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C O R P O R A T E S O C I A L R E S P O N S I B I L I T Y

( C S R )

Fiinovation understands evolution of industries leads to organized economies. Gradually, the focus of the

corporations shifted from a demand-supply relationship to marketing themselves among the target

audience in order to sustain them among increased competition. Fiinovation believes the consumers in

advancing economies entrust a brand which contributes towards improvement of their society. Societal

marketing, better known as CSR (Corporate Social Responsibility) provides a platform to the

corporations to meet the requirements of their business effectively and efficiently than competitors, while

they enhance the consumer's and society's well being.

UNIDO (United Nations Industrial Development Organization) defines CSR as, "Corporate Social

Responsibility is a management concept whereby companies integrate social and environmental concerns

in their business operations and interactions with their stakeholders. CSR is generally understood as being

the way through which a company achieves a balance of economic, environmental and social imperatives

(Triple-Bottom-Line- Approach); while at the same time, addressing the expectations of shareholders

and stakeholders. In this sense it is important to draw a distinction between CSR, which can be a strategic

business management concept, and charity, sponsorships or philanthropy. Even though the latter can also

make a valuable contribution to poverty reduction, will directly enhance the reputation of a company and

strengthen its brand, the concept of CSR clearly goes beyond that."

The Companies Act, 2013 in India has brought the idea of CSR to the forefront and through its disclose-

or-explain mandate, it promotes transparency and disclosure. Schedule VII of the Act, places the

community at the centre point of all activities. The Act advocates integrating CSR into the core operations

of the company.

Under the Companies Act 2013, a company must spend 2% of its average net profit in the preceding three

years on CSR if it has a turnover of Rs 1,000 crore or more, or net worth of Rs 500 crore or more, or net

profit of Rs 5 crore or more.

The companies that fall under the CSR ambit will have to appoint a CSR committee consisting of

at least three members including one Independent Director. The CSR committee would be

responsible to formulate CSR policy, recommend CSR initiatives and monitor CSR expenditure.

The Board members of the company will have to approve the CSR Policy drafted by the CSR

Committee. With respect to a foreign company covered under these rules, the CSR Committee

shall comprise of at least two persons of which one person shall be as specified under clause (d)

of sub-section (1) of section 380 of the Act and another person shall be nominated by the foreign

company. The Board would be mandated to report on CSR in the Annual Board report. In case of

failure to spend the prescribed amount, reasons would have to be disclosed in the report.

The CSR policy of a company will include a list of CSR projects or programs which a company

plans to undertake falling within the purview of the Schedule VII of the Act, specifying

modalities of execution of such project or programs and implementation schedules for the same.

fiinovation A company which is mandated to spend on CSR as per section 135 of the act fails to do so shall

explain the reason for its inability to do so in any year. A failure to do so will attract a fine of not

less than Rs. 50,000 and not more than Rs. 25,00,000. The default officer will attract

imprisonment for a term which may extend to three years or with fine which shall not be less

than Rs. 50,000 and not more than Rs 5,00,000, or with both.

The companies can claim tax deductions for their CSR activities. The Finance Minister has

clarified that deductions specifically allowed under Sections 30 to 36 of the Income Tax (IT)

Act, 1961 could be availed. Section 30 of the IT Act can be used for availing deductions against

expenditure incurred on repairs and insurance in respect of machinery, plant and furniture used

for CSR activities. Rent, rates, taxes and repairs incurred on buildings or other assets taken on

lease earmarked for CSR activity would also qualify for deductions. Companies can also claim

deduction towards depreciation on assets used for CSR purposes.

Schedule VII

The Schedule VII lists the number of activities that can be considered as CSR activity.

1. Eradicating extreme hunger and poverty;

2. Promotion of education;

3. Promoting gender equality and empowering women;

4. Reducing child mortality and improving maternal health;

5. Combating human immunodeficiency virus, acquired immune deficiency syndrome,

malaria and other diseases;

6. Ensuring environmental sustainability;

7. Employment enhancing vocational skills;

8. Social business projects;

9. 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;

10. Slum area development

11. Contribution to Swach Bharat Kosh

12. Contribution to Clean Ganga Fund

The Finance Minister, Shri Arun Jaitley presenting the Budget for 2015-16 proposed that

donations (other than CSR contributions under the Companies Act 2013) to the Swachh Bharat

Kosh (by residents and non residents) and Clean Ganga Fund (by residents) will be 100%

deductible under section 80G of the Income-tax Act.

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