Does the allocated fund to CSR lapses in case the organization could not spend in the year.

One Response to Does the allocated fund to CSR lapses in case the organization could not spend in the year.

1. Subhash Mittal says:

   April 16, 2015 at 6:43 am

   Dear Vikas,

   Present legal framework for CSR is as follows:

   S.135 Companies Act 2013 – defines the overall scope of CSR
   Sch VII – Defines authorised activities which can be undertaken under CSR
   Rules – specifies procedures referred to in S. 135
   Circulars / Notifications : Clarifies issues of interpretation and doubts

   Presently S.135 (5) states a company qualifying for CSR would spend in every financial year 2% of the average net profits of the company made immediately preceding three years. In case the company fails to spend this amount the Board in its report would explain the reason for not spending.

   Allocation of funds for CSR is at best indication of intent of the company to spend. However if it does not spend it has to explain the same in its Board report. Again whether the funds lapse or not, is an internal matter, which the company decides, however if 2% is not spent it must give reasons. In case a company allocates funds but fails to spend it should continue with those funds, to indicate its commitment. Infact the way reporting is required, which asks for project-wise outlay / budget – assumption is that this in case not spent will continue. Once say Rs 20 lakh has been allocated for a project, but only Rs 8 lakh is spent during the year. If your overall expenditure for the year remains less than 2% then you will need to explain. In case you have already allocated Rs 20 lakh, but now decide to close this project, one would expect reasons for closure. However you could off course continue with the project and spend during next year.

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