SPENDING OF CSR FUNDS ON COVID RELATED INFRASTRUCTURE - THE NEED OF THE HOUR

Due to the second wave of deadly Covid-19 gripping the country again, the Ministry of Corporate Affairs, Government of India (“MCA”) in furtherance of General Circular dated March 23, 2020¹ (“Covid Circular 2020”), has clarified that the following activities are eligible to consider as a Corporate Social Responsibility (“CSR”) activity under the Companies Act, 2013 (“Act”):

1. the spending of CSR funds for ‘setting up of makeshift hospitals and temporary covid care facilities’ is an eligible CSR activity under item nos. (i) to (xii) of Schedule VII of the Act relating to promotion of health care, including preventive health care and disaster management respectively;
2. the spending of CSR funds for ‘creating health infrastructure for covid care, establishment of medical oxygen generation and storage plants, manufacturing and supply of oxygen concentrators, ventilators, cylinders, and other medical equipment for countering Covid- 19 or similar such activities are eligible CSR activities under item nos. (i) to (xii) of Schedule VII of the Act relating to promotion of health care, including preventive health care, and disaster management respectively.

The MCA through vide circular titled ‘Clarification on offsetting the excess CSR spent for FY (“Financial Year”) 2019-20’ dated May 20, 2021² has clarified that where a company has contributed any amount to ‘PM CARES Fund’ on March 31, 2020 (the day on which emails was sent to the aforementioned 1000 corporates), which is over and above the minimum amount as prescribed under section 135(5) of the Act for FY 2019-20, and such excess amount or part thereof is set off against the requirement to spend the CSR amount under section 135(5) for FY 2020-21 subject to the compliance of the following conditions:

1. the amount offset as such shall have factored the unspent CSR amount for previous financial years, if any;
2. the chief financial officer shall certify that the contribution to ‘PMCARES Fund’ was indeed made on March 31, 2020 in pursuance of the appeal and the same shall also be so certified by the statutory auditor of the company; and
3. the details of such contribution shall be disclosed separately in the annual report on CSR as well as in the board’s report for FY 2020-21 in terms of section 134 (3) (o) of the Act.