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The corporate social responsibility provision in the new company law has assumed 'retrospective' colour, thanks to the corporate affairs ministry's latest clarification.
This Ministry has now clarified that the applicability test for CSR provisions would be based on the corporate meeting the defined parameters in any of three preceding financial years.
Simply put, for deciding on whether Company A has to conform to CSR provisions in 2014-15 financial year, it has to go back in time and see whether it met the criteria in any of three preceding financial years prior to April 1, 2014.
The CSR criteria is linked to turnover, networth and profits made by a company.
"The Corporate Affairs Ministry clarification makes the applicability of Section 135 ( CSR provision) retrospective. This has made it mandatory for companies to see any of the three financial years for the purpose of 2014-15.", said Lalit Kumar, Partner, J Sagar Associates, a law firm.
The MCA has exceeded its power of rule making and has gone beyond what Section 135 intended, he told Business Line.
S.N. Ananthasubramanian, a practicising company secretary, said this MCA clarification needs a close look.
"While the CSR provision came into force from April 1, 2014, its applicability is sought to be based on thresholds arrived at when the repealed Act (Companies Act 1956) was in vogue", he said.
srivats.kr@thehindu.co.in
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