Corporate Social Responsibility (CSR) & Filing of Form CSR-1 with MCA

Corporate Social Responsibility (CSR)

The Companies Act 2013 (Companies Act) has introduced several new provisions which transpiration the squatter of Indian corporate business. One of such new provisions is Corporate Social Responsibility (CSR). The concept of CSR rests on the ideology of requite and take. Companies take resources in the form of raw materials, human resources etc. from the society. By performing the task of CSR activities, the companies are giving something when to the society. Ministry of Corporate Affairs has notified Section 135 and Schedule VII of the Companies Act as well as the provisions of the Companies (Corporate Social Responsibility Policy) Rules, 2014 (CRS Rules) which has come into effect from 1 April 2014. In the pursuit paragraphs, I will discuss various aspects of CSR activities.

Applicability

The pursuit companies are required to constitute CSR committee –

1. Companies with net worth of Rs. 500 crores or more, or

2. Companies with turnover of Rs. 1000 crores or more, or

3. Companies with net profit of Rs. 5 crores or more.

If any of the above criteria is fulfil, the CSR provisions and related rules will be applicable to the company. These companies are required to form CSR committee consisting of its directors. This committee are responsible to take care of CSR activities.

Duties of Board of Directors

The Board of Directors shall discharge following duties in CSR activities. The role of Board of Directors are as follows –

1. Approve CSR policy.

2. Ensure its implementation.

3. Disclose the contents of CSR policies in its report.

4. Place the same on Company’s website.

5. Ensure that statutory specified value is spend by the company on CSR activities.

It’s important to note that presently there is no penalty if the specified value is not spending on CSR activities., however In such case the board’s report should specify the reason for such noncompliance.

CSR – Spending, Policies & Activities

Few important points of CSR spending are as follows –

• The companies covered by section 135 are required to spend at least 2% of their stereotype net profits during the three immediately preceding financial years.
• The section postulates that “net profit” shall be calculated in vibrations with the provisions of section 198.
• Company shall requite preference to the local zone and areas virtually it where it operates, for spending the value earmarked for CSR activities.
• Where the company fails to spend such amount, the Board of Directors shall, in its report, specify the reasons for not spending the amount.
• The CSR committee shall formulate and recommend CSR policy to the Board.
• The policy shall indicate the activities to be undertaken by the company as specified in Schedule VII.
• The CSR Committee shall recommend the value of expenditure to be incurred on the activities referred in CSR Policy
• The CSR Policy of the company shall be monitored by CSR committee from time to time.

As per schedule VII, the pursuit activities may be included by companies in their CSR policies:

• Eradicating hunger, poverty and malnutrition, promoting preventive health superintendency and sanitation and making misogynist unscratched drinking water.
• Promoting education, including special education and employment enhancing vocation skills expressly among children, women, elderly, and the differently abled and livelihood enhancement projects.
• Promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day superintendency centers and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically wrong-side-up groups.
• Ensuring environmental sustainability, ecological balance, protection of flora and fauna, unprepossessing welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air and water.
• Protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and minutiae of traditional arts and handicrafts.
• Measures for the goody of armed forces veterans, war widows and their dependents.
• Training to promote rural sports, nationally recognized sports, para Olympic sports and Olympic sports.
• Contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government for socio‐economic minutiae and relief and welfare of the Scheduled Caste, the Scheduled Tribes, other wrong-side-up classes, minorities and women.
• Contributions or funds provided to technology incubators located within wonk institutions which are tried by the Central Government.
• Rural minutiae projects.

Net Profit Considered for CSR Spending

Net Profit ways the net profit of a company as per its financial statement prepared in vibrations with

Section 198 of the Act, but shall not include the following, namely: ‐

• Any profit welling from any overseas workshop or branches of the company, whether operated as a separate company or otherwise.
• Any dividend received from other companies in India, which are covered under and complying with the provisions of section 135 of the Act.
• Profit from premium of shares/Debentures.
• Profit from sales of Forfeited share.
• Profit in terms of wanted natures (in terms of undertaking of company or any part of thereof).
• Profit from the sale of immovable property/fixed assets/any wanted nature.
• Any surplus transpiration in delivering value of an resources or liability recognized in probity reserves.

Following shall not be considered as expenditure:

• Income tax and any other tax on income
• Compensation, damages or other payments made voluntarily
• Loss of wanted natures including loss on sale of undertaking of company or any part of thereof
• Any transfer to assets/liabilities revaluation/equity reserves.

CSR Clarification on spending of CSR funds for Awareness and public outreach on COVID-19 Vaccination programme

https://taxguru.in/company-law/spending-csr-covid-19-vaccination-public-outreach-valid-csr-activity.html

Filing of Form CSR 1

(Pursuant to section 135 of the Companies Act, 2013 and Rule 4(1) and

(2) of Companies (CSR Policy) Rules, 2014)

https://taxguru.in/company-law/companies-csr-policy-amen.html

Form CSR-1 and availability of Form CSR-1 on MCA Portal

http://www.mca.gov.in/MinistryV2/companyformsdownload.html

https://www.mca.gov.in/MCA21/dca/help/instructionkit/1093-FormCSR_help.PDF

As per rules issued by MCA there is no due stage specified for filing of Form CSR-1 with MCA but from 01.04.2021 CSR Funding will be released only to that NGOs, that are registered with MCA by filing Form CSR-1.

So, if you want CSR Funding then it is mandatory for you to get registered with MCA by Filing Form CSR-1 as soon as possible. And Form CSR-1 is now available for Filing on MCA Portal.

Following type of NGO’s are eligible to file Form CSR-1 on MCA Portal for getting CSR Funding

(a) a company established under section 8 of the Act, or a registered public trust or a registered society, registered under section 12A and 80 G of the Income Tax Act, 1961 (43 of 1961), established by the company, either singly or withal with any other company, or

(b) a company established under section 8 of the Act or a registered trust or a registered society, established by the Central Government or State Government; or

(c) any entity established under an Act of Parliament or a State legislature; or

(d) a company established under section 8 of the Act, or a registered public trust or a registered society, registered under section 12A and 80G of the Income Tax Act, 1961, and having an established track record of at least three years in undertaking similar activities

Following documents are required for filing Form CSR-1

1. Copy of PAN Card of the NGO/Entity

2. Mail ID and Mobile Number of authorised representatives of NGO

3. Details of Governing Body Members including their Name, DIN/PAN and Email ids.

4. Copy of Registration Certificate

5. Digital Signature of the Authorised Person with his DIN/PAN Number

Please Note:

1. The Mail ID and Mobile Number of authorised representatives of NGO shall be verified by the MCA through OTP.

2. Certification of Form CSR-1 is Mandatory for all entities, either through any of practicing CA/CS/CMA.

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DISCLAIMER: The entire contents have been developed on the basis of relevant information and are purely the views of the authors. Though the authors have made utmost efforts to provide authentic information however, the authors expressly disclaim all or any liability to any person who has read this document, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this document. Reader should seek appropriate counsel for their own situation. I shall not take any responsibility or shall be held liable for any of the consequences directly or indirectly.