Good corporate governance is not achieved just by the inflow of the funds and monies, but also by attaining some supplementary responsibilities that need to be paid back to the environment it is functioning in. Thereby an organization should understand that business is not just done with a motive for earning a mass big profit, but it has a responsibility to give back to society for all the resources that it uses.
In order to fulfill its obligation towards the society the Law under Companies Act, 2013 prescribes a terminology under Section 135, known as the Corporate Social Responsibility or CSR. In today’s society the emphasis placed by more and more companies on corporate social responsibility simply symbolizes that recognition and prosperity is best achieved in an inclusive society. Currently, in the midst with the country going through a lockdown due to the outburst of the deadly novel coronavirus or COVID- 19, the companies and all other business functionaries are rendered as un-operational for the moment, but not to forget, that the Corporate shall be accountable to itself, country and the public in such times.
To combat such a situation, we are in need of a channel that makes the government and the businesses work together for the benefit of the citizens. The true sense of CSR should not be restricted or diluted to the sense, that for the mere sake of compliances, the company fulfills its obligation. Rather in such a situation, it should be about every single individual in a business taking responsibility to make a difference in everything that they do.
Thereby, against the backdrop of the increasing need of fund requirements in order to deal with the ongoing pandemic, the Ministry of Corporate Affairs has decided that any contribution made by the various organizations, would be considered to be an activity under the CSR provisions mentioned in the Act. To give effect to such a provision the Government on 28th March 2020, quoted that all contributions made for COVID- 19 shall qualify as CSR expenditure.
A Company in order to fulfill the CSR compliances, as mandated under the Act has alternatives under which it can discharge its a duty. One such contribution can be made to the Prime Minister’s National Relief Fund or any such fund set up by the Central Government or State Government for the socio-economic welfare. With the advent of time and circumstances, the Government had quoted that any individual or corporation can make contributions to either the Prime Minister’s Relief Fund or the Chief Minister’s Relief Fund as is set up by the respective State Governments.
But in the furtherance of such schemes set up by the government for making the country strong enough to combat such situations there are individuals or companies who, with ulterior motives do not contribute to such funds with bona fide intentions but to get tax rebates on such funding.
Because as is stated under the Income Tax Act, 1961, the contribution made to the CSR activities shall be treated as non-taxable perquisites. Also, it is likely that not every individual would support such a cause. To support this there were certain allegations and oppositions made to such funds set up by the Government but the Supreme Court in a Public Interest Litigation filed by Manohar Lal Sharma that questioned the legality of the constitution of such funds for COVID-19 which was further dismissed.
The Ministry, which is implementing the Act, has also clarified that COVID-19 activities relate to the promotion of healthcare, including preventive healthcare and sanitation and disaster management would qualify as CSR expenditure.
Thereby, in a situation where the Country is in a fight with a pandemic, the citizens to the general prudence should take into consideration that the funds collected are ultimately getting utilized for the betterment of the country in totality. Therefore, a question arises that in a democratic and plural society as ours, that has roots in nation-building tracing back into ancient times, as to why a mandate of law is required for citizens and corporations to contribute towards national causes when our Country is gripped with a PANDEMIC as serious as COVID19.
This Article is written by Riddhi Wasu. She is currently pursuing her B.B.A.LL.B.(Hons.) at Raisoni University, School of Law and she is in her second year.
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