Module -6

Corporate Social Responsibility

 Corporate social responsibility

• Corporate social responsibility (CSR) refers to practices and policies undertaken by

corporations that are intended to have a positive influence on the world.
• The key idea behind CSR is for corporations to pursue other pro-social objectives, in
addition to maximizing profits.
• Corporate social responsibility is a business model in which companies make a
concerted effort to operate in ways that enhance rather than degrade society and the
environment.
• CSR helps both society and the brand image of companies.
• Corporate responsibility programs are a great way to raise morale in the workplace.
Difference between Corporate responsibility and CSR
 CSR Reporting
• A corporate social responsibility (CSR) report is an internal- and external-facing
document companies use to communicate CSR efforts and their impact on the
environment and community. An organization's CRS efforts can fall into four
categories: environmental, ethical, philanthropic, and economic.
• Central Board of Direct Taxes (“CBDT”), in one of its circulars, was of the opinion
that “CSR expenditure is not incurred for the purposes of carrying on business” and
therefore, CSR expenditure cannot be brought under the ambit of tax deduction.
However, it was also mentioned that if the CSR expenditure falls under the realm of
expenditures declared under section 30 to 36 of the Income Tax Act; it can be claimed
as a tax deduction, provided that the conditions specified under section 30 to 36 are
met.
• Section 135(7), though it does not attract criminal liability, still dictates stringent
imposition of penalty for non-compliance with CSR regulations. This means that
companies take upon the arduous task of implementing CSR while incurring
substantial expenditure and still are obligated to pay tax as an additional commitment.
 CSR spending

•According to Companies Act 2013 Schedule VII The Board of

Directors shall make sure that the company spends in every
financial year, minimum of 2% of the average net profits made
during the 3 immediately preceding financial years as per CSR
policy.
•In case a company has not completed 3 financial years since its
incorporation, the average net profits shall be calculated for the
financial years since its incorporation.
 Tax treatment of CSR spends

• No specific tax exemptions have been extended to CSR expenditure per se.
Finance Act, 2014 also clarifies that expenditure on CSR does not form part
of business expenditure.
• No specific tax exemption has been extended to expenditure incurred on CSR,
spending on several activities like contributions to Prime Minister’s Relief
Fund, scientific research, rural development projects, skill development
projects, agricultural extension projects, etc., which find place in Schedule
VII, already enjoy exemptions under different sections of the Income Tax Act,
1961.