Corporate Social Responsibility (CSR) under section 135 of Companies Act, 2013 - Ministry Clarifies:
THE Ministry of Corporate Affairs has received several references and representation from stakeholders seeking clarifications on the provisions under Section 135 of the Companies Act, 2013 and the Companies (Corporate Social Responsibility Policy) Rules, 2014.
The Ministry clarifies:
1. The statutory provision and provisions of CSR Rules, 2014, is to ensure that while activities undertaken in pursuance of the CSR policy must be relatable to Schedule VII of the Companies Act 2013, the entries in the said Schedule VII must be interpreted liberally so as to capture the essence of the subjects enumerated in the said Schedule.
2. CSR activities should be undertaken by the companies in project/ programme mode. One-off events such as marathons/awards/charitable contribution/advertisement/ sponsorships of TV programmes etc. would not be qualified as part of CSR expenditure.
3. Expenses incurred by companies for the fulfillment of any Act/ Statute of regulations (such as Labour Laws, Land Acquisition Act etc.) would not count as CSR expenditure under the Companies Act.
4. Salaries paid by the companies to regular CSR staff as well as to volunteers of the companies (in proportion to company's time/hours spent specifically on CSR) can be factored into CSR project cost as part of the CSR expenditure.
5. "Any financial year" referred under Sub-Section (1) of Section 135 of the Act read with Rule 3(2) of Companies CSR Rule, 2014, implies ‘any of the three preceding financial years'.
6. Expenditure incurred by Foreign Holding Company for CSR activities in India will qualify as CSR spend of the Indian subsidiary if, the CSR expenditures are routed through Indian subsidiaries and if the Indian subsidiary is required to do so as per section 135 of the Act.
7. ‘Registered Trust' (as referred in Rule 4(2) of the Companies CSR Rules, 2014) would include Trusts registered under Income Tax Act 1956 (sic), for those States where registration of Trust is not mandatory.
8. Contribution to Corpus of a Trust/ society/ section 8 companies etc. will qualify as CSR expenditure as long as the Trust/ society/ section 8 companies etc. is created exclusively for undertaking CSR activities or where the corpus is created exclusively for a purpose directly relatable to a subject covered in Schedule VII of the Act.
Now the Ministry of Corporate Affairs mentions the Income Tax Act 1956 !Perhaps, they got it mixed up with the earlier Companies Act, 1956.
MoCA General Circular No. , Dated: June 18 2014