Applicability of Corporate Social Responsibility (CSR)

Applicability of Corporate Social Responsibility (CSR)

The provisions of Corporate Social Responsibility (CSR) were introduced in the new avatar of the Companies Act, 2013 (the Act). The Act was notified on 29 August 2013 and the provisions of the Act were made applicable in the phased manner. The provisions of CSR were made effective from 1 April 2014.

CSR is applicable to the Companies which fulfils any of criteria during the immediately preceding financial year as per the provisions of the section 135 (1) of the Act read with rule 3(1) of the CSR Rules:

1. Companies whose net worth of Rupees Five hundred crore or more, OR
2. Companies whose turnover of Rupees One thousand crore or more, OR
3. Companies whose net profit of Rupees Five crore or more

As per the section 2(20) of the Act, the word “Company” means the Company means a company incorporated under this Act or any previous Company Law.

These criteria are also applicable to every company including holding or subsidiary, and a foreign company defined u/s 2(42) of the Company having its branch office or project office in India.

It is persistent to note that CSR applicability is specific to each company. A holding or subsidiary of a company is not required to comply with the CSR provisions unless the holding or subsidiary itself fulfils the eligibility criteria prescribed under section 135(1) stated above.

CSR is also applicable to section 8 companies ie., the companies formed with charitable objects, etc.

Even if a company incorporated under the Act is carrying on business activities outside India and has no business activities in India, it still needs to comply with the CSR provisions if it fulfills the criteria prescribed under section 135(1) of the Act.