Impact of Finance Act, 2014 – CSR

Sanchit Srivastava, Dr. Ram Manohar Lohiya National Law University

Editor’s note:

Corporate social responsibility rests on the theory that since a company utilizes the resources offered by nature and society for its benefit it should act as a trustee towards ensuring the welfare of nature and society, and that the actions of a company affect more than just its shareholders. Moreover, investment in environmentally responsible technologies and societal benefit boosts the company’s competitiveness in the market as well. Under § 135 of the new Companies Act, 2013, CSR has been codified and made mandatory. However, its spirit has been dampened by the Finance Bill,2014 which has not allowed CSR expenditures as deductions under Section 37, Income Tax Act, 1961. This paper analyses the point of clash as to whether CSR expenditure is a charge to the income or is appropriation of income, which has nowhere been clarified in jurisprudence so far.

Introduction

The concept of corporate social responsibility (“CSR”) in India is primarily based on two theories – the Gandhian trusteeship theory and the stakeholders’ interest theory. While the former propounds that since a company utilizes the resources offered by nature and society for its benefit it would act as a trustee towards ensuring the welfare of nature and society, the latter is founded on the principle that the actions of a company affect more than just its shareholders – thus the general public holds an equal ‘stake’ in the company.

There is no straitjacket definition provided for CSR in the Indian legal system. However, the correct scope of the term can be gauged from a look at the definition provided by the European Commission:

[It is] the responsibility of enterprises for their impacts on society… enterprises should have in place a process to integrate social, environmental, ethical human rights and consumer concerns into their business operations and core strategy in close collaboration with their stakeholders[i]

Therefore CSR is not to be considered as a substitute for legislations aimed at social and environmental welfare but ancillary to them. It has been seen that investment in environmentally responsible technologies and societal benefit goes beyond mere legal compliance and boosts the company’s competitiveness in the market. Basic legal obligations in the social area, e.g. training, working conditions, management-employee relations, have a direct impact on productivity. It opens a way of managing change and of reconciling social development with improved competitiveness.

CSR has been incorporated under the new Companies Act, 2013 under Section 135. While the Ministry of Finance has been quite considerate towards overall social sector development, promoting sustainability, and in its interpretation of the newly-formed CSR provisions, the Finance Bill 2014 has dampened the spirit of CSR enthusiasts, by not allowing CSR expenditures as deductions under Section 37, Income Tax Act, 1961.

According to the new Amendment proposed in the Finance Bill 2014, under sub-section (1) of Section 37, any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in Section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession. This amendment will take effect from April 1, 2015, and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent years.

This provision can be attacked by a very primal argument that why would a company spend on CSR when it has no tax benefits, especially when it can claim absolute tax deduction in other government-notified schemes, like the Prime Minister’s Relief Fund, MNREGA etc. This paper is an attempt to discover and iron out conflicts within these two realms.

CSR under the Companies Act 2013

CSR is a concept that has been the centre of discussion amongst business and professional circles over the decades, and is widely regarded as the duty of any corporation towards its proximate society. Before the enactment of the 2013 Act there were two views on whether an expenditure of this nature should be voluntary or be mandated by legislation. However, the Act put these debates to rest by enlisting express provisions related to CSR. The Central Government through Ministry of Corporate Affairs (“MCA”) in order to achieve the aforesaid objective has issued back to back notifications dated  February  27, 2014 prescribing applicability from April 1, 2014 of relevant provisions, schedules and rules thereof under the 2013 Act concerning CSR.

135 and Schedule VII to the 2013 Act along with CSR Policy Rules, 2014 (“CSRP Rules”) [hereinafter collectively called “CSR provisions”] govern, operate and determine the scope of CSR initiative for the companies. However before we deal with the intricacies of the issue-at-hand, it would be appropriate to deal with the guiding principles of CSR, its applicability, features and scope thereof as enshrined under the 2013 Act and rules thereof.

The MCA in the Preamble to the Draft CSR rules listed the following guiding principles concerning CSR:[ii]

  • CSR is the process by which an organisation thinks about and evolves its relationships with stakeholders for the common good, and demonstrates its commitment in this regard by adoption of appropriate business processes and strategies.

  • CSR is not charity or mere donation.
  • CSR is way of conducting business, by which corporate entities visibly contribute to the social good.

  • CSR should be used to integrate economic, environmental and social objectives with the company’s operations and growth.

  • CSR projects/ programmes of a company may also focus on integrating business models of a company with social and environmental priorities and processes in order to create shared value.

CSR under S. 135 of 2013 Act

The provisions of S. 135 restrict the applicability of mandatory CSR to the following companies:

  • A company having net worth of Rs. 500 crore or more during any financial year; or
  • A company having turnover of Rs. 1,000 crore or more during any financial year; or
  • A company having net profit of Rs. 5 crore or more during any financial year;

If a company satisfies any of the aforesaid conditions in any of the financial years, then the CSR provisions are applicable to the said company and will have to be follow them year on year. However, the Rules relax the rigor of S. 135, in that if a company does not fulfil any of the said conditions for a continuous period of three financial years it can be exempted from this requirement, but the same will again resume once the company reaches this mark in any subsequent financial year thereon.[iii]

Under this clause, the Board of Directors shall be required to ensure that at least 2% of average net profits of the concerned Company during the immediately three financial years shall be spent as per the CSR plan approved by the Board of the Company.

Features and Scope of CSR activities under CSR Rules

  • CSR activities do not include activities undertaken in pursuance of normal course of business of a company.[iv]

  • CSR activities will have to be undertaken with preference to the local area and areas from where the company operates.

  • Projects or programmes of CSR as undertaken by a company should include activities and/or subjects as mentioned in Schedule VII to the 2013 Act.[v]

  • Only activities which are not exclusively for the benefit of employees of the company or their family members shall be considered as CSR activity.[vi]

  • The CSR activities can be undertaken by the company either through itself and/or through a registered trust or a registered society or a company established under S. 8 of 2013 Act by itself, its holding or subsidiary company, or otherwise subject to compliance of conditions mentioned therein and a cap of maximum 5 % of total CSR expenditure of the company in a financial year.[vii]

  • CSR activities can also be undertaken in collaboration with other companies with compliance of conditions mentioned therein.[viii]

  • Any surplus arising out of the CSR activity will not be part of the business profits of the company.[ix]

S. 37 (1) Income Tax Act 1961 vis-a-vis CSR Expenditure

This would be the central analysis of this paper. Prior to the introduction of S. 135 and the CSR Rules, there had been a catena of judicial pronouncements to the effect that CSR expenditure would be considered a part of business expenditure under S. 37 (1). Before examining this position of the law, it would be pertinent to have a brief conceptual understanding of S. 37(1) of the Income Tax Act.

37 (1) states that any expenditure which does not qualify under revenue expenditure within Ss. 30-36 or is a capital expenditure or personal expenses of the assessee shall be considered to be business expenditure if it is wholly and exclusively for the purposes of business or profession shall be allowed as business expenditure while computing income from profits and gains from business or profession. Herein the phrase “wholly and exclusively for the purposes of business” is important. There have been some varied judicial views relating to when expenditure would be classified as wholly and exclusively for the purpose of business over the years. However, the crux of these decisions can be summarized in two points – firstly, the fact that a particular transaction was prudent or indispensible or necessary for the assessee to enter into are irrelevant factors in determination of this question[x] as it is a well settled doctrine that the businessman is the best judge for business expediency[xi]; secondly, the foregoing does not prevent the Assessing Officer from inquiring into the reality of the transaction i.e. whether it was entered into purely business purposes and not extraneous considerations.[xii] Therefore it can be seen that this is a question of fact and would be determined accordingly.

Conflicts Arising

The point of clash arises while examining whether CSR expenditure is a charge to the income or is appropriation of income, which has nowhere been clarified. Expenditures of various natures have been allowed as permissible under CSR. For instance, the following types of CSR expenditures are permissible:

  • Direct expenditure on charitable activities;
  • Direct expenditure on charitable activities in local area;
  • Direct expenditure on capacity building of employees and implementing NPOs;
  • Grant to Trust or Society;
  • Transfer to other corporates under pooling of expenditure;
  • Donation to Govt. recognised funds where 100% tax relief is available.

Grants, Donations, etc., are voluntary appropriation of income and cannot be charged as expenditures against the income. The CSR law allows all these types of applications as CSR expenditures.[xiii] However from a technical aspect, it can be argued that any sort of CSR expenditure is perceived by the legislature to be mandatory in nature. The expression “shall ensure” used in S. 135(5) of the Act does suggest that there is a mandate to spend 2% of average net profits of the preceding three years on CSR activity.

Then, there are some CSR activities undertaken by companies which result in the creation of new capital assets, such as schools, hospitals, ambulance, or planting of trees, etc. The question which arises now is would the same be considered as a revenue or capital expense? Section 37(1) of the I-T Act grants deduction for expenditure which is not of capital nature. If the nature of CSR expenditure is such that no capital asset of taxpayer’s ownership is created (such as expenditure incurred on distribution of clothes or medicines, expenditure on free health camps, etc.) this condition will not be a hurdle. As per judicial interpretations, if the assets do not to belong to the taxpayer, the expenditure cannot be regarded as capital expenditure for the taxpayer.[xiv]

Exemptions on CSR Expenditure

35AC of the Act provides for deduction of expenditure incurred by way of payment by an assessee of any sum to a public sector company or a local authority or to an association or institution approved by the National Committee for carrying out any eligible project or scheme. In other words, the provisions of S. 35AC recognise the features of CSR provisions i.e., of allowing the company to either make contribution to the eligible organisations/entities that undertake eligible projects or schemes and/or incur expenditure directly by itself on eligible projects or schemes. The eligible projects or schemes as referred in S. 35AC are recommended under Rule 11K of the 1962 Rules.

35AC of the Act provides for deduction of expenditure incurred by way of payment by an assessee of any sum to a public sector company or a local authority or to an association or institution approved by the National Committee for carrying out any eligible project or scheme. In other words, the provisions of S. 35AC recognise the features of CSR provisions i.e., of allowing the company to either make contribution to the eligible organisations/entities that undertake eligible projects or schemes and/or incur expenditure directly by itself on eligible projects or schemes. The eligible projects or schemes as referred in S. 35AC are recommended under Rule 11K of the 1962 Rules.

On perusal of Rule 11K, one may find that the significant guidelines of activities as recommended are in consonance to the subjects as prescribed under Schedule VII to the 2013 Act. The following chart tabulating the activities as prescribed under Schedule VII to the 2013 Act and the allowability of expenditure incurred on the said activities under the Act confirms the said understanding.

  1. No.
Specific CSR Activities referred under Schedule VII to the 2013 Act Expenditure allowed under the relevant provisions of the Income-tax Act, 1961
1. Activities concerning Basic necessities of Life More than prescribed layers of subsidiaries
– Eradication of poverty, hunger and malnutrition Section 35AC read with Rule 11K(i)(f).
– Promoting Sanitation and health care and making available safe drinking water 35AC r/w Rules 11k(i)(a),(f),(j)
2. Activities concerning Education
– Promoting Education, including special education and employment enhancing vocational skills especially among children, women and elderly and the differently able 35AC r/w 11K(i)(c),(i),(o),(p),(s)
– Livelihood enhancement programs 35AC r/w Rules 11K(i)(j),(s)
3. Activities addressing inequality and gender discrimination  

Section 35AC r.w. Rule 11K(i)(n),(i) of the 1962 Rules

– Promoting gender equality
– Empowering women
– Setting up of homes and hostels for women and orphans
– Setting up old age homes, day care centre and such
4. Activities concerning Care for environment  

35AC r/w Rules 11K(i)(d),(h),(l),(q),(r)

– Ensuring environmental sustainability and ecological balance
– Preservation of flora and fauna, animal welfare, agro forestry
– Conservation of natural resources and maintaining quality of soil, air and wate
5. Activities concerning protection of National Heritage, Art and Culture 35AC r/w Rule 11K
– Protection of national heritage, art and culture including restoration of building and sites of historical importance and works of art
– Setting up public libraries
– Promotion of traditional arts and handicrafts and its development
6. Activities concerning benefit to Armed Forces, veterans, war widows and their dependants
– Measures for the benefit of armed forces, veterans, war widows and their dependents 80G(2)(a)(i) and 80G(2)(a)(iii)(h)(c)
7. Activities concerning Sports
– Training to promote rural sports, nationally recognised sports, Paralympics sports and Olympic sports 35AC r/w Rule 11K(i)(g)
8. Activities concerning national relief and welfare of Economically backward class of Society
– Contribution to PM National relief fund or any other fund 80G(2)(a)(iiia)
– Relief and welfare of the Schedules Casts, Schedules Tribes,\ Other backward castes, minorities and women 35AC r/w Rules 11K(i)(b),(c) and 11K(ii).
9. Activities concerning Technology incubators
– Contributions or funds provided to technology incubators located within academic institutions which are approved by Central Government 35(2AA)/80G(2)(iihi)
10. Activities concerning Rural Development (Projects)  35AC/35CCA

Judicial Pronouncements w.r.t. CSR

Prior to enactment of S. 135 of the 2013 Act, there were several instances when the courts were seized with the question of whether CSR expenditure under Companies Act 1956 would qualify as business expenditure u/s 37 (1) of the IT Act. The decisions, albeit differing in factual situations, propounded a common ratio – CSR expenditure qualified as expenditure “wholly and exclusively laid out for the purpose of business or profession” and as such could be allowed under business expenditure.

Some of these judgments along with a brief set of facts are discussed below:

Sri Venkata Satyanaryana Rice Mill Contractors Co. v CIT[xv] : The assessee was in the business of rice export from Andhra Pradesh. Before exporting rice a permit had to be obtained from the District Collector, which were granted only after payment was made to a welfare fund established by the District Collector.

The assessee claimed the contributions made to the welfare fund as business expenditure. The ITO disallowed the deduction by holding that the said payment was neither mandatory nor statutory but was only discretionary and further that the welfare fund had not been approved for the purposes of S. 80G. The ITAT held that though there was no compulsion on the part of assessee to make contribution to welfare fund the scheme showed that an advantage would accrue for the benefit of the assessee on the payment of the contribution and, therefore, the same was allowable as deduction.

The Andhra Pradesh HC disallowed this deduction by adjudging this expenditure as a compulsory extraction and therefore contrary to public policy.

On appeal, the Supreme Court reversed the decision of the HC and held this to be business expenditure. According to the Supreme Court, the correct test for determining the nature of business expenditure was not whether it was compulsory for the assessee to make the payment or not but commercial expediency.[xvi] The Supreme Court reaffirmed a decision of House of Lords[xvii] in which it was held:

“A sum of money expended, not of necessity and with a view to direct and immediate benefit to the trade, but voluntarily and on the grounds of commercial expediency and in order indirectly to facilitate the carrying on of the business, may yet be expended wholly and exclusively for the purposes of trade…”

The Supreme Court held that this contribution was in no way contrary to public policy as it was not an illegal payment (bribe or gratification) or penalty for infraction of any legal provision. The welfare fund was established by a voluntary scheme for the general benefit of the members of the public and as such contributions made openly by rice millers cannot be termed as contrary to public policy simply because the payment was a prerequisite to obtaining a permit from the Collector.

In this judgment, even though the Supreme Court did not expressly talk about CSR expenditure, the ratio impliedly suggests that if a company invests in any public welfare scheme such amount would be allowed as business expenditure u/s 37 (1), even if it were a voluntary investment. If such investment were made mandatory, it would be a measure to facilitate the continuance of business and as such would again qualify as business expenditure.

Krishna Sahkari Sakhar Karkhana v CIT[xviii]: The assessee a registered co-operative society, engaged in sale of sugar, paid a sum to an Education Fund of the State Federal Society as required under S. 68 of the Maharashtra Co-operative Societies Act and the rules made thereunder and claimed deduction thereof as business expenditure. The ITO allowed the claim but the Commissioner set aside the assessment and directed disallowance of the claim. On appeal, the Tribunal upheld the disallowance stating that the contribution made by the assessee to the education fund was not “wholly and exclusively” for the benefit of the assessee and there was no relation between the contribution made by the assessee-society and any advantage gained by it as a result thereof.

On appeal, the Bombay HC allowed the expenditure u/s 37 (1). The HC relying on CIT v Malayalam Plantations Ltd.[xix] opined that the phrase “for the purpose of business” in the section was not equivalent to, instead had a wider ambit than “for the purpose of earning profits”. A payment may also be made by a corporation with the object of rationalisation of its administration and modernisation of its machinery; it may include measures for the preservation of the business and for the protection of its assets and property from expropriation, coercive process or assertion of hostile title; it may also comprehend payment of statutory dues and taxes imposed as a pre-condition to commence or for the carrying on of a business; it may comprehend many other acts incidental to the carrying on of a business.[xx]

However this payment should be made only with the purpose of purpose of the business i.e. the expenditure incurred should be for carrying on of business and the assessee should incur it in the capacity of a businessman. This ratio also bolsters the allowability of CSR expenditure u/s 37 (1).

CIT v Madras Refineries Ltd.[xxi] : This judgment squarely deals with CSR expenditure and is the bedrock on which the antagonists of the 2014 Amendment have built their castle.

The assessee, Madras Refineries Limited was a public limited company. It provided funds for establishing drinking water facilities to the residents in the vicinity of the refinery and also provided aid to the school run for the benefit of the children of those local residents. It incurred an expense of Rs. 15, 32, 000/- for that purpose. The AO disallowed this expenditure u/s 37 (1), but the Commissioner partly reversed this decision and allowed Rs. 5, 00, 000/- as business expenditure stating that the amount was incurred by the company for the good and welfare of the community and therefore could be regarded as an activity for the promotion of the business. On second appeal, ITAT amended the order of the Commissioner and allowed the entire amount under this section.

The Madras HC upheld the decision of the ITAT in its entirety. Addressing the issue of CSR, the HC opined:

“The concept of business is not static. It has evolved over a period of time to include within its fold the concrete expression of care and concern for the society at large and the people of the locality in which the business is located in particular. Being known as a good corporate citizen brings goodwill of the local community, as also with the regulatory agencies and the society at large, thereby creating an atmosphere in which the business can succeed in a greater measure with the aid of such goodwill. Monies spent for bringing drinking water as also for establishing or improving the school meant for the residents of the locality in which the business is situated cannot be regarded as being wholly outside the ambit of the business concerns of the assessee, especially where the undertaking owned by the assessee is one which is to some extent a polluting industry.”[xxii]

The post Amendment scenario is muddled with varying judgments rendered by the ITAT and High Courts. Some of these judgments are discussed below.

CIT v Wipro Ltd.[xxiii]: The assessee-respondent had made contributions for the upliftment of a backward community in its nearby area. The AO disallowed the expenditure citing it as charity and not at all connected with the purpose of the business, and this decision was upheld by the CIT (A). On second appeal to ITAT, the Tribunal deleted the addition made by the AO.

On appeal by revenue to the Karnataka HC, a Division Bench upheld the decision of AO. The HC stated that the contributions made by the assessee were not direct but towards religious functions, charitable institutions, social clubs and certain acts of charity such as donating a borewell to the Municipality, etc. The HC thus decided this expenditure did not satisfy the test of commercial expediency u/s 37 (1). Due to assessee’s failure to adduce evidence, the expenditure under these heads cannot be stated to be exclusively for the purposes of business of the assessee and to allow it.[xxiv] The HC did not follow the decision in CIT v Madras Refineries Ltd.[xxv] relied on decisions of the Hon’ble Supreme Court[xxvi] to conclude that the application of the test of commercial expediency for determining whether expenditure was wholly and exclusively laid out for the purpose of the assessee’s business, reasonableness of the expenditure has to be judged from the point of view of the businessman and not of the Department. However the assessment authority is within its right to come to a conclusion either that the alleged payment is not real or it is not incurred by the assessee or in the character of a trader or it is not laid out wholly and exclusively for the purposes of the business of the assessee and to disallow it.[xxvii]

This judgment clearly spells out the policy behind S. 37 (1) Explanation 1 as added by the Finance Bill, 2014 and the CSR Policy Rules, 2014. Collectively, the effect of these two laws puts CSR activities outside the scope of business. These laws aim to compel the companies to undertake CSR with the aim of societal benefit and free from ulterior motives of profit or sustenance of their business.

CIT v Andhra Bank[xxviii] : The assessee claimed an amount of Rs. 2, 04, 34, 107/- spent on Andhra Bank Rural Development Trust, which is engaged in conducting several trainings for providing self employment to rural youth. After the training, the bank also provided finance to the rural youth. This amount, claimed by the assessee was disallowed by the Assessing Officer on the grounds that this activity was nowhere related to banking and thus could not be claimed to be for the purpose of business u/s 37 (1). The CIT (A) on consideration of the detailed objectives of the trust and the scheme conducted by the assessee of training and empowerment of rural youth allowed the expenditure.

The CSR activity in this case, as contended by the counsel for the assessee, was conducting training programmes for rural unemployed youth, and later on extending them credit facilities for starting their own enterprise. In view of this, the ITAT held that following the ratio in CIT v Infosys Technologies Ltd.[xxix], the Hon’ble Karnataka High Court considered the expenditure claimed by the assessee on installation of traffic signals at Bannerghata Circle, Bangalore, as expenditure having been incurred by the assessee in discharge of its corporate social responsibilities, which also facilitated the business of the assessee, and hence allowable as deduction under S. 37 (1) of the Act. Similarly, a coordinate bench of the Tribunal in NMDC Ltd. v Joint CIT[xxx] held donation of Rs. 5 crores made by the assessee therein to a Medical College, though not related to the business of the assessee, as having been incurred in furtherance of a corporate social responsibility and hence allowable as deduction. In the facts of the present case, the amount spent by the assessee served two objectives. Firstly, it was in discharge of its corporate social responsibility by training rural youth. Secondly, this act was also indirectly promoting the business of bank as these trained rural youth would be prospective clients of the bank.[xxxi]

This judgment of the ITAT contemplates that CSR expenditure can be allowed as business expenditure in two situations – firstly, when it is indirectly resulting in the promotion and continuance of business of the assessee; and secondly, even when it is not related to the purpose of the business but is in furtherance of CSR activities, as now the CSR activities are a statutory obligation to conduct a profitable business in the long run. However, due to the current amendment, now the application of this ratio would not be possible.

Conclusion

The appended Explanation to S. 37 (1) has left the concept of corporate social responsibility in the current scenario somewhat murkier than it was before. On the one hand it precludes all CSR expenditure from the purview of business expenditure due to the CSR Policy Rules which clearly state that CSR activities are those which are not undertaken for the purpose of business. It also in effect neutralizes the aforementioned judgments which have favoured the assessee-corporation in allowing tax exemption for CSR activities.

The Explanatory Memorandum to the Bill states that CSR expenditure, being an application of income, is not incurred wholly and exclusively for the purpose of carrying on business, therefore, not allowed as a deduction under section 37(1) of the Act. However, through judicial pronouncements it has been settled that where the income is utilized for self-imposed obligation, the same constitutes application of income whereas obligation where money flows out of an independent overriding title signifies diversion of income.[xxxii] Therefore it still remains unclear whether CSR is a mandate of the statute i.e. S. 135 Companies Act and the CSR Policy Rules, or a voluntary activity similar to the previous company law.

The objective of the CSR proposal is to make Corporate India a stakeholder in the development of the community. The existing provisions falling under section 30 to 36 covers deductions for expenditure on eligible projects for uplift of the public that are notified by the government, agriculture extension projects as well as skill development projects. Hence, depending on the needs of the society around – a company may consider spending in these projects. The tendency would shift to companies spending only in areas and organizations where they get maximum tax benefit, thereby adversely affecting the flow of funds in the other social sector programs and initiatives.

However in order to mollify the aftermath of this provision, The Finance Minister has clarified that deductions specifically allowed under Sections 30 to 36 of the Income Tax (IT) Act, 1961 could be availed. In effect, Section 30 of the IT Act can be used for availing deductions against expenditure incurred on repairs and insurance in respect of machinery, plant and furniture used for CSR activities. Rent, rates, taxes and repairs incurred on buildings or other assets taken on lease earmarked for CSR activity would also qualify for deductions. Companies can also claim deduction towards depreciation on assets used for CSR purposes. Funds spent on skill development projects would give the assessee the benefit of claiming 150% deduction in their books. In fact, the CSR Rules issued by MCA (Ministry of Corporate Affairs) read with the MCA circular dated June this year clarifies that CSR activities should be undertaken by the companies in project/ programme mode.[xxxiii]

Thus, in conclusion, it is evident that the current Finance Act offers a mixed bag for companies in terms of CSR expenditure. It will be interesting to see when this law is brought into force (April 1, 2015) how multi-national corporations react to it and the positive/negative changes (if any) in the ongoing trend of corporate social responsibility in India.

Edited by Neerja Gurnani

[i] EC, Green Paper, Promoting a European Framework for Corporate Social Responsibility, COM (2001) 366 (18/07/2001), para 20, available at http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52001DC0366&from=EN, last accessed on 14/10/2014.

[ii] Available at http://www.cuts-international.org/pdf/Draft-CSR_Rules_2013.pdf, last seen on 14/10/2014.

[iii] Rule 3 (2), The Companies (Corporate Social Responsibility Policy) Rules, 2014 (“CSR Rules”).

[iv] Ibid., rule 2 (e).

[v] Ibid.

[vi] Supra 3, rule 4 (5).

[vii] Ibid., rules 4 (2) and 4 (6).

[viii] Ibid., rule 4 (3).

[ix] Supra 3, rule 6 (2).

[x] Narsingdas Surajmal Properties (P.) Ltd. v CIT, [1981] 127 ITR 221 (Gau).

[xi] Jaipur Electro (P.) Ltd. v. CIT, [1996] 134 CTR 237 (Raj).

[xii] Ramanand Sagar v. Dy. CIT, [2002] 255 ITR 134 (Bom).

[xiii] M. Fogla, Pre-Budget: Confusing and Debatable Issues in CSR (Taxmann), available at http://www.taxmann.com/file/t3/pre-budget-confusing-debatable-issues-under-csr.aspx, last seen on 14/10/2014.

[xiv] Infra.

[xv] [1996] 89 TAXMAN 92 (SC).

[xvi] Ibid., at para 6.

[xvii] Atherton v. British Insulated & Helsby Cables Ltd., 10 TC 155, 191 (HL)

[xviii] [2000] 112 TAXMAN 246 (Bom).

[xix] [1964] 53 ITR 140.

[xx] Ibid., at para 6.

[xxi] [2004] 266 ITR 170.

[xxii] Ibid., at para 5.

[xxiii] [2014] 41 taxmann.com 190 (Karnataka) (decided on 23/08/2014).

[xxiv] Ibid., at para 18.

[xxv] Supra 21.

[xxvi] CIT v. Walchand & Co. (P.) Ltd., [1967] 65 ITR 381; Eastern Investments Ltd. v. CIT, [1951] 20 ITR 1 (SC); J.K. Woollen Mfrs. v. CIT, [1969] 72 ITR 612 (SC).

[xxvii] Ibid., at para 15.

[xxviii] MANU/IH/0457/2014, decided on 18/07/2014.

[xxix] [2014] 43 taxmann.com 251 (Karnataka). However this case would not be applicable in the current scenario due to Rule 4 (5), CSR Rules, 2014. Cf. Supra 6.

[xxx] MANU/IH/0156/2014, decided on 28/02/2014

[xxxi] Supra 28, at para 17.

[xxxii] CIT v DTTDC, [2013] 350 ITR 1.

[xxxiii] M. Allirajan, ‘Cos can avail tax benefits on CSR expenditure’ (The Times of India, 04/09/2014), available at http://timesofindia.indiatimes.com/business/india-business/Cos-can-avail-tax-benefits-for-expenditure-on-CSR/articleshow/41640139.cms, last seen on 14/10/2014.

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