Companies spend 2 per cent of their average net profit of past three years mandated by Companies Act.
New Delhi: Bajaj Group patriarch Rahul Bajaj has asked the government to clarify whether the Indian firms spending two per cent of their profits on corporate social responsibility, as mandated by the new company law, should get tax exemption on it.
Citing the conflicts in the tax laws, the veteran industry leader today said that when the companies spend money on charitable trust or donate to institutions as the Prime Minister Relief Fund, then they get exemptions but CSR spending is taxed.
"Today you spend money on R&D and you get 130 to 150 per cent write off. You give money into the PM Relief Fund, you will get 100 per cent write off. On various thing, you donate you get write off. Will you give it to the same organisation for CSR. You said that you would not get. There is contradiction in terms. It's not clear at all," Bajaj said.
However, he also said: "We do not want any exemption and incentive but there is a clearcut anomaly there." According to Bajaj, who is now involved with few NGOs and charitable organisations as member of the board of trustees and chairman, CSR is also like a philanthropy and "anomaly has to be clarified by the Ministry of Corporate Affairs and the Ministry of Finance".
The Companies Act of 2013 has made it mandatory on the corporates to spend 2 per cent of their average net profit of the past three years on corporate social responsibility-driven activities.
"It is for CII to consider whether they deem fit it to refer the concerned relevant committee to make it to the government and the Ministry of Corporate Affairs and Finance Ministry also," Bajaj said while addressing the annual session of industry body CII here.
According to him, if a company spends on charitable work through CSR, then the end recipient get the amount after tax is paid. "I know people who are associated with outstanding organisation including Nobel Peace Prize winner Kailash Satyarthi, I know how difficult for him to get money," he said.
Thermax Chairperson Meher Pudumjee said that there was a need to think beyond CSR activities involving public private participation. Godrej & Boyce Manufacturing Co CMD Jamshyd N Godrej said that there is no short of cause for spending on social works.
According to Godrej, there is need to think beyond the traditional philanthropy leveraging intellectual, financial and human capital. Infosys co-founder S Gopalakrishnan said more funds (as part of CSR and philanthropy) needs to be channelled into research in various areas.
Kris, as Gopalakrishnan is popularly called, has donated USD 1.8 million to Carnegie Mellon University (CMU) for brain research. He has also committed funding in a brain research centre at the Indian Institute of Science and set up three chairs at the Centre for Computational Brain Research, IIT Madras.