CSR 01082014

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Corporate SocialResponsibility

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CSR IN COMPANIES ACT, 2013

Section 135

Applicability

• Every company having

net worth of Rs 500 crore or more, or

turnover of Rs 1000 crore or moreor a net prot of Rs 5 crore or more ;

during any nancia year

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Enhanced !ppica"iity#

•hoding or su"sidiary company;• a foreign company dened under cause $%&' of

section & of the !ct having its "ranch o(ce orpro)ect o(ce in *ndia

which fu the criteria u+s 135 of the !ct

he net worth, turnover or net prot of a foreigncompany sha "e computed in accordance with-+S and ./ !+c of such company prepared in

accordance with the provisions of the !ct

Companies (Corporate Social Responsibilit Polic! R"les, 20I#

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CSR SPEN$ IN %INANCIA& 'EAR

• !t east &2 of the average net prots of the companymade during the three immediatey preceding nanciayears

• he section postuates that net prot4 sha "e cacuated

in accordance with the provisions of section 16

• 7ompany sha give preference to the oca area and areasaround it where it operates, for spending the amountearmar8ed for 7SR activities

• 9here the company fais to spend such amount, the -oardsha, in its report, specify the reasons for not spendingthe amount

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CSR EXPENDITURE

he 7SR pro)ects or programs or activities underta8enin *ndia ony sha amount to 7SR e:penditure

!ctivities underta8en in norma course of "usiness ofcompany sha not "e incuded in 7SR spend $eg he"usiness of co is to run educationa institution'

Companies (Corporate Social Responsibilit Polic! R"les, 20 I #

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CSR Committee- Constitution• 7SR 7ommittee sha consist of 3 or more

directors, with at east 1 *• 7ompanies $7SR .oicy' Rues &01%

he -oardoreign company one person $ie person resident in *ndia

authorised to accept on "ehaf of thecompany service of process any noticesor other documents served on thecompany' and another person sha "enominated "y the foreign company

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CSR Policy

• he 7SR committee sha formuate and recommend tothe -oard, a 7SR .oicy

• he poicy sha indicate the activities to "e underta8en"y the company as specied in Schedue ?**;

• he 7SR 7ommittee sha recommend the amount ofe:penditure to "e incurred on the activities referred in7SR .oicy

• he 7SR .oicy of the company sha "e monitored "y7SRcommittee from time to time

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CSR Policy

he -oard of every company sha,@$a'after ta8ing into account the recommendations

made "y the 7SR 7ommittee,$i' approve the 7SR .oicy for the company$ii'discose contents of such .oicy in its report$iii'pace it on the company

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? protection of nationa heritage, art and cuture incudingrestoration of "uidings and sites of historica

importance and wor8s of art; setting up pu"ic i"raries;promotion and deveopment of traditiona arts andhandicrafts;

? measures for the "enet of armed forces veterans, warwidows and their dependents;

?* training to promote rura sports, nationay recognisedsports, para oympic sports and ympic sports;

? contri"ution to the .rime Finisterundor any other fund set up "y the 7entra Hovernment forsocioAeconomic deveopment and reief and wefare of

the Schedued 7aste, the Schedued ri"es, other"ac8ward casses, minorities and women;

?* contri"utions or funds provided to technoogyincu"ators ocated within academic institutions whichare approved "y the 7entra Hovernment

?**rura deveopment pro)ectsF7! 7arication vide Henera 7ircuar &1 &01% t 16th


http://2014%2021%20clarification%20on%20csr%20sec%20135.pdf/http://2014%2021%20clarification%20on%20csr%20sec%20135.pdf/http://2014%2021%20clarification%20on%20csr%20sec%20135.pdf/http://2014%2021%20clarification%20on%20csr%20sec%20135.pdf/

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Every company which ceases to "e a companycovered under su"Jsection $1' of section 135 of the!ct $ie net worth of Rs 500 crore or more, orturnover of Rs 1000 crore or more or a net prot ofRs 5 crore or more' for three consecutive nancia

years sha not "e re=uired to K

$a' constitute a 7SR 7ommittee; and$"' compy with other provisions

Companies (Corporate Social Responsibilit Polic! R"les, 201#

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Implementation

• 7SR activities may "e underta8en through• a registered trust or• a registered society or

• ! company esta"ished "y the company or itshoding or su"sidiary or associate companyunder section 6 of the !ct or otherwise

F7! 7arication vide Henera 7ircuar &1+&01% t16th Iune,&01%

LRegistered rustM1 Registered with Registrar of rust in the State,& 9here no Registrar of rust in State, Registered

with * !uthority


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Implementation

• rust+SocietyoSuch trust, society or co $other than unreated to thecompany'sha have an esta"ished trac8 record of 3 yearsin underta8ing simiar programs or pro)ects;othe co has to specify the pro)ect or progams to "eunderta8en through these entities, and;o aso the modaities of utiiCation of funds on such pro)ectsand programs and the monitoring and reportingmechanism

• 7oa"oration with other company+$ies' for underta8ing

pro)ects or programs or 7SR activities is permitted

• he 7SR pro)ects or programs or activities that "enetony the empoyees of the co and their famiies sha not"e considered for 7SR


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Implementation

•-uiding 7SR capacities

7ompanies may "uid capacities of•their own personne;•their *mpementing agencies

through *nstitutions with esta"ished trac8 records of ateast 3 nancia years "ut such e:penditure sha note:ceed 52 of tota 7SR e:penditure of the co in one >N

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!onito"in# P"ocess

ihe 7SR 7ommittee sha institute transparentmonitoring mechanism for impementation of pro)ects,

iihe 7SR .oicy sha incude monitoring mechanism

iii he 7SR poicy sha specify that the surpusarising out of the 7SR pro)ects or programs or activitiessha not form part of the "usiness prot of a company

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CSR Repo"tin#

-oardMs Report of a company pertaining to a >Ncommencing on or after the 1st !pri, &01% sha

incude an annua report on 7SR

he -os of the co sha discose contents of 7SRpoicy in its report and the same sha "e dispayedon the companyMs we"site, if any

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Issue 1

• >rom which >N 7SR E:penditure / Reporting-eginsO

Response

• 7ompanies have to spend the amount on

7SR activities as re=uired "y section 135during the >N &01%A15 and Reporting of thesame woud "e in &015 -oardMs Report orotherwise state the )ustication for the same

in -oard Report

• !verage Get .rot of 3 preceding >N wiincude >N 13A1%, 1&A13,11A1&

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Issue II $Any o% t&e t&"ee p"ece'in# (nancialyea"s) &as been cla"i(e' *i'e ci"cula" 'ate' +une,. /0,1 lea's to %u"t&e" ambi#uity2

• !s per the carication, Lany nancia yearM referred under su"Asection $1' of section 135 of the !ct read with Rue 3$&' of 7SRRues, &01% impies Lany of the three preceding nancia yearsM

• 7onfusion# Section 135$1' re=uires every company to do 7SRactivities which are faing in the specied category in anynancia year

• Rues 3$&' provides that in case a company which ceases to "ecovered under section 135$1' for three consecutive nanciayears sha not "e re=uired to constitute 7SR 7ommittee andcompy with provision of 135 $&' to $5'

• Gow, as per the carication, in case, a company which meetsthe criteria in preceding three nancia years $ie &011A1&, 1&A13, 13A1%' "ut does not meet the criteria in nancia year&01%A15 wi need to ma8e 7SR 7ommittee and contri"ution for>N &01%A15

• *t needs carication1"

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Issue 3

• %he concept o& C'( is )ased on Co*pl+ or ,-plain. What i&

co*pan+ does not co*pl+ nor e-plain

(esponse

isclosure has to )e *ade in )oards report u/s 134

• Penalt+ u/s 1340"

Co. ine hich shall )e not less than (s. 5$$$$ )ut not *ore

than (s. 25$$$$$.

,ver+ o&&icer I*prison*ent e-tendin upto 3 +ears or &inenot less than (s. 5$$$$ )ut not *ore than (s. 5$$$$$.

1#

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• urther in case a co*pan+ has not spent the a*ountrequired under the la on corporate social activities and i& it

has e-plained the sa*e in the irectors (eport its leal

responsi)ilit+ in this reard stands dischared. 0section 135

05

• 7lso since it is ansera)le to all the sta8eholders the

co*pan+ can onl+ escape )+ e-plainin the enuine pro)le*

and hich is not possi)le ever+ +ear.

2$

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Issue 4

• 9i constitution of 7SR 7ommittee "e appica"e tohoding / su"sidiary companiesO

Response

• Rue 3$1' of 7ompanies $7SR .oicy' Rues, &01%#

K Every company;K its hoding or su"sidiary

*f fus the criteria specied in su"Asection $' ofsection 135 of the !ct sha compy with the provisions

of section 135 of the !ct and these rues• So. t&e c"ite"ia nee's to be %ul(lle' byin'i*i'ual company2

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Issue 5

• S&oul' a section company also 'o CSR3

Response

K *f section 6 companies are faing within the criteriaprovided under section 135$1', these woud "ere=uired to underta8e 7SR activities

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Issue 5

• Where C'( activities lead to pro&its then hat a)out such

surplus

(esponse

• %he surplus arisin out o& the C'( pro9ects or prora*s oractivities shall not &or* part o& the )usiness pro&it o& a co*pan+.

%he sa*e shall )e speci&ied in C'( Polic+. Ideall+ it should )e

rolled over to C'( Corpus.

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Issue 6

What is the treat*ent o& e-penses incurred )e+ond that

o& *andated C'( spend

%here are instances o& C'( activities that are in thepro9ect *ode hich require &und )e+ond that o& the

*andated 2 :.

Will such e-pense here incurred )e counted in

su)sequent inancial +ears as part o& C'( e-penditure.

(epl+;

• %his is an onoin quer+. %he

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*ssue PCSR Cont"ibution in 4in'9hether 7SR contri"ution permitted in 8ind, such as fora company engaged in "oo8s whether it coud donate"oo8s, for a company engaged in computer software,whether it coud distri"ute the software to the needy,

whether a company can donate and for say "uiding aod age home

Repy#

• Geeds carication

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*ssue 6

!s per >oreign 7ontri"ution Reguation !ct, &010 $>7R!'7ontri"ution with respect to 7SR received "y an GHfrom *ndian Su"sidiary which is foreign owned wi "edeemed to "e receiving the same from >oreign Source,thus re=uiring approva and Registration of Finistry of

Qome aBairsRepy

for smooth 7SR 7ontri"ution, amendment is re=uired in>7R! to e:cude 7SR 7ontri"ution from the meaning ofLforeign contri"utionM under 7ompanies !ct, &013

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Issue #

2!

• *f a company having turnover of more than Rs1000 crores or more "ut has incurred ossduring preceding three the >N then whether

such company is re=uired to compy with theprovisions of the section 135 7ompanies !ct,&013O

ResponseK !s per the itera interpretation the answer is

yes Qowever, such company can provide the )ustication for not spending the amount on

7SR activity in its -oard Report

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Issue 1$

• %here are certain corporate roups ho run hospitals

and educational institutions ill this )e considered as

C'(

• I& the hospitals and educational institutes are part o&

the )usiness activit+ the+ ould not )e considered as

C'( 7ctivit+. =oever i& so*e charit+ ids done )+

these hospitals or educational institutes ithout an+

statutor+ o)liation to do so then it can )e considered

as C'( 7ctivit+.

2"

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Issue 11

• whether the foowing activities can "econsidered as 7SR activity of the 7ompany, asper 7ompanies !ct, &013

• Rain water harvesting within factory premiseswhere the company does not use this water

• Renewa"e+ soar energy instaations withinfactory premises for "usiness consumptionwhere the company chooses soar energy in theinterest of the environment even though it ismore e:pensive than grid eectricity

2#

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*ssue 1& Since it has "een indicated in the rues that a7SR activities shoud "e in pro)ect+programme

mode, wi intermittent, oneAoB events such asmarathons +awards+advertisements +sponsorshipsof ? programmes, etc "e part of 7SRe:penditureO

• 7aried through 7ircuar no &1+&01% dated Iune 16, &01% as

7SR activities shoud "e underta8en "y the

companies in pro)ect+programme mode $asreferred in Rue %$1' of 7ompanies 7SR Rues,&01%' ne oB events as stated a"ove woudnot "e =uaied as part of 7SR e:penditure

3$

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*ssue 139i e:penses incurred for the fument of any

!ct+ Statute of Reguation count as 7SRe:penditureO• 7aried through 7ircuar no &1+&01% dated

Iune 16, &01% as

Go, e:penses incurred "y companies forfument of any !ct+Statute of reguations$such as a"our aws, and !c=uisition !ct,etc' woud not count as 7SR e:penditure underthe 7ompanies !ct

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*ssue 1% Shoud the saaries of the staB empoyed "y the

company for overseeing and directing 7SR

progammes+ pro)ects+ activities "e counted as7SR e:penditureO !so, can the eBorts of

empoyees of the company who vounteer for 7SRwor8 "e incuded in 7SR e:penditureO7aried through 7ircuar no &1+&01% dated Iune 16,

&01% as

Saaries paid "y the companies to reguar 7SR staBas we as to vounteers of the companies $inpromotion to companyMs time+hour spent

specicay on 7SR' can "e factored into 7SRpro)ect cost as part of the 7SR e:penditure

>urther Rue %$', provides that such e:pendituresha not e:ceed ve percent of tota 7SR

e:penditure of the company in one nancia year 32

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Thank You

Documents

CSR 01082014