Corporate social responsibility

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Mohit Kumar Saraf (Querist)

09 August 2014 1) Is CSR Expense allowed as per income Tax and if allowed then under which section?
2) Is there any panel provision , if CSR Exp. Not incurred by Company during F.Y 14-15.
3) Can we show CSR Exp as provision.
4) Is CSR a ordinary exp/ Operating Exp or Extraordinary exp...

Please give your suggestion reg. Above Question ..

Nikhil Kaushik

Nikhil Kaushik (Expert)

09 August 2014 1. CSR expenses as provided under Companies Act 2013, can be classified as:

a. expenses incurred by the company to undertake CSR activities on its own.

b. donations given to charitable trusts, National Relief Fund etc.

There is no confusion regarding Type B expenses as such expenses should be covered under section 80G of the Income-tax Act 1961

Problem with Type A expenses come from Companies (Corporate Social Responsibility Policy) Rules, 2014 wherein it has been prescribed that the CSR activities shall exclude the activities undertaken by the Company in its normal course of business. Thus it may be argued that such activities cannot be covered under section 37(1) of the Income-tax Act as "not wholly and exclusively" incurred for the business! However, the opposing argument is that any expense which "has to be incurred" as per law is deductible.

With regards to your other questions, do kindly read section 135 and the rules notified.

Given that these expenses should normally not invite TDS liability, provision itself may not get any tax deduction.

With regards to question 4, It is an ordinary expense.

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