Ministry of Corporate Affairs: Corporate Contributions towards CM Relief Funds for COVID-19 Do Not Qualify as CSR Expenditure

April 13, 2020.

by Sharvari Lohakare.

On Saturday, it has been clarified by the Union Ministry of Corporate Affairs that the corporate contributions made to the Chief Minister’s Relief Fund or State Relief Fund for COVID-19 should not be considered as admissible Corporate Social Responsibility (CSR) expenditure under the Companies Act, as it is not mentioned in the Schedule VII of the Act.

The Ministry also noted that spending CSR funds for COVID-19 related activities shall qualify as CSR expenditure. It was further clarified that funds may be spent for various activities related to COVID-19 under items no. (i) and (xii) of Schedule VII relating to promotion of health care including preventive health care and sanitation, and disaster management.

Various stakeholders sought clarifications regarding eligibility of CSR expenditure related to COVID-19 activities. Therefore the Ministry issued brief clarifications in FAQ format.

Contributions made to the PM CARES Fund shall qualify as CSR expenditure under item no (viii) of Schedule VII of the Companies Act, 2013. Similarly, it has also been explained that contributions made to the State Disaster Management Authority to combat COVID-19 shall also qualify for CSR expenditure under item no (xii) of Schedule VII of the Companies Act, 2013.

Since it is a moral/humanitarian/contractual obligation of all the employers to pay salary/wages to all the employees or workers during the lockdown period, Ministry directed for full payment as it is essential for livelihood as they have no alternate source of employment. Therefore, the payment of salary/wages to employees and workers during lockdown period shall not qualify as admissible CSR expenditure as per the section 135 of the Companies Act.

However onetime exception was made for the admissibility of the CSR expenditure. The Ministry clarified that subject to an explicit declaration by the Board of the company and due certification by the statutory auditor, if any ex-gratia payment is made to temporary/casual workers/daily wage workers over and above the disbursement of wages, specifically for the purpose of fighting COVID-19 crisis, it shall be admissible for one time.

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