FY is 01.01.2014 to 31.12.2014 - Is CSR spending applicable for the period 01.04.2014 to 31.12.2014

[madhumi...@gmail.com]

Dear Sir/Madam,

• Sec. 135(5) of the Act mentions that 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.

• Even though Sec. 135 of the Act and the CSR Rules are effective from 01.04.2014, neither in the Act nor in the CSR Rules, it is specifically mentioned that the CSR spending should start w.e.f 01.04.2014 or any other specific date.

• However, Rule 8 of the CSR Rules requires that ‘The Board's Report of a company covered under these rules pertaining to a financial year commencing on or after the 1^st day of April, 2014 shall include an annual report on CSR containing particulars specified in Annexure thereto.

• An inference can be drawn from the wordings of Rule 8 that a Company shall spend the prescribed portion of profit (i.e., average profit of FY 2013-14, 2012-13 and 2011-12) on CSR activities during the FY 2014-15 (i.e., 01.04.2014 to 31.03.2015)  and the Board’s Report pertaining to FY 2014-15 shall contain a report thereon.

My doubts are as below:

• Whether a Company, to which Sec. 135 is applicable and whose FY is 01.01.2014 to 31.12.2014, needs to spend on CSR activities during the period 01.04.2014 to 31.12.2014 being a part of FY 2014-15 as referred under the Rule 8?

My understanding is that since the FY of the Company has already started on 01.01.2014 when neither the Act nor the Rules were in existence relating to CSR, the CSR spending becomes applicable to the Company w.e.f 01.01.2015 or 01.04.2015 [if the Company aligns its FY to comply with Sec. 2(41) of the Act].

• If my above understanding is correct and if the Company doesn't spend on CSR [during the period 01.04.2014 to 31.12.2014 or 31.03.2015] for non-applicability as above, does the Company still need to mention the reason for not spending in its report for the FY 2014-15?
  

Kindly suggest please...

Thanks and Regards,

Madhumitha

[Sunny]

Dear All,

 

The below in mine query as well. Please reply to the same

 

Regards