The Ministry of Corporate Affairs (“MCA”) issued a notification dated 26th May, 2020 wherein the phrase “Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (“PM CARES Fund”)” was inserted under Schedule VII item (viii) after the original phrase which stated “Prime Minister’s national relief fund”. The amendment which is deemed to be in force from 28th March, 2020, basically deals with the changes in the Corporate Social Responsibility (hereinafter, CSR) norms under Schedule VII. By including contribution to the aforementioned PM CARES Fund within CSR, the government makes it mandatory in the face of COVID-19 pandemic for companies to make at least some contributions towards the PM Cares Fund. The PM CARES which is the largest Funding under Prime Ministerial Aegis that is used for relief purposes in any kind of distress situation , especially functioning as the central COVID relief fund as of now.
Under section 135 of the Companies Act, 2013, every company having net worth of at least Rs 500 crore, turnover of Rs 1,000 crore or more, or a minimum net profit of Rs 5 crore, during the immediately preceding financial year, has to make CSR expenditure , worth at least two per cent of their three-year annual average. Besides, skillfully maneuvering the CSR Contributions to the COVID-19 purpose, this amendment automatically ensures that such contributions primarily and directly dispensed to fund the local relief initiatives against COVID-19, as Section135(5) of the act states that the companies should give preference to the areas local to where it operates as far as utilizing the CSR Contributions is concerned. Such a move shall directly bridge the gap between the state/non state donators and the needy, and ensure higher accountability.
For the citizens to help, the government also announced that all donations towards the PM-CARES Fund are eligible for 100% tax deduction, under section 80G of the Income Tax Act, 1961. Further, the limit on deduction of 10% of gross income shall also not be applicable for donations made to PM-CARES Fund. In fact, not only PM Cares, but the companies are encouraged to direct their CSR Contributions in a vast range of other COVID-19 welfare activities, and this also expands the options of welfare spending for the Corporate Sectors
The Hon’ble National Company Law Appellate Tribunal,New Delhi, in its recent judgment in Ahluwalia Contracts (India) Limited v. Raheja Developers Limited dated July 23, 2019,