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Frequently Asked Questions (FAQs) with regard to Corporate Social Responsibility under section 135 of the Companies Act, 2013

Companies Law - 1/2016 - Dated:- 12-1-2016 - General Circular No. 01/2016 No. 05/19/2015- CSR Government of India Ministry of Corporate Affairs 5th Floor, 'A' Wing, Shastri Bhawan, Dr. R. P. Marg New Delhi - 110 001 Dated: 12th January, 2016 To, All Regional Director, All Registrar of Companies, All Stakeholders Subject: - . Sir, Section 135 of the Companies Act, 2013, Schedule VII of the Act and Companies CSR Policy Rules, 2014 read with General Circular dated 18.06.2014 issued by the M .....

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iving several queries and references seeking further clarifications on various issues relating to CSR provision of the Act. 2. In continuation to this Ministry's General Circular dated 18th June, 2014 and 17th September, 2014, a set of FAQs along with response of the Ministry is provided*for facilitating effective implementation of CSR : FREQUENTLY ASKED QUESTIONS ON CORPORATE SOCIAL RESPOSIBITITIES SI. NO. FAQS 1. WHETHER CSR PROVISION OF THE COMPANIES ACT, 2013 IS APPLICABLE TO ALL COMPANI .....

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ule, 2014 implies any of the three preceding financial years (refer General Circular No. 21/2014, dated: 18.06.2014) 3. WHETHER CSR EXPENDITURE OF A COMPANY CAN BE CLAIMED AS A BUSINESS EXPENDITURE? The amount spent by a company towards CSR cannot be claimed as business expenditure. The Finance Act, 2014 provides that any expenditure incurred by an assessee on the activities relating to Corporate Social Responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to b .....

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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. 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. The items enlisted in the Schedule VII of the Act, are broad-based and are intended to cover a wide range of activities. The General Circular also provides an illustrative list .....

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ions to Prime Minister s Relief Fund, Scientific Research, Rural development projects, skill development projects, agricultural extension projects, etc. which find place in Schedule VII, already enjoy exemptions under different sections of the Income Tax Act, 1961. 7. WHICH ACTIVITIES WOULD NOT QUALIFY AS CSR? The CSR projects or programs or activities that benefit only the employees of the company and their families. One- off events such as marathons/ awards/ charitable contribution/ advertisem .....

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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 the criteria. 9. Whether provisions of CSR are applicable on Section 8 Company, if it fulfills the criteria of section 135(1) of the Act. Section 135 of the Act reads Every company…… , i.e. no specific ex .....

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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. 11. WHETHER DISPLAY OF CSR POLICY OF A COMPANY ON WEBSITE OF THE COMPANY IS MANDATORY OR NOT? As per section 135(4) the Board of Directors of the company shall, after taking into account the recommendations of CSR Committee, approve the CSR Policy for the company and disclose contents of such policy in its report .....

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VE 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. WHETHER CONTRIBUTION IN KIND CAN BE MONETIZED TO BE SHOWN AS CSR EXPENDITURE? Section 135 prescribes …. .....

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expenditure. 17. CAN THE UNSPENT AMOUNT FROM OUT OF THE MINIMUM REQUIRED CSR EXPENDITURE BE CARRIED FORWARD TO THE NEXT YEAR? The Board is free to decide whether any unspent amount from out of the minimum required CSR expenditure is to be carried forward to the next year. However, the carried forward amount should be over and above the next year s CSR allocation equivalent to at least 2% of the average net profit of the company of the immediately preceding three years. 18. WHAT IS THE ROLE OF G .....

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e 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 .....

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n Government Scheme. Use of Corporate innovations and management skills in the delivery of public goods is at the core of CSR implementation by the companies. In- principle, CSR fund of companies should not be used as a source of funding Government Schemes. CSR projects should have a larger multiplier effect than that under the Government Schemes. However, under CSR provision of the Act and rules made thereunder, the Board of the eligible company is competent to take decision on supplementing an .....

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