Sec. 135 of co act 2013

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atul jain

atul jain (Querist)
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03 October 2014 CSR is mandatory or not?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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03 October 2014 it is mandatory............

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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03 October 2014 Mandatory for Companies refereed in sub section 1 of Section 135 of the Companies Act 2013.
This new section seeks to provide that every company having specified networth or turnover or net profit during any financial year shall constitute the Corporate Social Responsibility Committee of the Board. The composition of the committee shall be included in the Board's Report. The Committee shall formulate policy including the activities specified in Schedule VII. The Board shall disclose the content of policy in its report and place on website, if any of the company.The section further provides that the Board shall endeavour to ensure that atleast two per cent of average net profits of the company made during three immediately preceding financial years shall be spent on such policy every year. If the company fails to spend such amount the Board shall give in its report the reasons for not spending.

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CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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03 October 2014 Section 135 : Corporate Social Responsibility

(1) Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.

(2) The Board's report under sub-section (3) of section 134 shall disclose the composition of the Corporate Social Responsibility Committee.

(3) The Corporate Social Responsibility Committee shall,—

(a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII;

(b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and

(c) monitor the Corporate Social Responsibility Policy of the company from time to time.

(4) The Board of every company referred to in sub-section (1) shall,—

(a) after taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy in its report and also place it on the company's website, if any, in such manner as may be prescribed; and

(b) ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company.

(5) The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy:
Provided that the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities:
Provided further that if the company fails to spend such amount, the Board shall, in its report made under clause (o) of sub section (3) of section 134, specify the reasons for not spending the amount.

Explanation.—For the purposes of this section "average net profit" shall be calculated in accordance with the provisions of section 198.

Ankur Garg

Ankur Garg (Expert)
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03 October 2014 CSR is not mandatory at all. You are advised to check 3 trigger points given in section 135 whether they are applicable on your company.

Also refer my article available at the link below:

https://www.caclubindia.com/articles/law-and-interpretations-related-to-csr--21477.asp#.U_66v6NqOZQ

Thanks

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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03 October 2014 Yes. The three trigger points are covered u/s 135(1) i.e.,

1) Net worth of Rs 500 Crore or more OR
2) turnover of Rs 1000 Crore or more OR
3) Net profit of Rs 5 Crore or more

If any one of these three criteria is fulfilled CSR is mandatory.