With reference to Corporate Social Responsibility (CSR) rules in India, consider the following statements:
- CSR rules specify that expenditures that benefit the company
directly or its employees will not be considered as CSR activities.
- CSR rules do not specify minimum spending on CSR activities.
Which
of the statements given above is/are correct?
(a). 1 only
(b). 2 only
(c). Both 1 and 2
(d). Neither 1 nor 2
Explanation:
Only the first statement, "CSR rules
specify that expenditures that benefit the company directly or its employees
will not be considered as CSR activities," is correct. The second
statement, "CSR rules do not specify minimum spending on CSR activities,"
is incorrect.
Statement 1:
The Companies Act, 2013 states that CSR
activities should benefit society or specific communities, not the company or
its employees directly. Expenditures like employee benefits, sponsorship for
marketing benefits, and activities fulfilling statutory obligations are not
considered CSR activities.
Statement 2:
The Companies Act mandates that companies
meeting certain criteria spend at least 2% of their average net profit from the
preceding three financial years on CSR activities. This makes the statement
incorrect.
The first statement accurately reflects
the CSR rules in India.
Therefore, option (a) only 1 is correct.