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Corporate Social Responsibilities (CSR) Activities

CONSTITUTION OF BENCH:-SECTION 419
S. No. Particulars Provisions Under Companies Act, 2013
1 Applicability
  • (i) Net worth of rupees 500 crore or more
  • or
  • (ii) Turnover rupees 1000 crore or more
  • or
  • (iii) Net profit of rupees 5 crore or more during immediately preceeding financial year.
2 Prescribed CSR expenditure At least 2% of the average net profits of the company made during the three immediately preceding financial years
3 Prescribed CSR activities as per schedule VII
  • 1. Eradicating hunger, poverty, malnutrition, sanitation, etc
  • 2. Promoting education especially among children and women, gender equality, reduce inequality among backward groups.
  • 3. Promoting gender equality, empowering women or allied activities
  • 4. Ensuring environmental sustainability, ecological balance, protection of flora and fauna
  • 5. contribution to Clean Ganga Fund set up Central Government
  • 6. Protection of national heritage, art and culture including restoration of buildings of historical importance and works of art.
  • 7. Promotion and development of traditional arts and handicrafts
  • 8. Measures for the benefit of armed forces of veterans, war widows and their dependents
  • 9. Promotion of Rural Sports, nationally recognised sports, paralympic sports and olympic sports
  • 10. Contribution to PM National Relief Fund or other fund set up by the Central Government for social and economic development
  • 11. Contribution to incubators or research and development projects in the field of science, technology, engineering and medicine funded by the Central Government or State Government
  • 12. Rural Development projects
  • 13. Slum Area Development
  • 14. Disaster Management
4 Modes of Conducting CSR Activities
  • 1. Self Implementation
  • 2. Joint implementation with one or more companies
  • 3. Implementation through any of following agencies
  • - Section 8 Company or a registered public trust or a registered society, established by the company registered under section 12A and 80 G of the Income Tax Act, 1961 or
  • - Section 8 Company or a registered trust or a registered society, established by the Central Government or State Government
  • - any entity established under an Act of Parliament or a State legislature
  • - Section 8 Company or a registered public trust or a registered society registered under section 12A and 80G of the Income Tax Act, 1961 having an established track record of at least three years in undertaking similar activities
5 Registration with MCA All implementing agencies shall shall register itself with the Central Government by filing the form CSR-1 electronically with the Registrar, with effect from the 01st day of April 2021
6 Activities not amounting to CSR
  • 1. Activities undertaken in pursuance of normal business of the company
  • 2. Activities outside India, except training of sports personnel
  • 3. Contribution, direct or indirect, to a political party
  • 4. Activities benefiting employees
  • 5. Sponsorship for deriving marketing benefits for products/services
  • 6. Activities for statutory obligations
7 Impact Assessment Every company having average CSR obligation of ten crore rupees or more in the three immediately preceding financial years, shall undertake impact assessment, through an independent agency, of their CSR projects having outlays of one crore rupees or more, and which have been completed not less than one year before undertaking the impact study.
8 Failure to spend full or partial CSR obligation

(1) FAILURE to spend entire CSR amount:-
Transfer such unspent amount to fund established in Schedule VII with in period of 6 months of expiry of financial year.

(2) FAILURE to spend part of CSR amount:-
An amount remaining unspent pursuant to ongoing project shall be transferred to unspent CSR account within period of thirty days from the end of the financial year and such unspent amount shall be spent within period of three financial years from the date of such transfer.

  • Definition of Ongoing project
    “Ongoing Project” means a multi-year project undertaken by a Company in fulfilment of its CSR obligation having timelines not exceeding three years excluding the financial year in which it was commenced, and shall include such project that was initially not approved as a multi-year project but whose duration has been extended beyond one year by the board based on reasonable justification;

    		•
    9 Penalty for non compliance

    Company
    Twice the amount required to transfer to fund under Schedule VII or Unspent CSR amount or 1 Crore w.e. less

    Officers
    One tenth of the amount required to transfer to fund under Schedule VII or Unspent CSR amount or 2 Lakh w.e. less
    Important points to be considered for CSR as per Provisions of Companies Act, 2013
    • CSR Implementation can be through a registered public trust registered under section 12A and 80 G of the Income Tax Act, 1961 (43 of 1961), established by the company, either singly or along with any other company.
    • File E-form CSR-1 of registered public trust electronically with the MCA.
    • CFO/Authorised Director will certify regarding utilisation of CSR funds.
    • Board shall monitor ongoing project with reference to approved timeline and year wise allocation.
    • CSR committee shall prepare annual action plan and for recommended to the Board.
    • Excess CSR amount if any may be set off up to immediate succeeding three financial years.
    • The CSR amount may be spent by a company for creation or acquisition of a capital asset, shall be held by Registered Public Trust having charitable objects and CSR Registration Number.
    • The project should have commenced within the financial year to be termed as ‘ongoing’. The intent is to include a project which has an identifiable commencement and completion dates.
    • Any amount remaining unspent pursuant to any ongoing project, shall be transferred by the company within a period of thirty days from the end of the financial year to a special account to be opened by the company in that behalf for that financial year in any scheduled bank to be called the Unspent Corporate Social Responsibility Account, and such amount shall be spent by the company in pursuance of its obligation towards the Corporate Social Responsibility Policy within a period of three financial years from the date of such transfer.
    • An ongoing project will have ‘commenced’ when the company has either issued the work order pertaining to the project or awarded the contract for execution of the project.
    • The implementing agency acts on behalf of the company and mere disbursal of funds for implementation of a project does not amount to spending unless the implementing agency utilises the whole amount.
    • A company needs to open a separate ’Unspent CSR Account’ for each financial year but not for each ongoing project.
    • Penalty: If a company is in default in complying with the provisions the company shall be liable to a penalty of twice the amount required to be transferred by the company to the Fund specified in Schedule VII or the Unspent Corporate Social Responsibility Account, as the case may be, or one crore rupees, whichever is less, and every officer of the company who is in default shall be liable to a penalty of one-tenth of the amount required to be transferred by the company to such Fund specified in Schedule VII, or the Unspent Corporate Social Responsibility Account, as the case may be, or two lakh rupees, whichever is less