The Ministry of Corporate Affairs (“MCA”) vide General Circular No. 10/2020 dated 23.03.2020 has already clarified that spending CSR funds for COVID-19 related activities shall qualify as CSR expenditure.

It was 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.

Subsequently, vide Office Memorandum dated 28.03.2020, it was also clarified that any contribution made to PM CARES Fund shall qualify as CSR expenditure under the Companies Act, 2013.

Now, in continuation to earlier clarifications, the MCA vide its recent Circular No. 15 of 2020 dated 10.04.2020 has summed up its earlier clarifications and issued a set of FAQs along with clarifications in order to provide better clarity since it was receiving several representation / references from stakeholders.

A gist of clarifications provided by the MCA by its recent Circular dated 10.04.2020 has been set out hereunder for ease of reference:

(i) Contribution made to ‘PM CARES Fund’ shall qualify as CSR expenditure under item no (viii) of Schedule VII of the Companies Act, 2013

(ii) Contribution to Chief Minister’s Relief Fund’ or ‘State Relief Fund for COVID-19 shall not qualify as admissible CSR expenditure

(iii) Contribution made to State Disaster Management Authority to combat COVID-19 shall qualify as CSR expenditure

(iv) Spending CSR funds for COVID-19 related activities shall qualify as CSR expenditure (please refer to items nos. (i) and (xii) of Schedule VII relating to promotion of health care including preventive health care and sanitation, and disaster management can be undertaken)

(v) 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 because

• payment of salary/ wages in normal circumstances is a contractual and statutory obligation of the company; and
• making such payments during the lockdown period is a moral obligation of the employers, as they have no alternative source of employment or livelihood during this period

(vi) Payment of wages to temporary or casual or daily wage workers during the lockdown period shall not count towards CSR expenditure since

• it is part of the moral/ humanitarian/ contractual obligations of the company;
• it is applicable to all companies irrespective of whether they have any legal obligation for CSR contribution under section 135 of the Companies Act 2013

(vii) 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.

(General Circular No. 15 / 2020 dated 10.04.2020)

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