| Consider the following statements: |
| 1. If the parent group is registering a loss, then the subsidiary company does not have to spend under the Corporate Social Responsibility (CSR) provisions. |
| 2. Under the companies Bill 2012, CSR spending has been made mandatory for profit making companies (over a certain threshold) |
| Which of the above statements is/are correct? |
A) Both
B) None
C) Only 1
D) Only 2
Correct Answer: D
Solution :
[d] According to the new 'corporate social responsibility' (CSR) companies with sizable businesses would need to spend a minimum 2 per cent of net profit for the benefit of the society. The CSR activities will have to be within India, and the new rules will also apply to foreign companies registered here. However, funds given to political parties and the money spent for the benefit of the company's own employees (and their families) will not count as CSR. For the purpose of deciding the CSR spending eligibility of a company, profit from overseas branches and dividend received from other companies in India will be excluded from the net profit criteria. Besides, contributions made 'directly or indirectly' to any political party have been excluded from CSR ambit. The CSR policy of a company should also specify that "surplus arising out of the CSR projects or programmes or activities shall not form part of the business profit of a company." A company can also carry out CSR works through a registered trust or society or a separate company. As per the rules, a company may also collaborate with other companies for CSR activities, provided they have to separately report about spending on such projects programmes. A wide range of activities, including livelihood enhancement projects and steps for the benefit of armed forces veterans have been brought under the CSR ambit. When it comes to having manpower for CSR works, the government has said that companies can spend only up to 5 per cent of total CSR expenditure for them in a single financial year. This would be applicable for own personnel as well as those of their implementing agencies. Among other activities, livelihood enhancement and rural development projects, promoting preventive health care and sanitation as well as making safe drinking water available would be considered as CSR activities.
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