• CSR funding for Section 8 companies to do business

Dear Sir

My name is Jinesh Mathew. I am from Kochi, Kerala. I am running an online taxi fleet of 20 cabs under a partnership with my friend Pramod G Krishnan. These 20 cabs are CNG fueled and running exclusively for Uber in Kochi. 

Now we would like to form a section 8 company and do the same business in a bigger scale. As far as a section 8 company is concerned these are the merits we would like to present:-

1. One permanent employment will be generated for every 6 lakh rupees invested. That is one of the best investment to employment generation ratio. 

Investment will also support indirect employment generation in the fields of fuel distribution, car service and other parts sales, hostel, restaurants etc.

2. As CNG is more environmental friendly fuel compared to petrol and diesel that helps city to be less polluted. 

3. It will promote road safety in the city as our drivers are well trained.

4. It will promote women safety as online taxi trips are well documented and drivers trained to be well mannered. 

So my question is whether we will be eligible for CSR funding?
Asked 2 years ago in Business Law

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12 Answers

businesses are allowed to invest all the profits earned by them in fields such as education, gender equality, poverty and hunger as a crucial part of any CSR compliance. 

2) The company usually has a Corporate Social Responsibility Committee of the board and all the funds that are provided under the Corporate Social Responsibility are primarily and solely for the purpose of tackling social development issues and making a positive impact on the living standards of hundreds and thousands of economically poor and disadvantaged people of our society so that they too can live a dignified and productive life. CSR is essentially viewed as a corporate initiative to take responsibility and assess the company’s impact on social welfare and its effects on the environment. It is highly related to the efforts of companies for promoting positive social and environmental change. Social welfare programmes are a part of the provisions of this Act and it includes activities such as social empowerment, employment generation, vocational skills for women and the youth of our country, child welfare and various livelihood enhancement projects for differently-abled people.

 

3) it is doubtful that you would be eligible for CSR funding for taxi business 

Ajay Sethi
Advocate, Mumbai
96969 Answers
7827 Consultations

CSR funding is available to non-profit NGOs. The objects of such NGOs have to be promotion of education, health, water, environment, social empowerment, employment generation, vocation skills for youth and women, child welfare and the differently abled people by the livelihood enhancement projects. How your company is promoting the above objects is not clear. Further such company has to be a non-profit organization.

Ravi Shinde
Advocate, Hyderabad
4195 Answers
42 Consultations

Yes preliminary you are eligible but need to examine other details also

Prashant Nayak
Advocate, Mumbai
32492 Answers
201 Consultations

Dear Client,

Section 135 of the Companies Act 2013 provides the threshold limit for applicability of the CSR to a Company: (a) net worth of the company to be Rs 500 crore or more; or (b) turnover of the company to be Rs 1000 crore or more; or (c) net profit of the company to be Rs 5 crore or more. if your company have these eligibility criteria, the you will be able to get the CSR funding.

Anik Miu
Advocate, Bangalore
10178 Answers
120 Consultations

The Companies Act defines a Section 8 company as one whose objectives is to promote fields of arts, commerce, science, research, education, sports, charity, social welfare, religion, environment protection, or other similar objectives. These companies also apply their profits towards the furtherance of their cause and do not pay any dividend to their members.

Many Indian companies have been contributing to the society through Corporate Social Responsibility (CSR) arms and foundation since their inception, like Tata group, Aditya Birla group, among many others. So, CSR is not an entirely new concept in Indian context. But the Companies Act 2013 has put CSR in the forefront, with a ‘comply or explain’ mandate, for companies that have more than 5 crores INR as net profit for a year.

In India, clause 135 of Companies Act of 2013 governs the CSR, and was passed on 29th of August 2013. NGOs need to understand the applicability of the clause on companies, its details, permitted themes for intervention, etc. 

The act mandates spending of at least 2% of the average net profit in three consecutive years on CSR activities. The themes are also well-defined, along with what will be and what will not be considered expense on CSR

The conditions for an NGO to receive CSR funds from a company only if are as follows: A section 8 company Registered under section 12A and 80G of the Income Tax and have at least 3 years of undertaking charitable activities.

T Kalaiselvan
Advocate, Vellore
87166 Answers
2341 Consultations

First, please do understand that what is Sec.8 Company is and what is CSR funding?

The Companies Act defines a Section 8 company as one whose“objectives is to promote fields of arts, commerce, science, research,  education,  sports, charity, social welfare, religion, environmental protection, or other similar objectives.” These organisations additionally apply their benefits towards the encouragement of their goal and don’t deliver any profit to their individuals.

Section 8 companies contain the accompanying features that most different sorts of organisations don’t have:


  • Charitable Objective: Section 8 companies don’t plan to create profit. Their goals are absolutely beneficent in nature. They plan to further causes like science, culture, research, sports, religion, and so forth

  • No minimum share capital: Section 8 companies, in contrast to other companies, don’t need a recommended minimum paid up share capital.

  • Restricted risk: Members of these companies can have limited liability. Their liabilities can’t be limitless regardless.

  • Government license: Such companies can work provided that they have the Central Government’s licence. The Government can revoke this licence too.

  • Honours: Since these companies have charitable objectives, the Companies Act has agreed a few benefits and exemptions to them.

  • Firms as members: Apart from people and associations of individuals, Section 8 additionally permits firms to be members of these companies.

 

Benefits of Section 8 Company

  • Such companies are exempt from stamp duty registration.
  • A partnership firm can be a member in its capacity.
  • Such companies qualify for tax deduction to the investors of the company u/s 80G of the Income Tax Act.
  • Eligibility for CSR.

Corporate Social Responsibility (CSR) can be simply defined as the grants and funding process under which various Non-profit Organisations (NGOs) can get financial and other assistance from the corporate sector. Corporate Social Responsibility is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders.

Who will receive CSR funds?

The conditions for an NGO to receive CSR funds from a company only if are as follows: A section 8 company Registered under section 12A and 80G of the Income Tax and have at least 3 years of undertaking charitable activities. CSR funds are used for the development of local areas as part of social responsibility for which there is a company's board-driven policy

 

So think about what activity you have provided and how you can receive such funds.

Ajay N S
Advocate, Ernakulam
4095 Answers
113 Consultations

You would not be eligible for CSR funding 

Ajay Sethi
Advocate, Mumbai
96969 Answers
7827 Consultations

Eligibility can be determined by the nature of the entity and the nature of its business. The partnership business is not eligible for CSR funding. As per your data, you are not technically eligible to apply for the CSR 

Ajay N S
Advocate, Ernakulam
4095 Answers
113 Consultations

The motive what you have stated will not make you eligible for CSR funding 

T Kalaiselvan
Advocate, Vellore
87166 Answers
2341 Consultations

Yea you arw

Prashant Nayak
Advocate, Mumbai
32492 Answers
201 Consultations

You are in business to make profits, every business creates employment, all transporters are doing what you propose. You are not eligible for CSR. it is for NON-PROFIT NGOs.

Ravi Shinde
Advocate, Hyderabad
4195 Answers
42 Consultations

Dear Client, 

you will need to check the eligibility criteria for CSR funding. Section 135 of the Companies Act 2013 provides the threshold limit for applicability of the CSR to a Company: (a) net worth of the company to be Rs 500 crore or more; or (b) turnover of the company to be Rs 1000 crore or more; or (c) net profit of the company to be Rs 5 crore or more. if your company have these eligibility criteria, the you will be able to get the CSR funding.

Anik Miu
Advocate, Bangalore
10178 Answers
120 Consultations

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