MCA Clarifies No COVID-19 CSR Expenditure for Contribution to Chief Minister Relief Fund but Allowed for PM CARES Fund and Other CSR Clarifications

Ministry of Corporate Affairs (MCA) has issued a clarification vide General Circular No. 15/2020 dated 10.04.2020 in which certain clarifications were given related to the admissibility of expenditure in certain cases related to COVID-19 as Corporate Social Responsibility (CSR) expenditure of the companies. MCA has clarified that contribution to PM CARES FUND qualifies as CSR expenditure whereas contribution to Chief Minister Relief Fund does not qualify as CSR expenditure.

The Ministry of Corporate Affairs (MCA) has been receiving several references/representations from various stakeholders seeking clarifications on the eligibility of CSR expenditure related to COVID-19 activities. In this regard, a set of Frequently Asked Questions (FAQs) along with clarifications are provided below for a better understanding of the stakeholders.

The clarifications have been issued in the form of 7 FAQs.

It clarifies that the contribution to PM CARES FUND shall qualify as admissible CSR expenditure which corroborates with a clarification issued by the MCA on 28.03.2020 and General Circular No. 10/2020 dated 23.03.2020. In those circulars, it was expressly stated that PM CARES FUND has been set up to provide relief to those affected by any kind of emergency and distress situation and hence any contribution made to the PM CARES FUND shall qualify as CSR expenditure under the Companies Act, 2013.

In the Circular dated 23.03.2020, it was stated that any expenditure incurred for various activities related to COVID-19 under items (i) and (xii) of Schedule VII relating to promotion of health care including preventive health care and sanitation and disaster management shall qualify as CSR expenditure of the companies under the Companies Act, 2013.

Reference was also given to General Circular No. 21/2014 dated 18.06.2014 issued by MCA itself in which it was stated that items in Schedule VII are broad-based and may be interpreted liberally for this purpose.

In this backdrop, it is surprising to note that the Ministry of Corporate Affairs (MCA) has now clarified that donation to Chief Minister Relief Fund is not eligible as CSR expenditure. This is contrary to what stated in General Circular No. 10/2020 dated 23.03.2020.

Presently, the country is fighting with combatting the COVID-19 pandemic in the country. Not only the Central Government but also the State Governments are fighting the coronavirus battle. Under the circumstances, State Governments are also in the need of collection of funds. Corporates are one of the biggest donors to any fund. Many State Governments have announced or constituted a separate dedicated earmarked fund though under the umbrella of the Chief Minister Relief Fund which will be wholly and exclusively used for COVID-19 disaster. The notable fund is West Bengal State Emergency Relief Fund (WBSERF) which is constituted under the umbrella of Chief Minister Relief Fund. The State Government has also announced that this is a temporary fund which will be used for COVID-19 emergency.

MCA has clarified the non-admissibility of contribution to Chief Minister Relief Fund as CSR expenditure only because Chief Minister Relief Fund is not listed in Schedule VII of the Companies Act, 2013.

The Circular says," 'Chief Minister’s Relief Fund’ or ‘State Relief Fund for COVID-19’ is not included in Schedule VII of the Companies Act, 2013 and therefore any contribution to such funds shall not qualify as admissible CSR expenditure."

Read also on: Donation to PM CARES FUND and CM Relief Fund qualifies for CSR Expenditure amid COVID-19

In this context, it should be noted that even the PM CARES FUND is not listed in the Schedule VII of the Companies Act, 2013 but a contribution to PM CARES FUND is allowed to be eligible CSR Expenditure.

Only the Prime Minister’s National Relief Fund (PMNRF) is mentioned in Schedule VII of the Companies Act, 2013.

In my opinion, clarification solely based on the items covered in Schedule VII is wrong and misleading. The spirit of the Circulars of 2014 and 23.03.2020 should also be taken into account. At this time when every state is fighting with COVID-19, such a clarification will definitely hamper the State Government's efforts to collect funds from corporates unless the corporates otherwise donate voluntarily. In the present circumstances, contribution to Chief Minister Relief Fund unequivocally falls under the guidelines specified in General Circular 10/2020 issued on 23.03.2020.

MCA needs to reconsider this clarification.

At the time of writing this article, there are some media reports that some states approached MCA to rework clarification on donations to CM relief funds under CSR.

Read the full text of the FAQs.

MCA’s Frequently Asked Questions on the eligibility of CSR expenditure related to COVID-19 activities

General Circular No. 15 /2020

F. No. CSR-01/4/2020-CSR-MCA

Government of India

Ministry of Corporate Affairs

10th April, 2020

COVID-19 related Frequently Asked Questions (FAQs) on Corporate Social Responsibility (CSR)

The Ministry of Corporate Affairs (MCA) has been receiving several references/ representations from various stakeholders seeking clarifications on eligibility of CSR expenditure related to COVID-19 activities. In this regard, a set of Frequently Asked Questions (FAQs) along with clarifications are provided below for better understanding of the stakeholders.

S. No.	Frequently Asked Questions (FAQs)	Reply
1.	Whether contribution made to ‘PM CARES Fund’ shall qualify as CSR expenditure?	Contribution made to ‘PM CARES Fund’ shall qualify as CSR expenditure under item no (viii) of Schedule VII of the Companies Act, 2013 and it has been further clarified vide Office memorandum F. No. CSR-05/1/2020-CSR-MCA dated 28th March, 2020.
2.	Whether contribution made to ‘Chief Minister’s Relief Funds’ or ‘State Relief Fund for COVID-19’ shall qualify as CSR expenditure?	Chief Minister’s Relief Fund’ or ‘State Relief Fund for COVID-19’ is not included in Schedule VII of the Companies Act, 2013 and therefore any contribution to such funds shall not qualify as admissible CSR expenditure.
3.	Whether contribution made to State Disaster Management Authority shall qualify as CSR expenditure?	Contribution made to State Disaster Management Authority to combat COVID-19 shall qualify as CSR expenditure under item no (xii) of Schedule VII of the 2013 and clarified vide general circular No. 10/2020 dated 23rd March, 2020.
4.	Whether spending of CSR funds for COVID-19 related activities shall qualify as CSR expenditure?	Ministry vide general circular No. 10/2020 dated 23rd March, 2020 has clarified that spending CSR funds for COVID-19 related activities shall qualify as CSR expenditure. It is further clarified that funds may be spent for various activities related to COVID-19 under items nos. (i) and (xii) of Schedule VII relating to promotion of health care including preventive health care and sanitation, and disaster management. Further, as per general circular No. 21/2014 dated 18.06.2014, items in Schedule VII are broad based and may be interpreted liberally for this purpose.
5.	Whether payment of salary/wages to employees and workers, including contract labour, during the lockdown period can be adjusted against the CSR expenditure of the companies?	Payment of salary/ wages in normal circumstances is a contractual and statutory obligation of the company. Similarly, payment of salary/ wages to employees and workers even during the lockdown period is a moral obligation of the employers, as they have no alternative source of employment or livelihood during this period. Thus, payment of salary/ wages to employees and workers during the lockdown period (including imposition of other social distancing requirements) shall not qualify as admissible CSR expenditure.
6.	Whether payment of wages made to casual /daily wage workers during the lockdown period can be adjusted against the CSR expenditure of the companies?	Payment of wages to temporary or casual or daily wage workers during the lockdown period is part of the moral/ humanitarian/ contractual obligations of the company and is applicable to all companies irrespective of whether they have any legal obligation for CSR contribution under section 135 of the Companies Act 2013. Hence, payment of wages to temporary or casual or daily wage workers during the lockdown period shall not count towards CSR expenditure.
7.	Whether payment of ex-gratia to temporary /casual /daily wage workers shall qualify as CSR expenditure?	If any ex-gratia payment is made to temporary / casual workers/ daily wage workers over and above the disbursement of wages, specifically for the purpose of fighting COVID 19, the same shall be admissible towards CSR expenditure as a onetime exception provided there is an explicit declaration to that effect by the Board of the company, which is duly certified by the statutory auditor.