CSR applicablity

CS Badri

unread,

Jul 21, 2016, 6:56:13 AM7/21/16

to CSMysore

Dear Friends,

For purpose of applicability of CSR as per Section 135(1) of CA Act 2013 whether its Net profit (Before Tax) or Net profit (after Tax). The Law is clear about Meaning of Average Net profit under Section 135(5) which is as per Section 198 i.e Profit Before tax. further CSR Rules defines Net Profit under Rule 2(f) as "Net profit" means the net profit of a company as Per its financial statement prepared in accordance ' ' with the applicable provisions of the Act. Kindly help me out regarding interpretation of Net profit as per Section 135(1)??

Thanks in advance

CS Badri Sharma

Gagan Preet Singh

unread,

Jul 21, 2016, 8:09:58 AM7/21/16

to CSMysore

Hi,

Its PAT.

Chandravijay Shah & Co.

unread,

Jul 21, 2016, 8:30:03 AM7/21/16

to csmy...@googlegroups.com

Section 135(5) rw section 198(5) of the Companies Act, 2013 conveys it is PBT (Profit Before Tax). Section 198(5) throws enough light to interpret Average NP as Average PBT.

--
--
************************************************
Mail your comments, feedback and suggestions on CSMysore to Moderator: datta...@gmail.com and Manager: vivekhe...@gmail.com
---
You received this message because you are subscribed to the Google Groups "CSMysore" group.
To unsubscribe from this group and stop receiving emails from it, send an email to csmysore+u...@googlegroups.com.
For more options, visit https://groups.google.com/d/optout.

CS Badri

unread,

Jul 21, 2016, 8:43:46 AM7/21/16

to CSMysore

Even my view is its PAT Gangan Ji thanks for that . Further Chandravijay ji i agree with your view but am asking in context of 135(1) of CA Act 2013

deepali balpande

unread,

Jul 21, 2016, 8:50:17 AM7/21/16

to csmysore

See frequently asked qs of ICSI on CSR. It says that it is PBT.

Regards,

Deepali

Chandravijay Shah & Co.

unread,

Jul 21, 2016, 9:14:33 AM7/21/16

to csmy...@googlegroups.com

Is it that section 135(1) is controverted by section 135(5), though Explanation to section 135 defines only Average NP and not NP per se? Average NP is defined under Explanation to section 135 to mean PBT.

Can a different meaning be assigned to NP [sub-section (1)] and Average NP [sub-section (5)], when both fall under the common Provision, Namely, section 135? Mere pre-fix of the word “Average” cannot have a meaning different from the word ”NP”.

Logical conclusion seems that NP is not separately defined because the expression “Average NP” embraces the expression “NP”, too.

From: csmy...@googlegroups.com [mailto:csmy...@googlegroups.com] On Behalf Of CS Badri
Sent: 21 July, 2016 6:14 PM
To: CSMysore
Subject: [CSMysore] Re: CSR applicablity

Even my view is its PAT Gangan Ji thanks for that . Further Chandravijay ji i agree with your view but am asking in context of 135(1) of CA Act 2013

--

CS Badri

unread,

Jul 21, 2016, 9:14:36 AM7/21/16

to CSMysore

Thanks Deepali for prompt reply. i have even referred FAQ of ICSI and MCA in both of them Average net profit as per 135(5) is defined ,my concern is about Net profit as per 135(1)

On Thursday, 21 July 2016 16:26:13 UTC+5:30, CS Badri wrote:

Arpana Subedi

unread,

Jul 22, 2016, 1:24:19 AM7/22/16

to csmy...@googlegroups.com

Can we not spend on CSR??

IS it mandatory to spend on CSR, if yes than can anybody provide me the rules where its written it is mandatory?

Thanks and Regards,

CS Arpana S.

CS Badri

unread,

Jul 22, 2016, 1:48:38 AM7/22/16

to CSMysore

Chandravijay ji The Net Profit is defined as per Rule 2(f) as "Net profit" means the net profit of a company as Per its financial statement prepared in accordance ' ' with the applicable provisions of the Act and going by general meaning Net Profit as per Financial statement is PAT...Other views are appreciated.

Further Arpana JI as per Section 135(5) which provides for Spending of 2% of Average Net Profit of immediately previous last 3 years

On Thursday, 21 July 2016 16:26:13 UTC+5:30, CS Badri wrote:

Naveen Kumar

unread,

Jul 22, 2016, 2:35:47 AM7/22/16

to csmy...@googlegroups.com

If company is required to constitute the CSR comm. then as per sec.135(5) company spends, in every F.Y. at least 2% of avg. net profit made during three immediately preceding F.Y. in pursuance of CSR policy....

if company incurs loss then no need to spent 2% or any amount...

Further as per the MCA FAQ it clearly says that Net Profit means Net profit for sec.135 is as per sec. 198 of the com. Act 2013 which is primarily profit before tax

--

Regards

Naveen Kumar

CS Badri

unread,

Jul 22, 2016, 2:47:12 AM7/22/16

to CSMysore

Naveen Ji I have gone through MCA FAQ ON CSR it talks about Average Net Profit as per 135(5) not the Net Profit as Per section 135(1)

On Thursday, 21 July 2016 16:26:13 UTC+5:30, CS Badri wrote:

Naveen Kumar

unread,

Jul 22, 2016, 2:52:00 AM7/22/16

to csmy...@googlegroups.com

Badri ji, See the explanation as provided in sub sec. (5) of sec. 135 for Avg. Net profit which shall be calculated in acc. with sec.198 which is primarily profit before tax.. hope now this clarify u....

--

Regards

Naveen Kumar

CS Badri

unread,

Jul 22, 2016, 3:58:51 AM7/22/16

to CSMysore

Naveen Ji Average Net profit is defined for purpose of 135(5) that is as per 198 PBT agreed on this but i am asking about 135(1) which is as per rule 3(f) of CSR Rules 2014i.e Net profit as per Financial Statement. I guess am not able to clear my stance

On Thursday, 21 July 2016 16:26:13 UTC+5:30, CS Badri wrote:

nidhi goel

unread,

Jul 22, 2016, 5:22:10 AM7/22/16

to csmysore

In relation to your query Mr. Badri,

For the purpose of checking the eligibility of Company to fall in CSR category {as per Sec. 135(1)} the term Net Profit is given which is PAT.

For the purpose of how much contribution company needs to made {as per sec. 135 (5)} i.e. 2% of AVG. NET PROFIT, the term AVG NET PROFIT is used which is PBT (as per Sec 198 calculation).

I hope i have made my point clear.

Other views are welcomed.

--

Thanks & Regards

Nidhi Goel

Company Secretary.

CS Badri

unread,

Jul 22, 2016, 5:45:20 AM7/22/16

to CSMysore

MY stance is same as your Nidhi Ji... is there any legal backing towards your reply... Thanks in advance

On Thursday, 21 July 2016 16:26:13 UTC+5:30, CS Badri wrote:

nidhi goel

unread,

Jul 22, 2016, 5:55:36 AM7/22/16

to csmysore

that is written in law itself ...... definition as well as its clarification......

CS Badri

unread,

Jul 22, 2016, 6:11:40 AM7/22/16

to CSMysore

Nidhi Ji could you please share that relevant law backing.

On Thursday, 21 July 2016 16:26:13 UTC+5:30, CS Badri wrote:

nidhi goel

unread,

Jul 22, 2016, 6:35:57 AM7/22/16

to csmysore

Section 135 (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.

AS PER RULE 2 (F)

(f) "Net profit" means the net profit of a company as Per its financial statement prepared in accordance with the applicable Provisions of the Act, but shall not include the following, namely

:- (i) any profit arising from any overseas branch or branches of the company whether operated as a separate company or otherwise; and

(ii) any dividend received from other companies in India, which are covered under and complying with the provisions of section 135 of the Act:

Provided that net profit in respect of a financial year for which the relevant financial statements were prepared in accordance with the provisions of the Companies Act, 1956, (1 of 1956) shall not be required to be re-calculated in accordance with the provisions of the Act:

Provided further that in case of a foreign company covered under these rules, net profit means the net profit of such company as per profit and loss account prepared in terms of clause (a) of sub section (1) of section 381 read with section 198 of the Act

Sec 135 (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:

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

As per Calculation of Sec. 198, it is PBT.

Chandravijay Shah & Co.

unread,

Jul 22, 2016, 7:05:59 AM7/22/16

to CS Mysore

FAQs dated 12.01.2016 published by MCA are silent on this issue.

Rule 2(f) of CSR Rules is not unambiguous.

CS Badri

unread,

Jul 22, 2016, 7:07:23 AM7/22/16

to CSMysore

Thanks for your compilation.. but net profit after tax may be due to Rule 2(f) of CSR Rules 2014

On Thursday, 21 July 2016 16:26:13 UTC+5:30, CS Badri wrote:

Reply all

Reply to author

Forward