Csr calculation

Co Act 2013 37586 views 5 replies

Akanksha Gupta

Company Secretary

70 Points Joined November 2011

Dear All,

Sec 135 (1) of Companies Act 2013 states that Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board....

Explanation.—For the purposes of this section “average net profit” shall be calculated in accordance with the provisions of section 198. ]

Further Sec 198 (5)(a) says that any Income tax and super tax payable by the Company shall not be deducted while computing the said profits.

My queries are:

a) if PBT is Rs. 6 crores and after deducting Income tax to be paid it is around Rs. 4 crores, is CSR applicable? In my opinion it is.

b) For calculation of 2% of average net profits of preceeding 3 years, i have to take the respective year's PBT into consideration or PAT will be considered?

Thanks in advance.

Replies (5)

Karan Batra

Creator: TheProTalks

2325 Points Joined January 2016

Have a look at this, after going through you might get the point that not even Tax is added back but many more adjustments take into place for calculation of profits as per section 198.

Table to Compute Net Profit for CSR contribution as per Section 198 of Companies Act, 2013

	Particulars	FY

	Net profit after tax*

Add :	Allowed Credits
1	Profit on sale of immovable property
	( Original Cost – WDV )

Less :	Credits Disallowed
1	Premium on shares or debentures
2	Profit on sale of forfeited shares
3	Profit on sale of immovable property
	(Sale Value of Immovable Property – Original Cost )
4	Surplus in P&L on measurement of asset or liability at fair value

Less :	Expenses Allowed
1	All the usual Working Charges
2	Director’s Remuneration
3	Bonus or Commission paid to Staff
4	Tax on escess or abnormal profits
5	Tax on business profits imposed for special reasons
6	Interest on Debentures
7	Interest on Loans
8	Expenses on repairs ( other than Capital Expenditure )
9	Contributions made under section 181 ( Bonafide Charitable Trusts )
10	Depreciation
11	Prior period items
12	Legal liability for compensation or damages
13	Insurance Expenses

Add :	Expenses Disallowed
1	Income Tax
2	Compensations, damages or payments made voluntarily
3	Capital Loss on sale of undertaking or part thereof ( Not include losses on sale of asset )
4	Expenditure in P&L on measurement of asset or liability at fair value


	* Net profit after tax is taken as base and accordingly the adjustments need to be considered.

So coming back to your questions

1.Yes CSR Provisions will be applicable to your company If I assume other adjustments to be nil and profits are always before tax or should I say Tax adjusted

2. Before tax

vimugdha sharma

student

70 Points Joined July 2012

if company is incorporated 2 years back . how they calculate their CSR Expediture (2% of Average Profit of Preceeding 3 years ) .

Ghanshyam

mumbai

33 Points Joined March 2012

Is deferred tax liabilty also to be dissallowed or allowed?

Kiran Regalagadda

Student

22 Points Joined March 2015

	Particulars	FY

	Net profit after tax*

Add :	Allowed Credits
1	Profit on sale of immovable property
	( Original Cost – WDV )

Less :	Credits Disallowed
1	Premium on shares or debentures
2	Profit on sale of forfeited shares
3	Profit on sale of immovable property
	(Sale Value of Immovable Property – Original Cost )
4	Surplus in P&L on measurement of asset or liability at fair value

Less :	Expenses Allowed
1	All the usual Working Charges
2	Director’s Remuneration
3	Bonus or Commission paid to Staff
4	Tax on escess or abnormal profits
5	Tax on business profits imposed for special reasons
6	Interest on Debentures
7	Interest on Loans
8	Expenses on repairs ( other than Capital Expenditure )
9	Contributions made under section 181 ( Bonafide Charitable Trusts )
10	Depreciation
11	Prior period items
12	Legal liability for compensation or damages
13	Insurance Expenses

Add :	Expenses Disallowed
1	Income Tax
2	Compensations, damages or payments made voluntarily
3	Capital Loss on sale of undertaking or part thereof ( Not include losses on sale of asset )
4	Expenditure in P&L on measurement of asset or liability at fair value


	* Net profit after tax is taken as base and accordingly the adjustments need to be considered.