Category: Laws

Mass scale production and supply of the national flag, outreach and amplification efforts and other related activities are eligible CSR activities under this campaign.

Companies can spend their CSR funds for activities related to the ‘Har Ghar Tiranga’ campaign, according to the government.

The campaign is being organised by the government as part of the Azadi Ka Amrit Mahotsav to encourage people to bring home the national flag and hoist it to mark the 75th year of India’s independence.

Under the Companies Act, 2013, certain class of profitable companies are required to shell out at least two per cent of their three-year annual average net profit towards Corporate Social Responsibility (CSR) activities.

In a circular on Tuesday, the corporate affairs ministry said the campaign is aimed to invoke the feeling of patriotism in the hearts of people and to promote awareness about the Indian national flag.

“Spending of CSR funds for the activities related to this campaign such as mass scale production and supply of the national flag, outreach and amplification efforts and other related activities are eligible CSR activities,” the circular said.

The activities are eligible for CSR funds under the provisions of Schedule VII of the Companies Act pertaining to promotion of education relating to culture.

Schedule VII pertains to CSR activities.

The circular also noted that companies can undertake these activities subject to fulfilling the Companies (CSR Policy) Rules, 2014 and related circulars/ clarifications issued by the ministry.

The Companies Act, 2013 is implemented by the ministry.

Eminent CSR leaders discussed and reviewed the changes in the CSR Law under the chairmanship of Mr Sumant Chadha and after that came to a consensus that Corporate Social Responsibility (CSR) had gone a long way in instituting strategic programs to contribute toward causes

Eminent CSR leaders discussed and reviewed the changes in the CSR Law under the chairmanship of Mr Sumant Chadha and after that came to a consensus that Corporate Social Responsibility (CSR) had gone a long way in instituting strategic programs to contribute toward causes that enable the welfare of the society.

The amendments to the Companies Act, 2013 have defined organisations’ scope, helping strengthen the country socially and economically. Chadha said CSR had played a crucial role in supporting COVID-19 relief initiatives through contributions at multiple levels.

Others who attended included members of the Corporate Affairs Committee, including PK Rustagi, Ranjana Agarwal and Mr Sanjay Khanna, CS Devendra and V Deshpande.

Mr P K Rustagi highlighted in his address that there was a growing need for CSR after the coronavirus hit the world. He talked about the latest amendments in CSR. He said that COVID-19-related activity in the ordinary course of business can now be included as CSR along with the acquisition or creation of a capital asset provided that the company does not own it. He also said that any unspent CSR funds remaining at the end of a financial year should be transferred to an Unspent CSR Account or Transfer to a Schedule VII fund.

The value of a company is determined not only by its profits but also by sustainability, and CSR determines sustainability. Companies should not take CSR as a burden, CS Devendra and V Deshpande highlighted.

In his presentation, Mr Inder Mohan Singh gave a brief background and significant changes under the new CSR regime. He talked about the new CSR definition and said that constitution of the CSR committee has now been made optional. He also spoke about the concept of an ongoing project which is a new concept and was introduced on 22 January 2021.

Mr Sudhakar Saraswatula talked about the nuances and practical applications of CSR law. He said that the philosophy of giving back to society had been an integral part of the Indian culture and ethos, which has also been imbibed in traditional Indian businesses. He further said that the intent of CSR obligations is not merely to generate funds that additional taxes could have achieved and to involve companies to use their innovative ideas and management skills towards social development.

About the handling and implementation of various CSR projects and their impacts from the corporate point of view, Mr Ajay Holani said that the company should believe in integrating socio-economic development interventions within its core strategic business planning through its Corporate Social Responsibility.

The government has amended rules governing corporate social responsibility (CSR), including decriminalizing non-compliance with CSR provisions, allowing corporates to undertake multi-year projects and making registration compulsory for agencies

The government has amended rules governing corporate social responsibility (CSR), including decriminalizing non-compliance with CSR provisions, allowing corporates to undertake multi-year projects and making registration compulsory for agencies implementing CSR activities on behalf of companies.

Besides, companies have been permitted to set off the excess amount spent under CSR up to three succeeding financial years and they have also been allowed to create or acquire capital assets through CSR in the name of beneficiaries or a public authority or registered trust, among others.

These amended rules called The Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 have come into effect from January 22.

As per the amended rules, non-compliance with CSR provisions has been decriminalized by shifting such offences to penalty regime, while companies having CSR obligation below Rs 50 lakhs have been exempted from constituting a CSR Committee.

Under the Companies Act, 2013 — being implemented by the corporate affairs ministry — certain class of profitable companies are required to shell out at least two per cent of their three-year annual net profit towards CSR activities in a financial year.

To make the CSR framework more transparent, the amended rules specify that agencies implementing CSR projects for companies should get registered with the corporate affairs ministry’s MCA 21 portal and the system will automatically generate a unique CSR registration number.

The registration requirement will be effective from April 1, 2021.

To bring in the best international practices in the field of CSR and capacity building, the amend rules allow international organizations to carry out designing, monitoring and evaluation of the CSR projects or programmes. However, they cannot act as implementing agencies.

Besides, disclosure requirements have been enhanced with respect to CSR projects.

As per the amended rules, there will be impact assessment of CSR projects that will help companies to plan and allocate resources in a better manner. The assessment will be applicable subject to various conditions.

The CSR provisions came into force from April 1, 2014. The CSR expenditure has increased from Rs 10,066 crore in 2014-15 financial year to Rs 18,655 crore in 2018-19 and a cumulative total of Rs 79,000 crore has been spent throughout the country, as per the official data.

In a major relief to the Tata Education and Development Trust, the Income Tax Appellate Tribunal (ITAT) in Mumbai ordered that over Rs 220 crore of the Trust’s income exempted from tax in a case related to the assessment years 2011-12 and 2012-13

In a major relief to the Tata Education and Development Trust, the Income Tax Appellate Tribunal (ITAT) in Mumbai ordered that over Rs 220 crore of the Trust’s income exempted from tax in a case related to the assessment years 2011-12 and 2012-13.

The ITAT’s Mumbai bench gave a ruling on July 24 in favour of the Trust in their appeal against commissioner income tax (CIT) order wherein a demand of more than Rs 220 crore was levied by the tax department.

ITAT also stayed the matter of that demand without any minimum pay, the government said in statement.

The case pertains to assessment years 2011-12 and 2012-13 on money spent by the Trust for creating an endowment fund at the US-based Cornell University to provide scholarships to Indian students, and granting financial assistance to the Harvard Business School for constructing an executive building to be named Tata Hall.

The Trust had donated Rs 197.79 crore in 2011-12 and Rs 25.37 crore in 2012-13.

In the order, itat said: “…this wholly avoidable litigation which does not only clog the serious litigation before the judicial forums but also diverts scarce resources of the philanthropic bodies, like the assessee before us, to the areas which do no good to the society at large.”

The Tribunal hoped that the admirable work being done by the Government of India, in pursuing such forward looking policies at the macro level, is not allowed to be overshadowed by the isolated situations like this, at the field level, which must be minimized by sensitising the authorities concerned.

“An effort should be made to create a taxpayer friendly atmosphere by adopting just and fair approach at every level of the tax administration,” it observed.

The government said that the controversy began after the Public Account Committee (PAC) of the Lok Sabha in 2018 sought an enquiry in the matter as it believed that exemption granted by the direct tax body was in violation of the Income Tax Act.

Concluding the matter, ITAT said that all other grounds of appeals will be “rendered, academic and infructuous”.

“We have decided this issue in favour of the assessee and thus allowed this ground of appeal. We, therefore, uphold the plea of the assessee, and delete the resultant disallowance of claim of exemption,” it added.

The detailed ruling of Appellate Tribunal may be accessed by clicking on link.

FAQs on eligibility of CSR expenditure related to COVID-19 activities
In a set of FAQs issued by the Ministry of Corporate Affairs clarified that which COVID-19 related expenditures would qualify under the ‘corporate social responsibility’ (CSR) guidelines. As you may be aware, CSR has been made mandatory

In a set of FAQs issued by the Ministry of Corporate Affairs clarified that which COVID-19 related expenditures would qualify under the ‘corporate social responsibility’ (CSR) guidelines.

As you may be aware, CSR has been made mandatory, following an amendment to the Companies Act, 2013 in April 2014. Businesses can invest their profits in areas such as education, poverty, gender equality, and hunger as part of any CSR compliance. Large companies are required to spend 2 per cent of their net profit on CSR activities.

A set of FAQs along with clarifications are provided below for better understanding of the stakeholders.

S. No.	Frequently Asked Questions (FAQs)	Reply
1.	Whether contribution made to ‘PM CARES Fund’ shall qualify as CSR expenditure?	Contribution made to ‘PM CARES Fund’ shall qualify as CSR expenditure under item no (viii) of Schedule VII of the Companies Act, 2013 and it has been further clarified vide Office memorandum F. No. CSR-05/1/2020-CSR-MCA dated 28th March, 2020.
2.	Whether contribution made to ‘Chief Minister’s Relief Funds’ or ‘State Relief Fund for COVID-19’ shall qualify as CSR expenditure?	Chief Minister’s Relief Fund’ or ‘State Relief Fund for COVID-19’ is not included in Schedule VII of the Companies Act, 2013 and therefore any contribution to such funds shall not qualify as admissible CSR expenditure.
3.	Whether contribution made to State Disaster Management Authority shall qualify as CSR expenditure?	Contribution made to State Disaster Management Authority to combat COVID-19 shall qualify as CSR expenditure under item no (xii) of Schedule VII of the 2013 and clarified vide general circular No. 10/2020 dated 23rd March, 2020.
4.	Whether spending of CSR funds for COVID-19 related activities shall qualify as CSR expenditure?	Ministry vide general circular No. 10/2020 dated 23rd March, 2020 has clarified that spending CSR funds for COVID-19 related activities shall qualify as CSR expenditure. It is further clarified that funds may be spent for various activities related to COVID-19 under items nos. (i) and (xii) of Schedule VII relating to promotion of health care including preventive health care and sanitation, and disaster management. Further, as per general circular No. 21/2014 dated 18.06.2014, items in Schedule VII are broad based and may be interpreted liberally for this purpose.
5.	Whether payment of salary/wages to employees and workers, including contract labour, during the lockdown period can be adjusted against the CSR expenditure of the companies?	Payment of salary/ wages in normal circumstances is a contractual and statutory obligation of the company. Similarly, payment of salary/ wages to employees and workers even during the lockdown period is a moral obligation of the employers, as they have no alternative source of employment or livelihood during this period. Thus, payment of salary/ wages to employees and workers during the lockdown period (including imposition of other social distancing requirements) shall not qualify as admissible CSR expenditure.
6.	Whether payment of wages made to casual /daily wage workers during the lockdown period can be adjusted against the CSR expenditure of the companies?	Payment of wages to temporary or casual or daily wage workers during the lockdown period is part of the moral/ humanitarian/ contractual obligations of the company and is applicable to all companies irrespective of whether they have any legal obligation for CSR contribution under section 135 of the Companies Act 2013. Hence, payment of wages to temporary or casual or daily wage workers during the lockdown period shall not count towards CSR expenditure.
7.	Whether payment of ex-gratia to temporary /casual /daily wage workers shall qualify as CSR expenditure?	If any ex-gratia payment is made to temporary / casual workers/ daily wage workers over and above the disbursement of wages, specifically for the purpose of fighting COVID 19, the same shall be admissible towards CSR expenditure as a onetime exception provided there is an explicit declaration to that effect by the Board of the company, which is duly certified by the statutory auditor

The World Bank defines NGOs as private organisations that pursue activities to relieve suffering, promote the interests of the poor, protect the environment, provide basic social services, or undertake community development

The World Bank defines NGOs as private organisations that pursue activities to relieve suffering, promote the interests of the poor, protect the environment, provide basic social services, or undertake community development.

NGOs are legally constituted organisations which operate independently from government and are generally considered to be non-state, non-profit oriented groups who pursue purposes of public interest.

NGOs and Development: History and Role in India
NGOs are voluntary organisations (VOs). These are popularly known as NGOs because they are free from governmental control in their functioning. They are democratic and open to all those wishing to become member of the organisation voluntarily and serve the society.

Therefore, they have assumed a significant space in civil society, which is fast emerging today due to the weakening of the state.

NGO is a popular term, which has gained currency at global level and commands respect in society due to its welfare services in society. The organization does seek financial assistance from the government but it operates, at least theoretically, on its own principles and programmes.

NGOs are, in principle, open to voluntary membership.Any one may become member by choice and resign from the organization at one’s own will.

History of NGOs in India:
NGO have along history in India. In the past, people in this country have been found to have provided help to others in trouble. Since centuries there exists the tradition of voluntary service to the needy and helpless in the country. In the beginning, these services were rendered by people motivated by their religious feelings.

They believed that service to people would be the service to God and, therefore, would be a means to attain spiritual salvation and sometimes to atonement for any sinful act. Spirit of charity and altruism guided the voluntary action in the past, which had found expression in diverse forms even outside the formal established religious channels. Many people including rulers have trod the path of service to their fellow beings and adopted it as their life mission.

Floods, fires, earthquakes, epidemic outbreaks and other kinds of calamities were the occasions which motivated people to voluntary help those who were trapped in disastrous situations. Community life was very strong and people were guided by the ‘we’ feeling and selflessness in extending their individual support.

The help and support used to be individual, spontaneous and transitory.

It is around the late 18th and early 19th century that associations and organisations were being formed to render such activities in a more organised and permanent profile.

The reform movements of the 19th century were perhaps the first organised forms of voluntary action in the service of society. This was the period when the caste rigidities were strong, untouchability was in practice, and other social evils like child marriage, cursed status of widows were prevalent in the Indian society against which voluntary organizations came forward to launch reform movements.

NGOs have gained importance now and are increasing in number very fast. Enhancement of their importance is the result of weakening of the role of state in upholding the welfare and well-being of its citizens and consequent development of the assertive role of civil society to ascertain social welfare and integration. More than half a million voluntary organisations would perhaps be working in the country.

Role of NGOs in development:
NGOs have immense role in bringing about social change and development and it is being experienced from different parts of the country. Development, as we have read earlier, is a multi-faceted process, which essentially involves the aggressive participation of the people that would not be possible unless they are educated, awakened and motivated.

NGOs are taking up this job sportingly and successfully.

The areas in which we witness active and appreciative role of NGOs are as follows:

1. The NGOs are active to promote education, particularly among that section of population, which has remained un-benefited or less benefited by the measures adopted by the government.The education of girls, and other deprived people, particularly the SCs and STs, has been their target objective.
2. Women are the other vulnerable section of society. Gender discrimination is a ubiquitous cultural reality. Girls are discriminated in the upbringing pattern in the family. Larger numbers of the undernourished are from amongst the girls. Retention of girls in schools is much less as compared to boys.
3. Since the second half of the preceding century started the change in the status of women with their active participation in political,social and economic activities, which gained acceleration since the last quarter of the preceding century. Important in this process has been the role of academicians and NGOs.
4. The threat to the human life developed due to environmental pollution and imbalance and the depletion of natural resources as a consequence of the nature of development. Here, the role of NGOs is really noticeable and praiseworthy. Thousands of voluntary organisations are at work to awaken people and governments against environmental degradation and depletion of resources.
5. The NGOs have a major role to play towards the cause of people’s resettlement and are also performing commendable job in this direction. The projects like the construction of dams, road highways and railways have often made some sections of people, particularly in rural areas, vulnerable and are displaced without being properly compensated.
6. NGOs are also rendering great service in restoring dignity to the deprived and discriminated sections of the people in the society like women suffering from gender discrimination, lower caste people suffering from caste segregation and the status of untouchable, racial and religious discrimination.

Tata Trusts’ 2015 move to “surrender” registrations that gave them tax exemptions was “not voluntary”, the Income-Tax Department had told the Bombay High Court in August 2018. The department claimed that the trusts were “forced” to surrender the registrations after an I-T appellate authority

Tata Trusts’ 2015 move to “surrender” registrations that gave them tax exemptions was “not voluntary”, the Income-Tax Department had told the Bombay High Court in August 2018.

The department claimed that the trusts were “forced” to surrender the registrations after an I-T appellate authority order in March 2014 “established” tax violations by them.

The tax department’s submission in the court had come in response to a writ petition filed by one of the trusts, Jamsetji Tata Trust, which had challenged the department’s move to cancel the registrations, claiming that they had themselves surrendered the registrations in 2015.

Justifying its move to seek cancellation of registrations, the tax body had told the court that Tata Trusts “were left with no other option” but to surrender following the appellate authority’s ruling over various violations for the 2010-11 assessment year. ET has seen the department’s 2018 response, which has not come in the public domain so far.

In October 2019, the tax department cancelled registrations of six Tata Trusts — Jamsetji Tata Trust, RD Tata Trust, Tata Education Trust, Tata Social Welfare Trust, Sarvajanik Seva Trust and Navajbai Ratan Tata Trust.

Tata Trusts in a statement at the time said the cancellation order was “a culmination of the decision taken by these six trusts in 2015 to surrender, of their own volition, their registration under the I-T Act and to not claim the associated tax exemptions.” Tata Trusts had withdrawn the writ petition in the high court a year earlier, in October 2018.

The Income Tax Appellate Tribunal (ITAT) order, referred to by the I-T department in its response to the court, was passed on March 23, 2014. The department’s affidavit, filed by principal commissioner of income tax, Mumbai, Lekha Kumar, claimed that Jamsetji Tata Trust “itself agreed that decision to given up benefits was based on ITAT’s decision” in its case. “So, the surrender is not voluntary,” it said.

The government is considering a high-level committee’s recommendation on tax deduction on CSR funding and making non-compliance with CSR norms a civil offence, a senior Ministry of Corporate affairs (MCA) official said. The committee chaired by Corporate Affairs Ministry Secretary

The government is considering a high-level committee’s recommendation on tax deduction on CSR funding and making non-compliance with CSR norms a civil offence, a senior Ministry of Corporate affairs (MCA) official said.

The committee chaired by Corporate Affairs Ministry Secretary Injeti Srinivas in its report submitted on August 2019 has recommended that in case of violation of CSR provisions, penalty may be imposed instead of imprisonment.

In respect of tax benefit for CSR activities, the committee has recommended that all activities listed under Scheduled VII of the Companies Act, 2013 to enjoy uniform tax benefit and CSR expenditure to be made deductible from the income earned for the purpose of taxation.

“The Ministry of Corporate Affairs is considering these recommendations for implementation,” the official said.

During the monsoon session of Parliament, Minister of State for Finance and Corporate Affairs Ministry Anurag Singh Thakur had informed that the government was looking into the committee’s recommendations.

The committee has also suggested a provision to carry forward unspent CSR balance for three to five years.

According to the new CSR norms under Section 135 of the Companies Act, a company has to earmark a part of its profit for social activities and transfer all unspent amount to an escrow account if it is an ongoing project.

This account will be opened by the company concerned in a bank and be called the unspent corporate social responsibility account.

The CSR expenditure which remains unspent in three years would be transferred to any fund specified in Schedule VII of the Companies Act such as the Swachch Bharat Kosh, the Clean Ganga Fund, and the Prime Minister’s Relief Fund.

The central government funds should be discontinued as CSR spend, the committee report said and instead a special designated fund should be created for transfer of unspent CSR money beyond three to five years.

The committee has recommended that Schedule VII be aligned with the sustainable development goals to include sports promotion, senior citizens’ welfare, welfare of differently abled persons, disaster management, and heritage protection.

According to the government data, of the total 21,337 companies liable for CSR 9,753 companies did not report CSR activity in 2017-18.

The other recommendations of the committee include developing a CSR exchange portal to connect contributors, beneficiaries and agencies, allowing CSR in social benefit bonds and promoting social impact companies.

The committee constituted in October, 2018 has among its members N Chandrasekaran, chairman, Tata Sons, and Amit Chandra, managing director, Bain Capital Private Equity, among others.

The government on Tuesday informed Parliament that it has so far given permission to prosecute in 366 cases related to CSR related offences. “So far, sanction for prosecution has been accorded in 366 cases. All CSR related offences are compoundable

The government on Tuesday informed Parliament that it has so far given permission to prosecute in 366 cases related to CSR related offences.

“So far, sanction for prosecution has been accorded in 366 cases. All CSR related offences are compoundable. So far, 118 applications for compounding have been made and 37 cases have been compounded,” Minister of State for Finance and Corporate Affairs Anurag Singh Thakur said in a written reply to the Rajya Sabha on December 10.

Whenever any violation of the CSR provisions is reported, action against such non-compliant companies are initiated as per provisions of Companies Act, 2013 after due examination of records, he added.

The Minister further said that there was no proposal under consideration to incentivise companies for CSR investment in areas like education and health care.

He was responding to queries raised by JD(U) member M P Veerendra Kumar who had also asked if the government has constituted a monitoring committee to oversee the CSR spending of the companies.

The Minister said the CSR is a Board driven process and the Board of the company is empowered to decide the activities to be undertaken as per Schedule VII of the Companies Act, 2013 taking into consideration the recommendation of its CSR committee.

The entire CSR architecture is disclosure based and CSR mandated companies are required to file details of CSR amount spent annually in MCA21 registry, he added.

Chief Justice of India (CJI) Ranjan Gogoi wants Corporate Social Responsibility (CSR) integrated into a modern business strategy to achieve the goal of social justice. This practice will ensure that financial drivers and sustainable development metrics are embedded in mainstream businesses

Chief Justice of India (CJI) Ranjan Gogoi wants Corporate Social Responsibility (CSR) integrated into a modern business strategy to achieve the goal of social justice. This practice will ensure that financial drivers and sustainable development metrics are embedded in mainstream businesses.

“To achieve the goal of social justice in the best possible manner, CSR must be integrated into our modern business strategy,” Gogoi said while speaking at an Associated Chambers of Commerce of India (ASSOCHAM) event. He said India is a developing country and although the country’s economy began to thrive post-privatization and globalization, the situation is different from that of the developed west. “Having entered the global marketplace without a particularly robust regulatory infrastructure and fully functional state services like schools, highways, or hospitals, we have experienced and continue to experience great inequities,” Gogoi feels.

Therefore, it requires the companies and businesses to act beyond their legal obligations to integrate social, environmental and ethical concerns into a company’s business process, he added. Gogoi also observed that one of the areas of greatest weakness concerning social protection relates to the extremely limited attention within the CSR agenda to the vast majority of workers, producers and enterprises in the country that are associated with micro and small enterprises, small-scale agriculture and the so-called informal sector’.

In India, corporates have been engaging themselves in philanthropy and charitable activities while embedding the same in law has given a new dimension to the CSR. Sharing CJI’s views, ASSOCHAM Senior Vice President Niranjan Hiranandani said the CSR should go well beyond the legal obligation and it should become part of an enterprise, starting from the top management.