Faqs: Company Law and Corporate Social Resposibility - Expert Take

Can a company take up CSR projects outside the listed activities in Schedule VII, and claim CSR expenditure?

In the present form, the rules are prescriptive, and only those listed topics in Schedule VII will qualify as CSR expenditure. The CSR committee should evaluate whether the CSR project is in alignment to the CSR policy of the company.

Can Schedule VII be amended in future to include more topics/activities that the companies can consider for their CSR projects?

Schedule VII was already amended once in February 2014. Also, in March 2014, the ministry in a submission to the Delhi High Court, informed that it had decided to amend Schedule VII to the extent that "promoting preventive healthcare" would be modified to "promoting healthcare including preventive health care". Going by the above, it is clear that Schedule VII will get amended to include topics/activities.

In case of new qualifying companies that have not completed three years - how would the quantification be done as three-year profits would not be available?

There is no specific guidance to this on the Act and Rule. But as a conservative approach, such new companies that meet any of the three qualification criteria, will have their CSR Committee of the Board and the CSR policy is in place.

What will be the tax treatment of the CSR spend?

There are no definite answers available on this as of now. In the recently proposed Direct Taxes Code (DTC), the finance ministry has observed that allowing deduction for CSR expenditure would imply that the government would be contributing one-third of this expenditure as revenue foregone.

What should be the content of a CSR policy?

The Rule makes it clear that it is not just a CSR policy statement that the companies need to prepare, but a detailed policy framework. Apart from the overall vision and objective, the CSR policy should include the list of projects/programmes, modalities of execution, implementation schedules and monitoring process.

Is there a monitoring agency in place which has an authority to approve or not approve a particular CSR expenditure?

As part of the Act or Rule, no agency has been appointed with this authority. But all applicable companies, as part of the boards' report, should include an annual report on CSR as per the template specified as annexure to the Rules. This will enable interested stakeholders to get the information pertaining to the CSR expenditure of any company. This information can be further used to compare between companies, between sectors or even question a company.

Will direct CSR spend by an MNC in India be treated as a sufficient compliance for CSR spend for it's Indian subsidiary?

No, CSR expenditure for the Indian entity should be reflected in its statement of accounts.

In case of using an implementation partner (such as an NGO) for CSR projects - would contribution to the organisation be treated as spending or will the spending be construed only once the organisation has actually spent the relevant amount on implementation of the project?

Spending shall be construed only when utilisation of allocated funds has occurred. Mere allocation of funds is not spending on CSR.

If a company does help directly or indirectly on a disaster relief, does it qualify as CSR?

At present, disaster relief is not included in Schedule VII as a CSR Project/Programme and hence it will not qualify. Only contribution through the PM Relief Fund will qualify.

The author is, Partner and Head of Sustainability, KPMG in India . (With inputs from Santhosh Jayaram, Technical Director, Sustainability Advisory, KPMG in India)