Industry bodies Ficci and CII today expressed hope that new rules would provide boards of companies flexibility in deciding 'Corporate Social Responsibility' activities.
Both groupings have welcomed the clarity around provisions related to CSR activities.
The Corporate Affairs Ministry yesterday notified the rules for CSR activities. Under the new companies law, certain class of entities are required to shell out at least two per cent of their three-year annual average net profit towards social welfare spending.
The rules, to be effective from April 1, would be applicable to companies with at least Rs 5 crore net profit, or Rs 1,000 crore turnover or Rs 500 crore net worth.
Ficci President Sidharth Birla said he expects that implementation of the CSR provisions "will allow boards all reasonable flexibility, as the underlying intent of the law is to promote self-regulation, non-intrusion and accountability".
The consultative process followed by the Ministry in finalising these rules helped in taking care of many, "but unfortunately not all of, industry concerns," he said in a statement.
CII Director General Chandrajit Banerjee said the rules seek to limit the scope of CSR activities to those enshrined under Schedule VII of the Companies Act.
According to him, it needs to be appreciated that the term 'CSR' does not have a universally accepted definition.
"The Ministry has all along maintained that companies would be allowed to creatively innovate and integrate CSR strategies within their businesses that create enduring sources of livelihood and other societal value.
"Precluding the corporate boards from determining what would constitute CSR goes against the very premise of the Act, which is built on self-governance and enhanced disclosures," he said in a statement.
Meanwhile, Birla said that exempting overseas branch profits for calculation of net profit is an equitable step.
"Similarly, clarification on excluding independent directors, for private and unlisted public companies is a correct step for those who are not required to appoint such directors under law," he added.
Noting that tax deductibility of CSR spend remains unclear, he said the industry body was confident that steps would be taken to ensure that CSR expenditure is not construed as a tax on business.
