MCA Clarifies Contribution to PM Cares Fund as Eligible CSR Activity
In terms of Section 135 of the Companies Act, 2013 (Act), 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 the immediately preceding financial year, shall constitute a Corporate Social Responsibility (CSR) Committee. The said CSR Committee, inter-alia, formulates and recommends to the Board of Directors, a CSR Policy indicating the activities to be undertaken by the company, in areas or subject, specified in Schedule VII of the Act. The aforesaid Section 135 further provides that the Board of Directors of the company after considering the recommendations of the CSR Committee, should approve the CSR Policy for the company and ensure that the activities as are included in the CSR Policy of the company are undertaken by the company. The aforesaid Section 135 mandates that the companies which have crossed the aforementioned thresholds should spend, in every financial year, at least two percent of its average net profits made during the three immediately preceding financial years or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years, in pursuance of its CSR Policy.
The Ministry of Corporate Affairs (MCA) vide its Office Memorandum dated March 28, 2020 has clarified that any contribution made by a company, to the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund’ (PM CARES Fund) constituted to deal with the emergency or distress situations such as created by COVID 19 pandemic, would deemed to be an eligible CSR activity under Item No. (viii) of Schedule VII of the Act.
Item No. (viii) of the Schedule VII relates to contribution to the prime minister’s national relief fund or any other fund set up by the Central Government for socio economic development and relief and welfare of the schedule caste, tribes, other backward classes, minorities and women.
Any company which intends to make contribution to PM CARES Fund as part of its CSR activity under Section 135 of the Act, should ensure that Item No. (viii) of Schedule is included in its CSR Policy as a permitted activity and if not included, it may consider amending the same to include Item No. (viii) of Schedule VII, to enable the contribution made to PM CARES Fund to be considered as a valid CSR expenditure in terms of the provisions of Section 135 of the Act.