Opinion Of Eminent Legal Luminaries On Controversial Issues

Whether CSR Expenses Allowable?

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?
ANSWER: 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. Thus, rent, rates, taxes and repairs incurred on building or other assets taken on lease earmarked for CSR activities would also qualify for deductions. Companies can also claim deduction towards depreciation on assets used for CSR purposes. Funds spent on skill development projects gives the assessee the benefit of claiming 150% deduction in their books. In fact, the CSR Rules issued by MCA (Ministry of Corporate Affairs) read with the MCA circular dated June 2014 clarifies that CSR activities should be undertaken by the companies in project / programme mode.
EXPERT:
SECTION(S):
GENRE:
CATCH WORDS: ,

Leave a Reply

Your email address will not be published.

*

Credit: Several of the queries and answers are reproduced with permission from the AIFTP Journal. We thank AIFTP for generously allowing us to host their research material.
Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or a formal recommendation. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. Neither the author nor itatonline.org and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon. No part of this document should be distributed or copied (except for personal, non-commercial use) without express written permission of itatonline.org