A Private Company has its own Registered Trust through which it is making CSR Contributions:
1) The Company pays a lumpsum to the trust assuming, Rs. 30,00,000/- for CSR Activities, out of which the trust spends Rs.20,00,000/- on CSR Activities. When it comes to approving the contributions by the Board and recording the same in the board minutes, will the Board approve contribution for Rs.30,00,000/- which is the amount given to the Trust or Rs.20,00,000/- which is the amount actually spent by the Trust?
2) Whether payments/donations made to other trusts by the Registered Trust of the Company be taken as CSR Contribution?
3) Company has given scholarships to 30 engineering and medical students belonging to different colleges. Is it acceptable as a valid CSR Contribution?
06 July 2024
Here are the clarifications for your doubts regarding CSR contributions by a Private Company through its Registered Trust:
1. **Approval by the Board for CSR Contributions:** - The Board of the Company should approve the CSR contribution based on the amount allocated and disbursed for CSR activities by the Trust. In your case: - If the Company allocated Rs. 30,00,000 to the Trust but the Trust spent Rs. 20,00,000 on CSR activities, the Board should approve the contribution of Rs. 20,00,000 because that is the amount effectively utilized for CSR purposes. - Board resolutions and minutes should reflect the actual expenditure on CSR activities by the Trust, not the total allocated amount.
2. **Payments/Donations made by the Registered Trust of the Company:** - Payments or donations made by the Registered Trust of the Company to other trusts can be considered as CSR contributions, provided: - These payments/donations are used for CSR activities as defined under Schedule VII of the Companies Act, 2013. - The Board of the Company has approved such payments/donations, and they are within the overall CSR policy and budget of the Company. - It's crucial to ensure that the payments/donations made by the Registered Trust align with the CSR objectives of the Company and are utilized for eligible CSR activities.
3. **Scholarships for Engineering and Medical Students:** - Providing scholarships to 30 engineering and medical students can indeed qualify as a valid CSR contribution under the education category mentioned in Schedule VII of the Companies Act, 2013. - To ensure compliance: - The scholarships should be provided to students from economically weaker sections or deserving candidates as per the CSR policy of the Company. - The expenditure on scholarships should be reasonable and supported by appropriate documentation such as beneficiary details, selection criteria, and proof of disbursal. - The Board of the Company should approve such scholarships as part of its CSR activities.
In summary, ensure that all CSR contributions and expenditures are approved by the Board based on actual utilization for CSR activities. Payments/donations by the Registered Trust should align with CSR policy and objectives, and scholarships can be a valid CSR contribution if they meet the criteria specified under Schedule VII of the Companies Act, 2013.
CAclubindia
