CORPORATE SOCIAL RESPONSIBLITY-A DETAILED OVERVIEW – Semantic Taxgen Pvt Ltd
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Corporate Social Responsibility | CSR-1 Filing

CORPORATE SOCIAL RESPONSIBLITY-A DETAILED OVERVIEW

Corporate Social Responsibility (CSR)

is known as a Company’s responsibility in favour of the community as well as environment (both ecological and social) in which it operates. The companies complete this responsibility with the help of waste and pollution reduction processes, by contributing educational and social programs, by being environmentally friendly and by undertaking activities of similar nature. CSR is not charity or mere donations. CSR is one such way of conducting business, with help of which the corporate entities visibly input into the social good.

The companies are responsible socially as they do not bind themselves to use resources in engaging with activities that increase only their profits. The use of CSR is to integrate social, environmental and economic objectives with the company’s growth and operation. With the help of CSR it is said to up surge the reputation of a company’s brand among its society and customers.

As per the Companies Act, 2013  has formulated Section 135, Companies (Corporate Social Responsibility) Rules, 2014 and Schedule VII which prescribes mandatory provisions for Companies to fulfil their CSR. The article aims to analyze these provisions (including all the amendments therein).

Applicability of CSR Provisions: 

♥ All the Company’s including its holding or subsidiary having:

  • Net worth of Rs. 500 Crore or more, or
  • Turnover of Rs. 1000 crore or more, or
  • Net Profit of Rs. 5 crore or more

♥ during the immediately preceding financial year

Any foreign company that has its either its project office branch office in India, and further which fulfils the criteria as specified above

However, if a company ceases to meet the above criteria for 3 consecutive financial year, then it is not required to comply with CSR Provisions till such time it meets the specified criteria.

CSR Committee: 

Each and every Company where CSR is applicable needs to constitute a CSR Committee of the Board:

  • There can be 3 or more directors, out of which at least one director shall be an independent director. Yet, if a company does not need any appointment of an independent director, then it shall have 2 or more directors in the Committee.
  • It consists of only 2 directors in case of a private company that has only two directors on its Board
  • Consisting 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

CSR Policy 

CSR Policy of the company intend to, inter-alia, includes the following namely:

  • Listing of CSR projects or programs that are planned by the company in order to undertake specifying modalities of execution with such programs or project and further implementation schedules
  • Observing on the process of such projects or programs
  • Clause that says the surplus rising out of the CSR projects or programs or activities cannot form a part of the business profit of the company.

CSR Activities 

  • CSR related activities should be managed by the company, in accordance with the CSR Policy, excluding the activities that are undertaken in pursuance of its normal course of business.
  • Board of Directors might decide to undertake the CSR activities approved by the CSR Committee, through
  • As per section 8 company or a registered society or a registered trust, that are established by the company, it can be sole or with any other company, or
  • In accordance with section 8 company or a registered society or a registered trust, set up by the State Government or Central Government or any different entity initiated under an Act of Parliament or a State legislature
  • The section 8 company or a registered society or a registered trust, other than those mentioned in clauses (a) and (b) above, with an established track record of 3 years in undertaking similar programs or projects;
  • collaboration with other companies,

in order to manage programs or projects or the CSR activities in a way that the CSR Committees of respective companies are in a position to report separately on such projects or programs.

  • CSR programs or projects or such activities should not to be considered as CSR Activities:
  • The expenses that benefit only the employees of the company and their families
  • Contributing of any such amount directly or indirectly to any political party

Few Examples of CSR in India

Tata Group

The Tata Group amalgamation in India carries out different CSR projects, mostly based on community improvement and poverty alleviation programs. With the help of self-help groups, it engages in income generation, rural community development, women empowerment activities, and other social welfare programs. In terms of education, the Tata Group gives scholarships and endowments for numerous institutions.

Tata group additionally engages also in healthcare projects, like the immunization, facilitation of child education, and creation of awareness of AIDS. Other areas include economic empowerment through agriculture programs, environment protection, providing sports scholarships, and infrastructure development, such as hospitals, research centre,  educational institutions, sports academy, and cultural centre.

Ultratech Cement

Ultratech Cement, India’s one of the biggest cement company is also into the social work across 407 villages in the country aiming to create sustainability and self-reliance. The CSR activities focusses on education, infrastructure, environment, social welfare, healthcare and family welfare programs, and sustainable livelihood.

The company organises medical camps, immunization programs, sanitization programs, school enrolment, plantation drives, water conservation programs, industrial training, and organic farming programs.

Mahindra & Mahindra

An Indian automobile manufacturer Mahindra & Mahindra (M&M)started the K. C. Mahindra Education Trust in 1954, accompanied by Mahindra Foundation in 1969 with the main purpose of encouraging education. The prime focus of the company is on educational programs to assist socially and economically needy communities.

CSR programs focus on investing in scholarships and grants, livelihood training, healthcare for remote areas, water conservation, and disaster relief programs. M&M also runs programs like Nanhi Kali focusing on educating girls, Mahindra Pride Schools are mainly for industrial training, and Lifeline Express for healthcare services in remote areas.

ITC Group

ITC Group, a amalgamatesalong with business interests beyond hotels, FMCG, agriculture, IT, and packaging sectors focus on making sustainable livelihood and environment protection programs. The company generatesa supportable livelihood opportunity for six million people with the use its CSR activities.

The e-Choupal program, the objectiveis to connect rural farmers over the internet for obtaining agriculture products, it covers 40,000 villages and over four million farmers. It’sfarm forestry and social program mainly assists farmers in changing wasteland to pulpwood plantations. Social empowerment programs using micro-enterprises or loans have created sustainable livelihoods for over 40,000 rural women.

Five types of entities covered for registration in Form CSR -1 :

1) The company initiated under Section 8 of the Companies Act, 2013 with Section 80G and Section 12A registrations as under the Income Tax Act, 1961.

2) Registered Public Trust within Section 80G and 12A registrations under the Income Tax Act, 1961.

3) The company established under Section 8 of the Companies Act, 2013 or Registered Society or Registered Trust initiated by the State Government or Central Government.

4) Registered Society with Section 80G and Section 12A registrations as per the Income Tax Act, 1961.

5) Entities initiated under an Act of State Legislature or Parliament.

It is observed that Registration of an entity with each Government authorities such as Registered under Companies Act or Registration under Public Trust Act or Registration under Societies Registration Act 2013 is a pre-defined for registration as an entity under CSR-1 Form.

The following requirement of Form CSR-1 demands whether the entity is initiated either by any company or group of companies. The sole purpose is to classify persons or promoters involving in registration of such entities. All such details need to be provided in prescribed column. The identification of an entity can be established with the help of CIN (Corporate Identity Number) a unique registration number which can be prefilled in given form. The registration number of trust or society is to be mentioned in given column.

If the above mentioned entities that are not started by any company or group of companies, then in such case the entity requires an set track record of three years in undertaking very similar activities should be mentioned in form CSR-1.

Other points of Form CSR-1 are Registration of an Entity/Date of Incorporation, Registered Office of an entity, for confirmation of OTP (One time Password) an email address of an entity is obligatory and for sending further communication, PAN Number of an entity and details of Directors, Board of trustees and authorized representative of an entity need to be mentioned in CSR-1 Form. These abovementioned details help in determining the existence of an entity.

Replicas of Certificate of Registration of each entity self-attested by their authorized signatory of an entity should be attached compulsorily. PAN of an entity self-attested with the authorized signatory of an entity should be attached compulsorily.

Form CSR-1 should be digitally signed by following persons:

  1. a) Any Directors of Section 8 Company
  2. b) Any trustees of Registered Trust
  3. c) Through Secretary/Chairperson in case of Registered Society
  4. d) Authorized Signatory in instance of entity established under an Act of State Legislature or Parliament.
  5. e) Any practising company secretary in practice or a cost accountant in practice or chartered accountant in practice.

All details of the form are correctly filled up and legible attachments are attached to form like PAN Card and Registration Certificate of an entity, it will be digitally signed and submitted. The Form is said to be in STP mode (Straight to process mode). Once the CSR -1 Form is processed successfully, a receipt of the same is sent to the user like a proper email to the email address of the entity.

Additionally, also a digitally signed approval letter with a CSR Registration number with such mentioned format CSRXXXXXXXX where X signifies system generated unique sequential number that will be shared with the user and also the email address of the entity as provided in Form CSR-1 This different CSR Registration Number will be mentioned all over that includes the letterhead of entity concerned. This assures the CSR expended will be with registered and authorized entities with the Ministry of Corporate Affairs.

Finally, the purpose behind the Form CSR-1 appears to monitor, streamline, and regulate the process of Corporate Social Responsibilities activities of corporate in a much better and transparent manner thereby protecting society at large. The advantages of CSR (Corporate Social Responsibility) shall move efficiently to bigger section of society thus achieving the motive of Corporate Social Responsibility of the Government.

 

Frequently asked questions:-

Ques:- Whether CSR expenditure of company can be claimed as Business Expenditure?

Ans :- Amount spent by the company towards CSR cannot claim as business expenditure. As per the Finance Act, 2014 it offers that any expenditure incur by an assessee on such activities in relation to corporate social responsibility refers in section 135 of the Companies Act, 2013 may not be deemed to be an expense incur by the assessee for the motive of the profession or business.

Ques:- Is average net profit Criteria under section 135(5) considered net profit tax or Net profit after tax?

Ans:- Calculating of net profit for section 135 in accordance with section 198 of the Companies Act, 2013 which primarily is NET PROFIT BEFORE TAX.

Ques:-Is provision of CSR applicable on Section 8 Company, if yes, does it fulfil the criteria under section 135(1) of the act?

Ans: -Section 135 of the Act reads “Every company…….”, that is  no specific exemption given to section 8 companies with regard to applicability of section 135, hence section 8 companies are required to follow CSR provisions.

Ques:- Can donation of money to Trust by a company be Treated as CSR expenditure of the Company?

Ans:- Generally, the Circular No. 21/2014 of MCA as on date June 18, 2014 states that contributes to the corpus of a Section 8 companies/Trust/ Society etc. that will further qualify as CSR expenditure in the following conditions:
(a) A Society/Trust/ Section 8 company etc. is formed solely for undertaking CSR activities or
(b) where the corpus is formed solely aiming directly related to a subject covered in Schedule VII of the Act

Ques:- Can we say that contribution towards political party is considered a CSR activity?

Ans:- The Subsidized amount may be indirectly or directly to any political party under section 182 of the Act, is not said to be a CSR activity. (You may refer Rule 4(7) of CSR Policy, Rules 2014).

Ques:- Is contribution in kind permissible as CSR or not?

  • Ans:-As per section 135 it states “…. it ensures that company spends….”.The company spends the amount.
  • Disclaimer : The information contained in this article is intended solely for the dissemination of information and does not aim at solicitation of work. Though meticulous care has been taken but the author assumes no liability in respect of any loss/ damage incurred while acting on the information provided in this article. The author can be reached at sanjeev@semantictaxgen.in and can be called at +91-8126700005.

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