CHENNUPATI AJAYA BABU (manager(taxation)) (87 Points)
15 December 2016Dear All,
Can I know the following doubt?
Check the qualification/eligibility of Institution, where CSR activities can be undertaken by the companies such as
a) set up of Scientific laboratary in Govt. High Schools,
b) Set up of Library in Govt. High Schools.
Our main object is to promote education in rural areas.
Is it comply the above two situations to full fill the CSR obligation under Section 135 of the Companies Act,2013?
Ch Ajaya bau
Manager (Taxation)
Sanjay S
(Chartered Accountant)
(1375 Points)
Replied 15 December 2016
Hey,
You could have posted this query under the 'CORPORATE LAW' section of the Forum where Various experts & specialists in Corporate Law could have given a good persepective.
Nevertheless, My view on this is as follows:
CORPORATE LAW COMPLIANCE:
The Activities which may be included by companies in their CSR policies have been listed out under Schedule VII to the Companies Act, 2013. Section 135(3) of the Act, requires that the spending should be in any of the 7 activites mentioned in the above Schedule.
The two areas of spending you have mentioned are squarely covered under Clause (ii) of the above Schedule, ie., "Promoting education, including special education and employment enhancing vocation skills.....".
Hence, I opine that you will have duly complied the provisions u/s 135 if your expenditure in above 2 areas amounts to atleast 2% of average net profits of company during the 3 immediately preceding financial years.
TAX ASPECT:
And since we are in the "TAXATION" section of Forum, I might as well add that the above CSR Expenditure shall be disallowed u/s 37(1) of the Income Tax Act, 1961 while computing the Tax liability since its not an expenditure incurred for the objects of business/ profession.
Hope this clarifies the issue.
CAclubindia
