Section 135(1) of the Companies Act 2013, deals with the CSR provisions and constitution of CSR committee.
Modes of spending CSR expenditure:
As per Rule 4(2), Companies can spend on CSR activity through any of the below 3 ways.
1. Eligible Companies coming together to form a Trust, Society, or Section 8 Company for conducting CSR activities. Such Companies need not be subsidiary, associate or holding Companies. Unrelated Companies can also come together for this purpose
2. Companies can take up CSR activities through registered Trusts, registered Society, Section 8 Companies established by Central Govt, State Govt or under an Act of Parliament or a state legislature
3. Through registered Trust, registered Society or a Section 8 Company if below mentioned conditions are met.
Here we would be discussing the rules related to CSR activity done by Companies through Section 8 Companies.
As per Rule 4 of CSR policy rules 2014 a section 8 company is eligible for taking registration under rule 4 of CSR policy rules 2014 for undertaking CSR activities upon fulfilment of the following conditions-
The company established under section 8 of the Companies Act, 2013 with section 12A and section 80G registrations under the Income Tax Act, 1961.
(the above-mentioned section 8 company shall be eligible only when it is established by the company, either singly or along with any other company, OR when it is having an established track record of at least three years in undertaking similar activities)
PROCESS FOR UNDERTAKING CSR ACTIVITY
1. registration with the Central Government by filing the form CSR-1 electronically with the Registrar, w.e.f. 01.04.2021.
2. Form CSR-1 shall be signed and submitted electronically by the entity and shall be verified digitally by a Chartered Accountant in practice or Company Secretary in practice or a Cost Accountant in practice.
3. On the submission of the Form CSR-1 on the portal, a unique CSR Registration Number shall be generated by the system automatically.
REQUIREMENTS FOR FILING OF FORM CSR-1
Following information are required for filing the FORM CSR-1-
1. Is the Company established by any company or group of companies?- a) If Yes provide Name of the Company.
b) If No, whether the entity has an established track record of three years in undertaking similar activities?
Copy of PAN Card of the NGO
2. E-Mail ID
3. Mobile Number
4. Address of the Entity
5. Details of Governing Body Members (Trustees or Member of Societies)
6. Copy of Registration Certificate
7. Digital Signature of (Trustee/CEO/Chairperson/Secretary) with his PAN Number
PROCESS FOR REGISTRATION UNDER SECTION 12A OF INCOME TAX ACT, 1961
The income of an organization is exempted if an NGO has 12-A registration. This is one-time registration and has Lifetime validity.
FILING OF FORM 10-A
The process for applying for 12A registration and form 10A filing has been made online only with the digital signature of the signatory. To obtain 12 A registration, an application in form 10 A for registration of a charitable or religious trust or institution must be made online to the commissioner of income tax along with the following documents-
DOCUMENTS REQUIRED FOR FORM 10-A
1. Self-certified copy of registration with Registrar of Companies.
2. Self-certified copy of the documents evidencing adoption or modification of the objects, if any:
3. Registration Certificate and MOA /Trust Deed (two copies – self attested by NGO head);
4. NOC from Landlord (where registered office is situated);
5. Copy of PAN card of NGO/Trust/Institution.
6. Electricity Bill / House tax Receipt Water Bill (photocopy)
7. Where the trust or institution has been in existence during any year or years prior to the financial year in which the application for registration is made, self-certified copies of the annual accounts of the trust or institution relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made)for which such accounts have been made up:
8. Note on the activities of the trust or institution;
9. Self-certified copy of order of rejection of application for grant of registration under section 12A or section 12AA, as the case may be, if any.
Deemed Registration u/s 12A
As held in the case of CIT vs. Society for The Promotion of Education, Adventure Sport & Conservation of Environment
“Non-disposal of an application for registration before the expiry of six months as provided u/s 12AA (2) results in deemed grant of registration”
PROCESS FOR REGISTRATION UNDER SECTION 80 G OF INCOME TAX ACT,1961
If an organization has obtained certification under section 80-G of Income Tax Act then donors of that NGO can claim exemption from Income Tax.
The prior requirement for getting registration under section 80G is to obtain registration under Section 12A.
ELIGIBILTY The applicant or recipient of the 80G registration must comply with the requirements specified below:
- The application can only be made by a public charitable trust, registered society, recognized educational institution or an institution funded by the Government.
- The trust/institution applying for the certificate must be duly registered under the Societies Registration Act, 1860. or Section 8 of the Companies Act; or any other relevant Acts.
- Applicants of the certificate must not represent any religion based or caste and creeds based activity.
- The respective trust/institution should only utilize the donated funds for charitable purposes.
- The registered trust institution should not hold any income which is not exempted.
- Entity’s pursuing any other businesses are required to maintain a separate account, so that the donations received are not confused with savings of any other kind.
- The applicant should have maintained the appropriate annual returns, accounting and book keeping before applying for the certificate.
- The recipient of the certificate must ensure the timely renewal of certificates, so as to receive the eligible tax benefits.
Process of Obtaining 80G Registration-
FILING OF FORM- 10G
Registration under this section will be processed by the Commissioner of Income Tax after receiving an application from the applicant in Form 10G.
DOCUMENTS TO BE ATTACHED WITH FORM 10 G
1. Registration Certificate
2. MOA /Trust Deed
3. NOC from Landlord (where registered office is situated);
4. Copy of the Pan Card of the Trust/Institution.
5. Copy of electricity bill, house tax receipt, or water bill
6. Proof of welfare activities pursued
7. Progress Report since the foundation of the NGO or for the previous 3 years
8. The statement of accounts and balance sheet since the foundation/previous 3 years
9. List of contributors along with their address and PAN.
10. List of governing body of trustees with their contact details
11. Description of business carrying out by the institution /trust/fund
12. Details of shares, security or other property purchased by or on behalf of the trust from any interested person.
13. Whether any part of the income or any property of the association was used or applied in a manner which results directly or indirectly in conferring any benefit, amenity or perquisite (whether converted into money or not), on any interested person as specified in sub-section (3) of section 13? If so, details thereof.
14. Copy of registration granted under section 12A or copy of notification issued under section 10(23)or section 10(23C)
15. Period of last approval, if any. Please enclose a copy of the approval.
16. If any change in the aims and objects and the rules and regulations have been made since the last approval, the details thereof
Form No. 10G shall be furnished electronically,—
(i) under digital signature, if the return of income is required to be furnished under digital signature; or
(ii) through electronic verification code in a case not covered under clause (i).
CONCLUSION- As stated above Section 8 company has to get itself Pre- registered under Section 12 A and 80 G of income tax act, 1961 in order to get eligible under rule 4 of CSR policy rules 2014 for undertaking CSR activities. Then every registered Trust registered Society or Section 8 Company who wish to conduct activities through CSR funding needs to be registered with MCA through form CSR-1.