Search Results For: Corporate Social Responsibility


QUERY: Whether it is necessary to provide (Corporate Social Responsibility) CSR expenses in the books of account on accrual basis, considering AS–29 “Provisions, Contingent Liabilities and Contingent Assets”?
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Section 128 of the Companies Act, 2013 mandates every company to maintain its books of account on accrual basis. As per AS-1 “Disclosure of Accounting Policies” in accrual basis cost and revenue are accrued that is recognised as they are incurred or earned and recorded in the financial statements of the periods to which they relate.

QUERY: Whether it is necessary to provide (Corporate Social Responsibility) CSR expenses in the books of account on accrual basis, considering AS–29 “Provisions, Contingent Liabilities and Contingent Assets”?
ANSWER: Click here to read the full answer of the expert
EXPERT:
SECTION(S):
GENRE:
CATCH WORDS: , , ,

Section 128 of the Companies Act, 2013 mandates every company to maintain its books of account on accrual basis. As per AS-1 “Disclosure of Accounting Policies” on accrual basis, cost and revenue are accrued that is recognised as they are incurred or earned and recorded in the financial statements of the periods to which they relate:

QUERY: A company, obliged to spend 2% of average net profits on Corporate Social Responsibility. Considering the fact that the mandates of the Companies Act on CSR specifies only expenditure specified in Schedule VII, which are not related to business. Further the CSR rules insist that the expenditure should not be in the course of business or undertaken for employees and families. Will this expenditure be allowed as business expenditure? Will it be treated on par with other statutory payments and be subject to 43B.
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EXPERT:
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Explanation 2 has been inserted in section 37(1) of the Act with effect from assessment year 2015-16 which reads as under:

“For the removal of doubts, it is hereby declared that for the purpose of sub-section (1), any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purpose of the business or profession”

QUERY: Explanation 2 to Section 37 provides that any expenditure incurred by an assessee on the activities relating to corporate social responsibility shall not be deemed to be an expenditure incurred by the assessee for the purpose of business. According to the Memorandum explaining the provisions of the Finance Bill 2014, such expense, being an application of income, is not incurred wholly and exclusively for the purpose of carrying on business and, hence, not allowable as deduction. It also says that CSR which is of the nature described in Section 30 to 36 of the Act shall be allowed under those sections subject to fulfilment of the conditions, if any, specified therein. Which types of expenses can be allowed under these sections?
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As it is evident from section 37 of the Act, that it is subject to the provisions of sections 30 to 36. Further, the Finance Minister has clarified that deductions specifically allowable under sections 30 to 36 of the Income-tax Act, 1961 could be availed. In effect, Section 30 of the Act can be used for availing deductions against the expenditure incurred on rent, repairs and insurance in respect of building. Section 31 in respect of repairs and insurance of machinery, plant and furniture used for CSR activities.

QUERY: Whether it is necessary to provide (Corporate Social Responsibility) CSR expenses in the books of account on accrual basis, considering AS–29 “Provisions, Contingent Liabilities and Contingent Assets”?
ANSWER: Click here to read the full answer of the expert
EXPERT:
SECTION(S):
GENRE:
CATCH WORDS: , ,

Section 128 of the Companies Act, 2013 mandates every company to maintain its books of account on accrual basis. As per AS-1 “Disclosure of Accounting Policies” in accrual basis cost and revenue are accrued that is recognised as they are incurred or earned and recorded in the financial statements of the periods to which they relate