There is a famous saying that ‘Change is the only thing permanent in this world.’ Specially, in the world of law, wherein changes and amendments are crucial and forms an instrumental part. One such change has emerged in the subject of Corporate Social Responsibility.
Ministry of Corporate Affairs has come up with another amendment in the CSR Policy Rules, 2014 by way of introduction of CSR Policy Amendment Rules, 2022 vide Notification dated 20th September, 2022. The said changes are discussed herewith in tabular form along with interpretation.
|Mandation of CSR Committee
|Amount lying in Unspent CSR A/c with respect to an Ongoing Project and also need to comply with the CSR provisions.
|Will CSR Committee now be required even when the CSR liability is below 50 lacs but unspent amount is present with respect to an Ongoing project?
|Applicability of CSR Provisions when threshold limits are not met for consecutive 3 years
|Rule 3(2) of CSR Rules have been deleted. It provided that after 3 years, Company shall not be required to have CSR committee & comply CSR provisions
|Does it mean that CSR provisions once applicable shall remain applicable always?
Does it mean that applicability of CSR provisions need to reviewed on yearly basis?
|Inclusion of entities which are exempt under Section 10(23C) Clause (iv) to (via) of Income Tax Act but not registered under Section 12A of the Income Tax Act
|Educational Institutions, Hospitals and Religious Trusts (not compulsorily registered u/s 12A) also brought into the picture to widen the scope of CSR.
|Expense of Impact Assessment
|2 percent of total CSR expense or Rs. 50 lacs, whichever is higher (previously 5 percent or Rs. 50 lacs, whichever is lower)
|To curb the misutilization of funds in the name of CSR. However, now the minimum expense allowed can be Rs. 50 lacs.
|Annual Report of CSR
|Format provided in the amended Rules.
|No major changes. Board Meeting being held on or after 20th September needs to provide new format
The changes as discussed above may seem minor ones but some of these have the capacity of opening new ends of discussion and debate in the Industry.
Firstly, the question that may be raised now is regarding the applicability of CSR provisions on a Company. Till date, it was held that the CSR provisions once applicable shall remain applicable for atleast 3 years even if the limits are not met. However, with the removal of the said clauses, two contradicting views are emerging which needs further clarification from the Ministry.
Secondly, the bringing in the role of the institutions and trusts which have not been registered under Section 12A of Income Tax Act, 1961, may distort the purpose of CSR if not monitored properly. Registration under Section 12A provided a filter to such institutions and a certain level of check on the reliability of the institution. Now, that filtration shall be missing. In other words, CSR initiatives have to be followed in spirit to keep its flame alive and growing.