New norms take away corporates’ discretion on the spending
The final CSR framework notified by the Corporate Affairs Ministry is largely prescriptive in nature. The new norms come into effect from April 1.
Setting ambiguity at rest, the Corporate Affairs Ministry made it clear that political contribution will not be considered as CSR activity under the new rules. Corporate India had sought clarity on this issue.
Besides broadening the scope of certain already specified activities that could be counted as CSR, the Ministry has added several new activities, such as rural development projects, protection of national heritage buildings and support for promoting rural sports.
However, the new framework has not left it open to company boards to decide on the CSR activities.
The CSR spend should not include any expenditure on an item “not in conformity or not in line with activities which fall within the purview of Schedule VII”, said the Rules notified by the Corporate Affairs Ministry.
The flexibility that Corporate Affairs Minister Sachin Pilot promised to corporate India after the enactment of the new company law seems to be missing, some corporate observers said. “It (notified framework) is slightly prescriptive. Not absolutely prescriptive. It limits the boundary within Schedule VII,” Santosh Jayaram, Technical Director-Sustainability and Climate Change, KPMG India, toldBusiness Line.
Lalit Kumar, Partner, J Sagar Associates, a law firm, said activities outside Schedule VII will not be considered as a permitted CSR activity and this is reflected in many places in the CSR Rules 2014. The Ministry has overhauled the Schedule VII, which had spelt out activities that could be included in CSR policy. The effect of the amendment is that some activities provided in the current Schedule VII, such as ‘social business projects’ have been completely deleted..
Some activities that have been added include protection of national heritage, art and culture, including restoration of buildings and sites for historical importance and works of art.
Measures for the benefit of Armed Forces veterans, war widows and their dependents have also been added.
The scope of promoting education has been expanded to include special education especially among children, women, the elderly and differently-abled.