Corporate Social Responsibility - PPT.pptx

Corporate Social Responsibility

1. Why a new Law was needed ? 1 RRR CHAMBERS Email ID- [email protected] RRR Chambers - [email protected]

2. Why a new Law was needed ? Scenario in Modern Days 2 RRR Chambers - [email protected]

3. Why a new Law was needed ? What is CSR 3 RRR Chambers - [email protected]

4. The Pyramid of CSR 4 Contribute resources to the community, improve quality of life Obligation to do what is right, just and fair Law is society’s codification of right and wrong The foundation upon which all others rest RRR Chambers - [email protected]

5. 5 PHASES OF CSR RRR Chambers - [email protected]

6. Current state of CSR in India 6 Central Public Sector Enterprises to allocate 2-3% of the PAT for the inclusive development of a backward district CSR &sustainability  guidelines by Department of Public Enterprises 2013) RRR Chambers - [email protected]

7. Why a new Law was needed ? Major Object of Corporate Entity 7 To develop products to serve needs of consumers, create more and more customers for that product…. Earn profits for Shareholders and Promoters RRR Chambers - [email protected]

8. Why a new Law was needed ? Why Companies Need CSR 8 RRR Chambers - [email protected]

9. Why a new Law was needed ? There are many business reasons for companies to be socially responsible. Reasons for CSR 9 Internal                                            Philanthropic                             External          Employees                                     Education                            Local Communities     Customers                                       Health                                    Publicity Shareholders                                   Social Development                Pollution control Tax benefits                                    Charity                                      Environment Brand enhancement                       Donation                                  National Interest RRR Chambers - [email protected]

10. Why a new Law was needed ? Benefits of CSR 10 RRR Chambers - [email protected]

11. Why a new Law was needed ? CSR- ISSUES 11 RRR Chambers - [email protected]

12. Why a new Law was needed ? CSR Importance and its Relevance Today 12 CSR as a strategy is becoming increasingly important for businesses today because of three identifiable trends RRR Chambers - [email protected]

13. CSR Importance and its Relevance Today In PM’s Words……….. 13

14. Why a new Law was needed ? CSR Vision Vs Company’s Strategy 14 RRR Chambers - [email protected]

15. CSR – Companies Act, 2013 Section 135 Rules Schedule VII 15

16. 16 Every Company With Net Worth of Rs. 500 Crores or more Turnover of Rs. 1000 Crores or more Net Profit of Rs. 5 Crores 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. Applicability & Constitution of a CSR Committee(Rule 3) * To be inducted by 31 st March, 2015

17. CSR Committee (Rule 5) The companies mentioned in the rule 3 shall constitute CSR Committee as under.- 17 RRR Chambers - [email protected]

18. CSR Committee - Mandate 18 RRR Chambers - [email protected]

19. BOARD’S RESPONSIBILITY The Board of every company after taking into account the recommendations made by CSR Committee: Approve the CSR Policy Disclose contents of such Policy in its report Place it on the company’s website , and Ensure that the activities as are included in CSR Policy of the company are undertaken by the company, and Ensure that the company spends, in every financial year, at least TWO PER CENT OF THE AVERAGE NET PROFITS • If the Company fails to spend such amount, the Board shall, in its report specify the reasons for not spending the amount “Average net profit” shall be calculated in accordance with the provisions of section 198 of the 2013 Act 19 RRR Chambers - [email protected]

20. 20 CSR Activities The 2013 Act provides that the company shall give preference to the local area and areas around it where it operates RRR Chambers - [email protected]

21. CSR Activities- Modes 21 operating within India , established track record of at least three years in carrying out activities in related areas RRR Chambers - [email protected]

22. Why a new Law was needed ? Implementation Of CSR Activities Through outside Agency Rule 4(2) 22 RRR Chambers - [email protected]

23. Net Profit Rule 2(f) Rule: 2(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 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 (l) of section 381 read with section 198 of the Act. 23 RRR Chambers - [email protected]

24. Add Share Capital Add Reserves created out of Profit and Securities Premium Account Subtract Accumulated Losses Subtract Deferred Expenditure Subtract Miscellaneous Expenditure not written off Reserves created out of Revaluation of Assets, write-back of depreciation and amalgamation should not be included Note: All figures to be as per the Audited Balance Sheet 24 Calculation of Net Profit RRR Chambers - [email protected]

25. Example: A company was incorporated fifty years ago with a paid-up capital of Rs. Two Lakhs. The company bought 50 acres of urban land at Rs. 3000- per acre. The company did nothing else in the past fifty years. The land is valued now at about Rs. 20 Crores per acre. The company has done revaluation of the land in its balance sheet. For CSR purposes, the net worth of the company is about Rs. 1.5 Lakhs and not Rs. 1000 Crores. 25 Calculation of Net Profit RRR Chambers - [email protected]

26. CSR- Policy Rule 6 (a) a list of CSR projects or programs which a company plans to undertake falling within the purview of the Schedule VII of the Act,; and (b) monitoring process of such projects or programs: Provided that the CSR activities does not include the activities undertaken in course of normal course of business of a company. Board of Directors shall ensure that activities included by a company in its Corporate Social Responsibility Policy are related to the activities included in Schedule VII of the Act 26 RRR Chambers - [email protected]

27. CSR- Reporting Rule 8 27 RRR Chambers - [email protected]

28. Periodic reporting on the CSR activities, execution modalities, implementation schedules etc., to the CSR Committee shall be in the following format which may be amended by the CSR Committee from time to time. 28 CSR- Reporting Sl No Company Initiative Schedule VII Activity Execution details Budget (Rs) Amount Spent (Rs) Remarks RRR Chambers - [email protected]

29. How Corporates should work 29

30. Why a new Law was needed ? 30 www.ahaladaraoassociates.com Business operations Vs CSR RRR Chambers - [email protected]

31. Why a new Law was needed ? CSR Policy - Core Elements 31 RRR Chambers - [email protected]

32. Why a new Law was needed ? How to Implement CSR Policy 32 RRR Chambers - [email protected]

33. Why a new Law was needed ? Implementation framework consists of Building Roadmap & Rollout 33 When What How Plan Conduct Csr assessment & develop strategy From CSR team Do Develop & implement csr commitments Examine CSR Committee Check Assure and report on progress Measure and assure performance improve Evaluate and improve Evaluate Performance RRR Chambers - [email protected]

34. Why a new Law was needed ? CSR – Integral part of Governance of Corporates 34 RRR Chambers - [email protected]

35. Intangible Assets 35

36. 36 non-monetary asset, without physical substance

37. 37 RRR Chambers - [email protected]

38. Kinds of Intangible Asset Legal 38 LEGAL BUSINESS RRR Chambers - [email protected]

39. Is it creating brand image??? ...... 39

40. CSR – Tax Implication 40

41. Tax Exemption- Section 80G This section does not restrict the deduction to individuals, companies or any specific category of taxpayer. Allowable to all kind of Assessee. Donations made to foreign trusts do not quality for deduction under this section. Deduction cannot be claimed for donations made to political parties for any reason, including paying for brochures, souvenirs or pamphlets brought out by such parties. Only donation made to prescribed funds and institutions qualify for deduction . Maximum allowable deduction :- If aggregate of the sums donated exceed 10% of the adjusted gross total income, the amount in excess of 10% ceases to be entitled for tax benefit. Only donations in cash/ cheque are eligible for the tax deduction . NRIs are also entitled to claim tax benefits against donations , subject to the donations being made to eligible institutions and funds. 41 RRR Chambers - [email protected]

42. Tax Exemption- Section 35 AC To promote reinvestment of business profits in areas where massive capital input is required for socio-economic development, a tax incentive has been provided under Section 35AC of the Income Tax Act, 1961. The section provides that where an assessee incurs any expenditure by way of payments of any sum to: i ) a public sector company or; ii) a local authority or; iii) to an association/ institution approved by the National Committee for carrying out any eligible project or scheme for promoting the social and economic welfare or upliftment of the public as the Central Government may specify, then the amount so paid shall be allowed as deduction from the business income of the assessee/ contributor of such amount. 42 RRR Chambers - [email protected]

43. Why a new Law was needed ? Deduction – Section 37 43 Section 37 of IT Act, 1961 : Allowed if and only if spent for the sake of business Deductions are not allowed if it is application of Money. “ As the application of income is not allowed as deduction for the purposes of computing taxable income of a company, amount spent on CSR cannot be allowed as deduction for computing taxable income of the company,” RRR Chambers - [email protected]

44. What is the Impact of CSR contribution – from “ Tax deductibility point of view” 44

45. 45 Companies Act, 2013 Income Tax Act, 1961 CSR ?????

46. Budget 2014-15 has clarified that CSR spend made by companies in line with new Company Law obligations will not be entitled for income tax deduction (under Section 37). Section 135 of the Companies Act excludes activities undertaken in pursuance of the normal course of business of a company and, therefore, render these not deductible under Section 37 (1), 46 Clarification RRR Chambers - [email protected]

47. Why a new Law was needed ? Narendra Modi -led government plans to penalise CSR defaulters under Companies Act 2013 Under the current law, there's no mandatory obligation on the company, but a responsibility is cast upon the board members. The new law, which came into effect on April 1, 2014, says if a company isn't able to give a satisfactory explanation about not spending on CSR activities, the corporate affairs ministry, at most, can question the roles and responsibility of its directors. The quantum of penalty in case of non-compliance hasn't been worked out Government’s stance- CSR Activities 47 RRR Chambers - [email protected]

48. Why a new Law was needed ? Positive Outcomes When Businesses Adopt Social Responsibility 48 Benefits to Community and General Public Environmental Benefits Charitable contributions Employee volunteer programs Corporate involvement in community education, employment and homelessness programs Product safety and quality Greater material recyclability Better product durability and functionality Greater use of renewable resources Integration of environmental management tools into business plans, including life-cycle assessment and costing, environmental management standards, and eco-labeling RRR Chambers - [email protected]

49. Why a new Law was needed ? Tata Consultancy Services :- The Adult Literacy Program. Larsen & Toubro (L & T) Limited:- Construction Vocational Training CISCO System Inc.:- “triple bottom line” ITC:- helping small farmers with degraded land pieces Maruti :- Industrial Training Institutes (ITI) CSR- Sustainability Initiatives In India 49 RRR Chambers - [email protected]

50. Why a new Law was needed ? Conclusion 50 Corporates shall perform its CSR activities purely as charitable purpose. If incidentally any Intangible assets viz; Goodwill , Patents, Brand etc are created then after due recognition and valuation of such Intangible assets it may be disclosed but Corporates shall never aim for creation of wealth through CSR . It shall always be incidental to its main activity and not be its primary goal. RRR Chambers - [email protected]

51. Why a new Law was needed ? 51 RRR Chambers - [email protected] THANK YOU K