{"id":262,"date":"2021-05-03T17:31:24","date_gmt":"2021-05-03T17:31:24","guid":{"rendered":"https:\/\/consultcaonline.com\/?p=262"},"modified":"2022-05-11T05:51:16","modified_gmt":"2022-05-11T05:51:16","slug":"corporate-social-responsibility-csr","status":"publish","type":"post","link":"https:\/\/consultcaonline.com\/index.php\/2021\/05\/03\/corporate-social-responsibility-csr\/","title":{"rendered":"Corporate Social Responsibility (CSR)"},"content":{"rendered":"\n<p class=\"has-vivid-cyan-blue-color has-text-color\"><strong><em><u>What is Corporate Social Responsibility?<\/u><\/em><\/strong><\/p>\n\n\n\n<p>CSR is a responsibility of a Company\u2019s towards the community and environment in which it operates. CSR is a way of conducting business, by which corporates contribute to the social good.<\/p>\n\n\n\n<p>Companies contribute for the betterment of our society out of the profit as a mandatory provision under section 135 of Companies Act, 2013 for betterment of our society.<\/p>\n\n\n\n<p class=\"has-vivid-cyan-blue-color has-text-color\"><strong><u><em>Applicability of CSR Provisions:<\/em><\/u><\/strong><\/p>\n\n\n\n<p>Every Company including its holding or subsidiary during the immediately preceding financial year having:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Turnover of Rs. 1000 crore or more, or<\/li><li>Net worth of Rs. 500 crore or more, or<\/li><li>Net Profit of Rs. 5 crore or more.<\/li><\/ul>\n\n\n\n<p>This provision also apply to the foreign companies having branch office in India and fulfills the above mention conditions.<\/p>\n\n\n\n<p>However, if a company ceases to meet the above criteria for 3 consecutive financial years then the company need not required to comply with these Provisions till such time it meets the specified criteria.<\/p>\n\n\n\n<p class=\"has-vivid-cyan-blue-color has-text-color\"><strong><u><em>Composition of CSR Committee:<\/em><\/u><\/strong><\/p>\n\n\n\n<p>Every Company which fulfills the above mentioned CSR provision shall be required to constitute a CSR Committee.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Committee Consist of 3 or more directors, out of that at least one director shall be an independent director. However, if the company is not required to appoint an independent director then shall have 2 or more directors in the Committee.<\/li><li>CSR Committee Consist of 2 directors in case of a private company.<\/li><li>CSR Committee Consist of at least 2 persons in case of a foreign Company of which one person shall be its authorized person resident in India and another nominated by the foreign company.<\/li><li>However, if the expenditure of the company against CSR is not more than Rs. 50 lakhs, then it is not required to form the committee.<\/li><\/ul>\n\n\n\n<p class=\"has-vivid-cyan-blue-color has-text-color\"><strong><u><em>Functions of CSR Committee:<\/em><\/u><\/strong><\/p>\n\n\n\n<p>The Corporate Social Responsibility Committee shall,\u2014<\/p>\n\n\n\n<p>(a) Formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company as per Schedule VII,<\/p>\n\n\n\n<p>(b) Recommend the amount of expenditure to be incurred on the activities referred to in clause (a),<\/p>\n\n\n\n<p>(c) Monitor the Corporate Social Responsibility Policy of the company from time to time.<\/p>\n\n\n\n<p class=\"has-vivid-cyan-blue-color has-text-color\"><strong><u><em>Responsibility of Board of Directors:<\/em><\/u><\/strong><\/p>\n\n\n\n<p>The Board of every company referred to in sub-section (1) shall,\u2014<\/p>\n\n\n\n<p>(a) After taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the Company and disclose contents of such Policy in its report and also place it on the Company\u2019s website, if any, in such manner as may be prescribed; and<\/p>\n\n\n\n<p>(b) Ensure that the activities as are included in Corporate Social Responsibility Policy is undertaken by the company or not; and<\/p>\n\n\n\n<p>(c) Ensure that the company spends, in every financial year, at least <strong>2% of the average net profits<\/strong> of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.<\/p>\n\n\n\n<p>(d) If the company fails to spend such amount, the Board shall, in its report, specify the reasons for not spending the amount as clause (o) of sub-section (3) of section 134 of the Companies Act.<\/p>\n\n\n\n<p><strong>For the term above \u201caverage net profit\u201d<\/strong> shall be calculated as per the provisions of section 198:<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>&nbsp;<\/strong><\/td><td><strong>PARTICULARS<\/strong><\/td><td><strong>FY<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Net profit after tax*<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>Add<\/strong><\/td><td><strong>Allowed Credits<\/strong><\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Profit on sale of Immovable Property (Original Cost \u2013 WDV)<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>Less<\/strong><\/td><td><strong>Credits Disallowed<\/strong><\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Premium on Shares or Debentures<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Profit on sale of Forfeited Shares<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Profit on sale of Immovable Property (Sale Value \u2013 Original Cost)<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Surplus in measurement of asset or liability at fair value<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>Less<\/strong><\/td><td><strong>Expenses Allowed<\/strong><\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>All the usual working charges<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Director\u2019s Remuneration<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Bonus or Commission paid to Staff<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Tax on excess or abnormal profits<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Tax on business profits imposed for special reasons<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Interest on Debentures<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Interest on Loans<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Expenses on Repairs (other than Capital Expenditure)<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Contributions made under section 181 (Bonafide Charitable Trusts)<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Depreciation<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Prior period items<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Legal liability or compensation or damages<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Insurance Expenses<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>Add<\/strong><\/td><td><strong>Expenses Disallowed<\/strong><\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Income Tax<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Compensations, damages, or payments made voluntarily<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Capital Loss on sale of undertaking or part thereof (Not include losses on sale of asset)<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><tr><td><strong>&nbsp;<\/strong><\/td><td>Expenditure in P&amp;L on measurement of asset or liability at fair value<\/td><td><strong>&nbsp;<\/strong><\/td><\/tr><\/tbody><\/table><figcaption>*Net profit after tax is taken as base and accordingly the adjustments need to be considered.<\/figcaption><\/figure>\n\n\n\n<p class=\"has-vivid-cyan-blue-color has-text-color\"><strong><u><em>Activities permitted under CSR:<\/em><\/u><\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Eradicating extreme hunger and poverty;<\/li><li>Promotion of education;<\/li><li>Promoting gender equality, and empowering women;<\/li><li>Reducing child mortality;<\/li><li>Improving maternal health;<\/li><li>Combating human immunodeficiency virus, acquired, immune deficiency syndrome, malaria, and other diseases;<\/li><li>Ensuring environmental sustainability;<\/li><li>Rural development projects<\/li><li>Slum area development.<\/li><li>Protection of national heritage, art, and culture<\/li><li>Employment enhancing vocational skills, social business projects;<\/li><li>Contribution to the Prime Minister\u2019s National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development, and<\/li><li>Relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women, and such other matters as may be prescribed.<\/li><\/ul>\n\n\n\n<p class=\"has-vivid-cyan-blue-color has-text-color\"><strong><u><em>Other Important Point:<\/em><\/u><\/strong><\/p>\n\n\n\n<p>The Company shall give preference to the local areas around it where it operates, for expenditure earmarked for Corporate Social Responsibility activities.<\/p>\n\n\n\n<p>CSR is not a donation or charity so 80G deduction not allowed on this expenditure.<\/p>\n\n\n\n<p>However, if the expenditure of the company against CSR is not more than Rs. 50 lakhs, then it is not required to form the committee.<\/p>\n\n\n\n<p class=\"has-vivid-cyan-blue-color has-text-color\"><strong><u><em>Penalty Provision:<\/em><\/u><\/strong><\/p>\n\n\n\n<p><em>The Government has amended the provision of Section 135 through&nbsp;the <\/em><strong><em>Companies (Amendment) Act, 2019<\/em><\/strong><em>&nbsp;and inserted penalty provisions for companies as well as officers in default as follows;<\/em><\/p>\n\n\n\n<p><em>a) Penalty for Companies: The company shall be punishable with a fine which shall not be less than 50,000 rupees and it may extend to 25 lakh rupees, and<\/em><\/p>\n\n\n\n<p><em>(b) Penalty for Officer in default: Every officer of such company who is in default shall be punishable with imprisonment for a term which may extend to 3 years or with a fine which shall not be less than 50,000 rupees but it may extend to 5 lakh rupees, or with both.<\/em><\/p>\n\n\n\n<p class=\"has-vivid-cyan-blue-color has-text-color\"><strong><u><em>Income tax Benefits:<\/em><\/u><\/strong><\/p>\n\n\n\n<p><em>It is very much clear that expenditure incurred as CSR is not<\/em><strong> <\/strong><em>incurred wholly and exclusively for the purpose of carrying on business so not allowed as tax deduction. But <\/em><em>if such expenditures are in nature described in Section 30 to 36 of the Income Tax Act, 1961 shall be allowed as deduction.<\/em><\/p>\n\n\n\n<p><em>THE ABOVE AMENDMENT SHALL BE APPLICABLE FROM 1ST&nbsp;APRIL, 2015<\/em><em><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>What is Corporate Social Responsibility? CSR is a responsibility of a Company\u2019s towards the community and environment in which it operates. CSR is a way of conducting business, by which corporates contribute to the social good. Companies contribute for the betterment of our society out of the profit as a mandatory provision under section 135 [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":264,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-262","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-producer-company"],"_links":{"self":[{"href":"https:\/\/consultcaonline.com\/index.php\/wp-json\/wp\/v2\/posts\/262","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/consultcaonline.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/consultcaonline.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/consultcaonline.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/consultcaonline.com\/index.php\/wp-json\/wp\/v2\/comments?post=262"}],"version-history":[{"count":5,"href":"https:\/\/consultcaonline.com\/index.php\/wp-json\/wp\/v2\/posts\/262\/revisions"}],"predecessor-version":[{"id":502,"href":"https:\/\/consultcaonline.com\/index.php\/wp-json\/wp\/v2\/posts\/262\/revisions\/502"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/consultcaonline.com\/index.php\/wp-json\/wp\/v2\/media\/264"}],"wp:attachment":[{"href":"https:\/\/consultcaonline.com\/index.php\/wp-json\/wp\/v2\/media?parent=262"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/consultcaonline.com\/index.php\/wp-json\/wp\/v2\/categories?post=262"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/consultcaonline.com\/index.php\/wp-json\/wp\/v2\/tags?post=262"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}