Source Times of india
Pilot to pitch for tax relief on CSR spend
The author has posted comments on this articlePankaj Doval, TNN | Dec 5, 2012, 01.50AM IST
NEW DELHI: The corporate affairs ministry on Tuesday said it would pitch for tax exemptions for companies that spend 2% of their net profit on CSR activities as proposed in the new Companies Bill, even as it refused to make the spending mandatory.
Corporate affairs minister Sachin Pilot, who met industry captains over the issue, said the government has no intention of being a "watchdog" over the implementation of the measure but rather make it voluntary and participatory for Indic Inc. "We do not want an inspector raj, but rather have a system which is self regulating and self compliant," Pilot said.
The Companies Bill is pending in Parliament and stipulates a CSR spend for every company having net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore or more or a net profit of Rs 5 crore or more during a financial year. It asks for a spend of "at least 2%" of the average net profit of the three immediately preceding financial years. "We have taken this suggestion that was made in the deliberations. I will discuss this with the finance ministry to evolve some sort of a middle ground," he said, though refusing to share further details. But while the 2% spend is voluntary, Pilot said a company qualifying for it will have to explain if it fails to do so. "If they do not spend 2%, they will have to report about it. If they fail to do so, then they will have to face action under Section 134 as enshrined in the Bill." Section 134 says that any company that contravenes the CSR spend provision, and also fails to explain the reason for the same in its reporting, shall be punishable with a fine not less than Rs 25,000 but which may extend to Rs 25 lakh. Also, every officer of the company in default shall be punishable with imprisonment for a term which may extend to three years or with a fine not less than Rs 25,000 but extendable up to Rs 25 lakh, or with both. As many as 11,000-13,000 companies could be eligible for the CSR spend, Pilot said, adding that the ministry's website will have a template detailing the manner of reporting. Pilot said he would try to see that the bill is taken up in the ongoing Winter session
The Companies Bill, that seeks to replace the existing Companies Act of 1956, was tabled in Parliament last year and proposes a leaner and contemporary company law. Apart from recommending a 2% annual spend on CSR activities, the Bill proposes higher corporate disclosures to prevent corporate frauds. Also it seeks to empower shareholders by proposing the concept of class-action suits.
The Parliamentary Standing Committee on the Bill, headed by BJP leader Yashwant Singh, had recommended that the 2% spend on CSR should be ensured, rather than making it a voluntary exercise.
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