Corporates that had paid heed to the MCA’s appeal last year to contribute generously to the ‘Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund’ (PM Cares Fund) have some relief coming their way on the CSR obligations front.
The MCA has now clarified that excess CSR amount spent by the companies — over and above the minimum prescribed amount for FY 2019-20 — by way of contribution to the ‘PM Cares Fund’ can be set off against the mandatory CSR obligation for FY 2020-21.
This clarification comes in the wake of several representations received by the ministry for setting off the excess CSR spent for FY 2019 –20 by way of contribution to the Fund against the mandatory CSR obligation for FY 2020-21.
It maybe recalled that MCA had on March 28 last year clarified that any contribution made to the Fund would qualify as Corporate Social Responsibility (CSR) expenditure under the Company Law.
MCA has now in a circular said that where a Company has contributed any amount to “PM CARES FUND” on March 31, 2020, which is over and above the minimum amount as prescribed under Section 135 (5) of the Companies Act 2013 for FY 2019–20, and such excess amount ( or part thereof) is offset against the requirement to be spent under CSR obligations for FY 2020-21, then the same would not be viewed as a violation.
This is, however, subject to conditions, including that the amount offset as such should have factored the unspent CSR amount for previous financial years, if any; the chief financial officer should certify that the contribution to PM CARES FUND was indeed made on March 31, 2020 in pursuance of the appeal of the MCA and the same should also be certified by the statutory auditor of the company; and the details of such contribution should be disclosed separately in the annual report on CSR as well as in the Board Report for FY 2020-21, the MCA has said.
Aseem Chawla, Managing Partner, ASC Legal said this latest MCA circular is enabling in nature; keeping in line with the earlier prescription suggesting that any excess contribution made would be allowed to be carry forward and act as an offset against future years’ CSR contribution obligation.
“In the present awkward times any CSR related activity or initiative which relates to Covid-19 emergent situation should be welcomed and the corporate compliance ecosystem should facilitate the same,” he said.
S N Ananthasubramanian, former President of the ICSI and practising Company Secretary, said: “With the advent of the second wave, this MCA clarification seems appropriate and is inevitable”.
The MCA had on March 31 last year appealed to corporate India to contribute to the PM CARES FUND and had highlighted the benefits of such contributions in its official website . In the appeal, it was mentioned that such contributions include the unspent CSR amount, if any, and an amount over and above the minimum prescribed CSR amount for FY 2019–20, which can later be offset against the CSR obligation arising in subsequent financial years.