Audit of items of Cost : Section -148.

• The Central Government may direct
• Companies engaged in the production of such goods or
• Providing such services
• maintain  particulars relating to the cost records in the books of account kept by such companies.
• Cost records shall comprise particulars relating to utilization of material or labour or other items of cost and maintained in form CRA-1.
• Central Government shall  before issuing such direction consult the regulatory body.

 

Applicability of Cost Record: Section -148.

Mandatory Cost Records

The Class of companies Including Foreign Companies

• engaged in production of specified goods and
• having an overall turnover of Rs. 35 cr. or more during preceding Financial year
• shall be required to include cost records in their books of account.

Classes of Companies as specified are

• Regulated Sectors
• Non-regulated sectors

 

Regulated Sectors –Comprehensively revised now

• Telecommunication regulated by the Telecom Regulatory Authority of India under the Telecom Regulatory
• Generation, transmission, distribution and supply of electricity regulated by the relevant regulatory body or authority under the Electricity Act, 2003 (36 of 2003)
• Petroleum products under the Petroleum and Natural Gas Regulatory Board Act, 2006
• Drugs and pharmaceuticals
• Fertilizers
• Sugar and industrial alcohol

 

Non-regulated Sectors- List newly notified

33 items are provided under Non –Regulated Sector including:

• Machinery and mechanical appliances used in defence, space and atomic energy sectors.
• Turbo jets and turbo propellers;
• Arms, ammunitions and Explosives;
• Propellant powders; prepared explosives.
• Radar apparatus, radio navigational aid apparatus and radio remote control apparatus.
• Tanks and other armoured fighting vehicles
• Port services of stevedoring, pilotage, hauling, mooring, re-mooring, hooking, measuring, loading and unloading services rendered by a Port.
• Aeronautical services of air traffic management etc.                                               …………………………many more

Applicability of Cost Audit : Section -148.

Insertion of rules through section 206C (1E) by MoF

The Ministry of Finance (Department of Revenue)  by Notification 75/2016  dated 19th August, 2016 inserted the following rules through section 206C (1E) :-

“Class or classes of buyers to whom provisions of sub-section (1D) of section 206C shall not apply.

37CB. (1) The provisions of sub- section (1D) of section 206C in relation to sale of any goods (other than bullion or jewellery) or providing any service shall not apply to the following class or classes of buyers , namely:—

(i) Government;

(ii) embassies, Consulates, High Commissions, Legation or Commission and   traderepresentation, of a foreign State;

(iii) Institutions notified under United Nations (Privileges and Immunities) Act, 1947”.

Analysis of the above provision:-

1. This provision specify the class or classes of buyers on whom the provisions of sec 206C (1D) which deals with TCS on cash sales of goods & services, shall not apply.

2. This provision shallapply to sale of any goods (except bullion or jewellery) and providing of any services.

3. This section exempts only the following class or classes of buyers from paying TCS on cash purchase of any goods (other than bullion or jewellery) or receiving any service exceeding Rs 2 lakh -

a. Government;

b. Embassies, Consulates, High Commissions, Legation or Commission and   trade representation, of a foreign State;

c. Institutions notified under United Nations (Privileges and Immunities) Act, 1947”.

4. Thus the provisions of this section applies to every buyer other than those mentioned in relation to purchase of any goods (other than bullion or jewellery) or receiver of any service exceeding Rs 2 lakh.

Corporate Social Responsibility

‘Earth provides enough to satisfy every man's need, but not every man's greed.’  – Mahatma Gandhi

Corporate Social Responsibility :Section -135

Every company having

• Net worth   -  Rs. 500 crore or more, or
• Turnover   -  Rs. 1000 crore or more or
• Net profit   -  Rs. 5 crore or more

During any FY shall

• constitute a CSR Committee having 3* or more directors( 1 should be independent director, if applicable).
• 2% of average net profits of the preceding 3 financial Years to be spent on CSR activities.
• Disclosure of policy to shareholders
• Give reasons on failure of implementation , if any in the Board Report.

 CSR Committee The CSR Committee shall

• Formulate and recommend to the Board, Corporate Social Responsibility Policy.
• The Policy shall indicate the activities to be undertaken by the company as specified in Schedule VII
• Recommend the amount of expenditure to be incurred on the activities
• Monitor the Corporate Social Responsibility Policy of the company from time to time

* In case of Private Company having only 2 Directors. The requirement of Independent Director or 3 Directors in the Committee is not required.

 

CSR Activities

• Only such CSR activities will be taken into consideration as are under taken with in India.
• Companies may build CSR capacities of their own personnel as well as those of their Implementing agencies through Institutions
• with established track records of at least three financial years
• expenditure on administrative overheads shall not exceed five percent of total CSR expenditure of the company in one financial year.
• Should not benefit only employees & their family
• Contribution to Political Party not considered.

 

Companies (Corporate Social Responsibility Policy) Amendment Rules, 2016.

Activities can be undertaken by  the Company either singly or along with any other company:

• By itself or
• Through Company established under section 8* of the Act or
• a registered trust* or
• a registered society* 

Established by the company or

The Central Government or State Government or any entity established under an Act of Parliament or a State legislature 

 

*The other Entity should have established track records in similar programs or projects for 3 years and  should have

• specified project.
• the modalities of utilisation of funds of such projects and
• the monitoring and reporting mechanism 

*if not promoted by the company

REPORTING OF CSR

The Board of Directors after taking into account the recommendation of CSR Committee shall :

• Approve the CSR Policy for the Company
• Disclose content of such policy in its report
• Be displayed on the website of the company

Corporate Social Responsibility

• The Company to give preference to local area and areas around where it operates, for spending the amount earmarked for CSR activities
• The Company shall publish the details of their CSR initiatives undertaken in the Directors’ Report and in the company’s website.
• CSR policy to specify that surplus arising out of CSR projects shall not form part of business profit of a company.
• Net profit shall not include such sums as are prescribed and calculated as per s. 198.
• Not required to maintain CSR committee if conditions not satisfied for 3 consecutive years
• CSR Expense would include payments for corpus of NGO

Corporate Social Responsibility : Schedule - VII.

• Eradicating hunger, poverty and malnutrition, promoting health care including preventive health care and sanitation including contribution to the Swatch Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water;
• Promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly, & differently abled & livelihood enhancements projects;
• Promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups; 
• Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agro forestry, conservation of natural resources and maintaining quality of soil, air and water including contribution to the Clean Ganga Fund setup by the Central Government for rejuvenation of river Ganga; 
• Protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional arts and handicrafts;
• Measures for the benefit of armed forces veterans, war widows and their dependents;
• Training to promote rural sports, nationally recognized sports, para Olympic sports and Olympic sports.
• Contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Castes, the
• Scheduled Tribes , other backward classes, minorities and women;
• Contributions or funds provided to technology incubators located   within academic institutions which are approved by the Central   Government;
• Rural development projects.
• Slum area development.

Corporate Social Responsibility :Section -135.

Clarification dated 16th May, 2016:

• While Undertaking CSR activities
• Companies should not contravene any other prevailing laws of the land  including Cigarettes and other  Tobacco Products Act( COTPA),2003