The Ministry of Corporate Affairs has issued clarifications by way of Frequently Asked Questions (FAQ) relating to the Corporate Social Responsibility (CSR) obligations of companies under Companies Act, 2013.
Some important aspects clarified by General Circular No. 1 of 2016, dated 12-1-2016 issued for the purpose are: (a) CSR expenditure cannot be claimed as a business expenditure for income tax purposes; (b) Net profit for the purpose of Section 135 of CA 2013 shall be computed as per Section 198 and shall mean ‘profit before tax’; (c) CSR activities must be relatable to activities under Schedule VII of CA 2013 and the entries under Schedule VII should be interpreted liberally; (d) One off events, activities for employees and their families, activities undertaken outside India shall not be considered CSR activites; (e) Holding and subsidiary companies do not have any CSR obligation unless they themselves cross the prescribed thresholds; and (f) Amount spent in excess this year cannot be adjusted against subsequent year’s liability.