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What is CSR?

Corporate Social Responsibility is a management concept by which companies integrate social and environmental aspects into their business operations and interactions with their stakeholders. CSR is generally understood as the way in which a company achieves a balance between economic, environmental and social requirements (“Triple-Bottom-Line-Approach”) while satisfying the expectations of shareholders and stakeholders.

The following activities can be performed by a company to accomplish its CSR obligations:

  • Eradicating extreme hunger and poverty
  • Promotion of education
  • Promoting gender equality and empowering women
  • Reducing child mortality
  • Improving maternal health
  • Combating human immunodeficiency virus, acquired, immune deficiency syndrome, malaria and other diseases
  • Ensuring environmental sustainability,
  • Employment enhancing vocational skills, social business projects
  • Contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development, and
  • Relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women and such other matters as may be prescribed.

Will sponsorship in 44th chess Olympiad qualify as a CSR activity

These following activities are not covered under CSR:

The CSR projects or programs or activities that benefit only the employees of the company and their families shall not be considered as CSR activities in accordance with section 135 of the Act.

  • One-off events such as marathons/ awards/ charitable contribution/ advertisement/sponsorships of TV programmes etc. would not be qualified as part of CSR expenditure.
  • Expenses incurred by companies for the fulfillment of any Act/ Statute of regulations (such as Labour Laws, Land Acquisition Act etc.) would not count as CSR expenditure under the Companies Act.
  • Contribution of any amount directly or indirectly to any political party shall not be considered as a CSR activity.
  • Activities undertaken by the company in pursuance of its normal course of business.

SPONSORSHIP AS CSR ACTIVITY

As per schedule vii of section 135 Of Companies Act 2013,

“(vii) training to promote rural sports, nationally recognised sports, paralympic sports and Olympic sports;”  is a csr activity.

  • This provision is about the “training of sports” to the sportsmen and to encourage sports by building sports academies, trainings and sports development.
  • When the act was first passed, companies could only support “training to promote rural sports, nationally recognised sports, paralympic sports and olympic sports” under corporate social responsibility.
  • In 2015, the umbrella was widened to include “construction, renovation, maintenance of stadiums, gymnasiums and rehabilitation centres” as permissible CSR activities.
  • This sponsorship in 44th chess Olympiad is not for promotion of rural sports , not an Olympic game , not covered in paralympics and there is no clarity on the definition of nationally recognized sport.
  • Moreover, one of the activity which is not covered in CSR as per section 135 of Companies Act 2013 is,

 “one-off events such as marathons/ awards/ charitable contribution/ advertisement/sponsorships of tv programmes etc. Would not be qualified as part of CSR expenditure.”

  • As per this provision as it’s a one-off event in which the company will be sponsoring, so it’s not qualified as CSR.
  • This report of high level committee on the CSR 2018 clearly mentions that sponsorships are not CSR.

https://www.mca.gov.in/ministry/pdf/csrhlc_13092019.pdf

The committee was of the considered view that while sponsorship is not and should not be a CSR activity, funding of amateur sports tournaments as part of annual competitions at state and national level conducted by recognized national sports federations should be allowed as CSR activity.

  • There are many companies who has contributed in sports but that is contribution for trainings or building sports academies or promoting rural sports through schemes. There is no companies which has included its sponsorship activities in the CSR activities.
  • Also there is no such circular issued by MCA for considering this activity as a CSR.
  • Therefore, the sponsorship in 44th chess Olympiad would not be qualified as a CSR activity in the schedule VII. This answer has been concluded based on the liberal interpretation of provisions of CSR and based on the report of high level committee on CSR.

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