CA IPCC Amendments for Nov 2015 I May 2015- Explanation to section 37- Part 10

TL;DR

Section 37 of the company's act discusses disallowing CSR expenses under expenses deductions.

Transcript

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Key Insights

• ❓ Section 37 of the Companies Act disallows companies from deducting CSR expenses.
• 🪐 Criteria such as net worth, turnover, and net profit determine a company's obligation to spend on CSR activities.
• ❓ CSR expenses are not considered as deductions in the financial statements under Section 37.
• ❓ Donation to relief funds is disallowed as CSR expenses under Section 37.
• ❓ Companies must fulfill specific conditions to deduct CSR expenses under Section 37.
• 👻 Amendment in Section 37b allows deduction for CSR expenses related to specified sections.
• ❓ Journal reduction is applied to disallow certain expenses, including CSR expenditures.

Questions & Answers

Q: What does Section 37 of the Companies Act relate to?

Section 37 of the Companies Act outlines the disallowance of Corporate Social Responsibility expenses as deductions for companies in their financial statements.

Q: How are companies mandated to spend on CSR activities?

Companies are mandated to spend on CSR activities based on specific criteria such as net worth, turnover, and net profit levels, as stipulated in Section 37.

Q: Why are CSR expenses not allowed as deductions under Section 37?

CSR expenses are not allowed as deductions under Section 37 to ensure that companies fulfill their social responsibility obligations without tax benefits.

Q: How do companies decide on their CSR expenditure under Section 37?

Companies determine their CSR expenditure based on specific criteria, such as net worth, turnover, and net profit levels, to meet the obligation set forth by Section 37.

Summary & Key Takeaways

• Section 37 of the Companies Act prohibits companies from deducting Corporate Social Responsibility (CSR) expenses from their taxable income.

• CSR expenses incurred by companies will not be considered as expenditure under Section 37.

• The net worth, turnover, and net profit criteria determine if a company is obligated to spend on CSR activities.