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Untitled Document
NO.05/01/2014- CSR
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
NEW DELHI
GENERAL CIRCULAR NO
21/2014, Dated: June 18, 2014
To,
All Regional Director,
All Registrar of Companies,
All Stakeholders
Subject: - Clarifications with regard to provisions of Corporate Social Responsibility under section 135 of the Companies Act, 2013.
Sir,
This Ministry has received several references and representation from stakeholders seeking clarifications on the provisions under Section 135 of the Companies Act, 2013 (herein after referred as 'the Act') and the Companies (Corporate Social Responsibility Policy) Rules, 2014, as well as activities to be undertaken as per Schedule VII of the Companies Act, 2013. Clarifications with respect to representations received in the Ministry on Corporate Social Responsibility (herein after referred as ('CSR') are as under:-
(i) The statutory provision and provisions of CSR Rules, 2014, is to ensure that while activities undertaken in pursuance of the CSR policy must be relatable to Schedule VII of the Companies Act 2013, the entries in the said Schedule VII must be interpreted liberally so as to capture the essence of the subjects enumerated in the said Schedule. The items enlisted in the amended Schedule VII of the Act, are broad-based and are intended to cover a wide range of activities as illustratively mentioned in the Annexure.
(ii) It is further clarified that CSR activities should be undertaken by the companies in project/ programme mode [as referred in Rule 4 (1) of Companies CSR Rules, 2014]. One-off events such as marathons/ awards/ charitable contribution/ advertisement/ sponsorships of TV programmes etc. would not be qualified as part of CSR expenditure.
(iii) 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.
(iv) Salaries paid by the companies to regular CSR staff as well as to volunteers of the companies (in proportion to company's time/hours spent specifically on CSR) can be factored into CSR project cost as part of the CSR expenditure.
(v) "Any financial year" referred under Sub-Section (1) of Section 135 of the Act read with Rule 3(2) of Companies CSR Rule, 2014, implies 'any of the three preceding financial years'.
(vi) Expenditure incurred by Foreign Holding Company for CSR activities in India will qualify as CSR spend of the Indian subsidiary if, the CSR expenditures are routed through Indian subsidiaries and if the Indian subsidiary is required to do so as per section 135 of the Act.
(vii) 'Registered Trust' (as referred in Rule 4(2) of the Companies CSR Rules, 2014) would include Trusts registered under Income Tax Act 1956, for those States where registration of Trust is not mandatory.
(viii) Contribution to Corpus of a Trust/ society/ section 8 companies etc. will qualify as CSR expenditure as long as (a) the Trust/ society/ section 8 companies etc. is created exclusively for undertaking CSR activities or (b) where the corpus is created exclusively for a purpose directly relatable to a subject covered in Schedule VII of the Act.
2. This issues with the approval of Competent Authority.
(Seema Rath)
Assistant Director (CSR)
Annexure referred to at para (i) of General Circular No. 21/2014 dated 18.06.2014
| Sl. No. |
Additional items requested to be included in Schedule VII or to be clarified as already being covered under Schedule VII of the Act |
Whether covered under Schedule VII of the Act |
| 1. |
Promotion of Road Safety through CSR:
(i) (a) Promotions of Education, "Educating the Masses and Promotion of Road Safety awareness in all facets of road usage,
(b) Drivers' training,
(c) Training to enforcement personnel,
(d) Safety traffic engineering and awareness through print, audio and visual media" should be included.
(ii) Social Business Projects :
"giving medical and Legal aid, treatment to road accident victims" should be included. |
(a) Schedule VII (ii) under "promoting education".
(b) For drivers training etc. Schedule VII (ii) under "vocational skills".
(c) It is establishment functions of Government (cannot be covered).
(d) Schedule VII (ii) under "promoting education".
(ii) Schedule VII (i) under 'promoting health care including preventive health care.' |
| 2. |
Provisions for aids and appliances to the differently-able persons - 'Request for inclusion |
Schedule VII (i) under 'promoting health care including preventive health care.' |
| 3. |
The company contemplates of setting up ARTIIC (Applied Research Training and Innovation Centre) at Nasik. Centre will cover the following aspects as CSR initiatives for the benefit of the predominately rural farming community:
(a) Capacity building for farmers covering best sustainable farm management practices.
(b) Training Agriculture Labour on skill development.
(c) Doing our own research on the field for individual crops to find out the most cost optimum and Agri – ecological sustainable farm practices. (Applied research) with a focus on water management.
(d) To do Product Life Cycle analysis from the soil conservation point of view.
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Item no. (ii) of Schedule VII under the head of "promoting education" and "vocational skills" and "rural development".
(a) "Vocational skill" livelihood enhancement projects.
(b) "Vocational skill"
(c) 'Ecological balance', 'maintaining quality of soil, air and water'.
(d) "Conservation of natural resource" and 'maintaining quality of soil, air and water'.
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| 4. |
To make "Consumer Protection Services" eligible under CSR. (Reference received by Dr. V.G. Patel, Chairman of Consumer Education and Research Centre).
(i) Providing effective consumer grievance redressal mechanism.
(ii) Protecting consumer's health and safety, sustainable consumption, consumer service, support and complaint resolution.
(iii) Consumer protection activities.
(iv) Consumer Rights to be mandated.
(v) all consumer protection programs and activities" on the same lines as Rural Development, Education etc.
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Consumer education and awareness can be covered under Schedule VII (ii) "promoting education". |
| 5. |
a) Donations to IIM [A] for conservation of buildings and renovation of classrooms would qualify as "promoting education" and hence eligible for compliance of companies with Corporate Social Responsibility.
b) Donations to IIMA for conservation of buildings and renovation of classrooms would qualify as "protection of national heritage, art and culture, including restoration of buildings and sites of historical importance" and hence eligible for compliance of companies with CSR.
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Conservation and renovation of school buildings and classrooms relates to CSR activities under Schedule VII as "promoting education". |
| 6. |
Non Academic Technopark TBI not located within an academic Institution but approved and supported by Department of Science and Technology. |
Schedule VII (ii) under "promoting education", if approved by Department of Science and Technology. |
| 7. |
Disaster Relief |
Disaster relief can cover wide range of activities that can be appropriately shown under various items listed in Schedule VII. For example,
(i) medical aid can be covered under 'promoting health care including preventive health care.'
(ii) food supply can be covered under eradicating hunger, poverty and malnutrition.
(iii) supply of clean water can be covered under 'sanitation and making available safe drinking water'.
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| 8. |
Trauma care around highways in case of road accidents. |
Under 'health care'. |
| 9. |
Clarity on "rural development projects" |
Any project meant for the development of rural India will be covered under this. |
| 10. |
Supplementing of Govt. schemes like mid-day meal by corporates through additional nutrition would qualify under Schedule VII. |
Yes. Under Schedule VII, item no. (i) under 'poverty and malnutrition'. |
| 11. |
Research and Studies in the areas specified in Schedule VII. |
Yes, under the respective areas of items defined in Schedule VII. Otherwise under 'promoting education'. |
| 12. |
Capacity building of government officials and elected representatives – both in the area of PPPs and urban infrastructure. |
No. |
| 13. |
Sustainable urban development and urban public transport systems |
Not covered. |
| 14. |
Enabling access to, or improving the delivery of, public health systems be considered under the head "preventive healthcare" or "measures for reducing inequalities faced by socially & economically backward groups"? |
Can be covered under both the heads of "healthcare" or "measures for reducing inequalities faced by socially & economically backward groups", depending on the context. |
| 15. |
Likewise, could slum re-development or EWS housing be covered under "measures for reducing inequalities faced by socially & economically backward groups"? |
Yes. |
| 16. |
Renewable energy projects |
Under 'Environmental sustainability, ecological balance and conservation of natural resources', |
| 17. |
(i) Are the initiatives mentioned in Schedule VII exhaustive?
(ii) In case a company wants to undertake initiatives for the beneficiaries mentioned in Schedule VII, but the activity is not included in Schedule VII, then will it count (as per 2(c)(ii) of the Final Rules, they will count)?
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(i) & (ii) Schedule VII is to be liberally interpreted so as to capture the essence of subjects enumerated in the schedule.
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| 18. |
US-India Physicians Exchange Program – broadly speaking, this would be program that provides for the professional exchange of physicians between India and the United States. |
No.
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