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1. Corporate Social Responsibility(CSR)

2. INTRODUCTION (CSR)

3. INTRODUCTION (CSR)

4. TRANSITION TO THE ACT
Repeal of the Companies Act, 1956 (“Old Law”)
and transition to the Act

5. CLAUSE 135
REQUIREMENTS
KEY HIGHLIGHTS

6. For whom (CSR)

7. CLAUSE 135 REQUIREMENTS – KEY
HIGHLIGHTS
Create Board Committee
• CSR Committee of the Board
3 or more Directors, at least one Independent Director
Spend & Reporting
• Beginning FY2014-15
• Spend at least 2% of average net profits (before taxes) in
last 3 years
• Format specified in draft rules
• Specify “reason” if spend is less than 2%

8. DRAFT RULES – CSR
COMMITTEE & BOARD

9. DRAFT RULES – CSR
COMMITTEE & BOARD
Corpus of CSR
Average net profits +
Any income arising there from +
Surplus arising out of CSR activities

10. DRAFT RULES – CSR
COMMITTEE & BOARD

11. WHAT COUNTS IN 2%

12. WHAT COUNTS IN 2%

13. WHAT COUNTS IN 2%

14. WHAT DOESN’T COUNTS IN 2%

15. REPORTING FRAMEWORK
CSR Policy, including web link if available
 CSR Committee
Average Net Profit for last 3 financial years
Threshold Limit = 2% of above
Explanation if spend is less than 2%
Responsibility Statement of CSR Committee

16. REPORTING FRAMEWORK

17. RECOMMENDATIONS
CSR Committee & Policy
Broaden to encompass area of CSR work
- Specific projects/programs defined by CSR Team
- Promote other aspects of shared value such as
environmental activities which go beyond the law
Internal
Include all “Full-Time Equivalents” (FTE) across CSR Team,
volunteerism, and social business integration
External
Include Social Businesses that are not NGOs Implementation
- Phased: FY2014-15 only reporting, no 2% mandate
- Net Profits: Only profits made in India
- Accounting: Below the line as an appropriation

18. FAQs

19. FAQs
1) Whether is applicable to Private limited and closely
held public limited companies also?
Ans :
Yes,
It is applicable to EVERY Company if ANY ONE of the
following conditions during ANY financial year satisfies:
a) Turnover > Rs 1000 cr. OR
b) Net worth > Rs. 500 cr. OR
c) Net Profit > Rs. 5 cr.

20. FAQs
2) Whether is Compulsory to have Corporate Social
Responsibility Committee even if company has Separate
Expenditure Committee who approves the major
expenditure?
Ans :
Yes,
As per Section 135 (1) of the Companies Act, 2013, says
“Every company ...........shall constitute Corporate Social
Responsibility Committee of the Board............”
Hence, its compulsory to have Corporate Social
Responsibility Committee of the Board.
Its constitution includes :
Three or more board members out of which at least one
director shall be an independent director.

21. FAQs
3) What are the activities to be included in CSR?
Ans:
Schedule VII of the Companies Act,2013, specifies CSR
activities. Schedule states “Activities which may be
included in CSR policy are as follows :
Eradication of hunger and poverty
Promotion of education
Promotion of gender equality and women empowerment
Health - reducing child mortality, improving maternal health, combating HIV, AIDS,
malaria
Employment enhancing vocational skills
Contribution to PM's fund or other fund set up by central govt or the state govts for
socio-economic development and relief and funds for the welfare of SC, ST, backward
classes, minorities and women
Ensuring environmental sustainability
Social business projects
Such other matters as may be prescribed

22. FAQs
4)
List of activities in Schedule VII are illustrative or
mandatory activities to be included in CSR?
Ans:Schedule VII of the Companies Act,2013 states
“Activities which may be included in CSR policy”
where as
Clause states “CSR Policy which shall
indicate………activities as specified in Schedule VII.
There is conflicting view - As per the language , it is mandatory at the same time it is to be
noted that Mr. Sachin Pilot , Hon’ble Minister of Corporate Affaires at an event held by
corporate body CCI on 04th October,2013 stated that he was going to replace the word
as mentioned in Schedule VII from “such other manner as may be prescribed” to “ as
the company deems fit”. From this one may take a view that it is illustrative and not
mandatory. But the same is yet to be clarified.
Also note that the in reckoning spending of 2% of the “average net profit”; donation to
charities, political donations and donations to National Defence Fund shall not be
counted.

23. FAQs
5) If you have a CSR activity in which you open a school and if
you make a profit. Is it a CSR activity?
Ans:
Hon’ble Minister of Corporate Affaire while replying the debate
on the Bill in Lok Sabha on 18-12-2012 clarified that
certainly it will not be a CSR activity. The idea is not to
make profit from a CSR budget.
The idea is to give better quality of life to the people that you
are working along with.

24. FAQs
5) Would CSR spending be allowed as a Deduction under
Income Tax Act?
Ans: It may be viewed as an Appropriation of profit and
hence, not allowable at the same time one may also take
another view that is it an overriding obligation created by
law, although computed with reference to profits, and
hence, allowable.
Examples :
-Maysore Kirloskar Limited(Kar)
- Even if expenses is a donation, it is yet deductible u/s 37(1).
-HPCL(Mum ITAT)
- Expenses on 20-point programme at instance of Govt., allowable since done as
a responsible corporate citizen.
However, Tax Treatment of CSR spend will be in accordance with the IT Act, as may be
notified by CBDT.

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