Csr applicability in newly incorporated company

vinay (CS PROFESSIONAL) (94 Points)
Replied 19 July 2016

Hai sir,

Even i have same doubt. If you got any clarification, Request you to reply in this forum.

Mandar (Associate) (561 Points)
Replied 19 July 2016

As pe my view ,

The Company has to spend CSR amount as mandated under the Act.

If we consider Sec 135(5) :- Reference has been given of sub section (1) and the said sections only refers how much amount of average profit the Company
shall spend which is "made" during 3 preceding FY.

Calculation :- 0+0+(NP of Current Year)/3

vinay (CS PROFESSIONAL) (94 Points)
Replied 19 July 2016

Shall we form CSR commiitee as per Sec 135(1) of the companies Act, 2013

Mandar (Associate) (561 Points)
Replied 19 July 2016

Yes , if conditions in the provision are met than you should form a CSR Committee.

Harvinder kumar (Company Secretary ) (195 Points)
Replied 22 July 2016

Thanks Mandar for your kind reply in this regard. Constitution of CSR committee is fine but I have doubt over spending of 2% of average net profit made during the three preceding financial years. You are right that ss 5 says that the Board of Directors shall ensure that the Company spends in every fianancial year at least above mentioned amount. Does 'every financial year' is a key to make newly incorporated company having only one year financial track spend that amount?

Regards,

Harvinder

Mandar (Associate) (561 Points)
Replied 26 July 2016

Yes , Reason :- If the said wordings are not mentioned than every company has to wait for 3 Financial years to comply with with CSR provisions even though they cross the threshold as specified in Section 135(1)

(Supra of a Judgement)

Indira Bai And Anr. vs Gift Tax Officer, Madras on 20 March, 1961(AIR 1962 Mad 96, 1962 44 ITR 66 Mad)

(5) Even a cursory reading of S. 3 of the Act brings out prominently two features. The first is that the charge to tax is "for every financial year" in respect of the gifts made by a person during the previous year. The second is that the rate of tax is as specified in the schedule. The normal interpretation which one would be inclined to place upon the section so worded would be that all the transactions by way of gifts made during a particular period are being brought to tax under the Sec. 3. Whether the section would be capable of a different interpretation if instead of "There shall be charged for every financial year.... a tax.... in respect of the gifts, if any, made by a person during the previous year...." the section had been worded as follows : "There shall be charged during every financial year...... a tax....... in respect of every gift made by a person during the previous year...." it is not necessary to consider

vimugdha sharma (student) (70 Points)
Replied 16 December 2017

Hello Mandar ,

i am also dealing with same doubt but as per my understading i found out following

ICAI had opined in the context of applicability of CARO requirements on internal audit to unlisted companies on the basis of average turnover criterion as under:

“…. Since average turnover of three financial years immediately preceding the year under audit is to be considered, it follows that a company cannot be covered under this clause during the first three years of its operation on the basis of the turnover criterion….” [Para 61(g) of ICAI’s Statement on CARO, 2003]

On the same analogy, it can be opined that a company covered by section 135(1) will not be required to comply with mandatory corporate spends obligations in the first three years of its operations.

Kindly Guide me .