expenditure for carrying on the activities.
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The CSR Committee to institute a
transparent monitoring mechanism for monitoring the CSR activities and policy.
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A responsibility statement assuring the
compliance of the policy.
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Even if the
approved expenditure is unutilised, the same cannot be considered as
income for the company.
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5
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Role of Board:
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To consider and approve the proposed CSR
Policy
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To ensure spending such amount on
implementation of CSR activities. [Atleast 2% of previous 3 years average
profits (as calculated under Sec 198)]
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To make the disclosures said in point no. 6.
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Query?
1. If the specified 2% amount is not spent during the financial
year, can a provision be made in the financial statement towards the unspent
amount? (AS 29)?
2. Depending on the nature of activity can the expenditure be classified
as capital expenditure?
3. Previously, voluntary CSR expenses were allowed to be tax
deductable. Therefore will the same
continue even now?
4. Will Central Board of Direct Taxes (CBDT) give tax breaks on
CSR spending?
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6
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Disclosure:
Board’s Report:
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The Board’s report shall contain the
composition of the CSR Committee.
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If the Company fails to spend the 2% amount,
then such failure to spend the specified amount (min 2% of the 3 yr average
net profits) shall be reported along with reasons in the Boards’ Report
Annual
Report: The CSR report to
be included in the Annual Report.
§ Indian Company: Board report to
contain an annual report on CSR activities in the specified format as an
annexure
§ Foreign Company: The balance sheet shall contain a report on
CSR activities as an annexure.
Company’s Website:
The Company shall
display the CSR Policy on the Company’s website along with the CSR
initiatives undertaken by the Company.
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The Act has not
specified any penal provision if the company fails to spend the said amount on
the CSR activities.
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7
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CSR Activities
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All those activities covered under Schedule
VII.
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If the Company or its
holding or subsidiary or associate company has established a Sec 8 Company or
Registered Trust/ Society: then the company may
carry on the activities through the Trust, Society or a Company.
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If the Company is
contributing to a Sec 8 Company / Trust /Society not established by the Company:
then
such trust or society or company shall have an established track record of 3
years in undertaking similar programs or projects.
- The Company shall
o
Specify the projects or programs to be
undertaken through these entities
o
The modalities of utilization of funds
o
The monitoring and reporting mechanism.
Collaboration:
Yes, companies may
collaborate or pool recourses with other companies in carrying on such CSR
activities provided the respective companies can report their expenses separately
on such projects or programs.
Others:
CSR Capacity
building is permitted, subject to a max cap of 5% of total CSR Expenditure of
the Company in One Financial Year.
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What
are not considered as CSR Activities:
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Any activity carried on in the normal
course of business.
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Political Contributions
Major Restriction:
The CSR activities
undertaken in India only shall be considered.
Query:
How
will the above said major restriction
be fulfilled by a Foreign Company, as in Sec 135 (5) it is said that
“preference shall be given to local areas where it operates” for carrying on
the projects or programs.
In
this case is it mandatory for them to carry on the activity in India only?
On
doing so wouldn’t they be deprived of their right to carry on any activity in
their country even when it is so permitted by the act. .
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8
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Profits
and Expenses of CSR Activities:
Profits arising out of CSR activities:
Cannot be
considered to be as business profits of the Company.
CSR
Expenditure:
Includes all expenditure
contributing to corpus for projects or programs relating to CSR activities
approved by the Board on the recommendation of its CSR Committee.
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