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Utilisation of Corporate Social Responsibility Funds: A Legal Guide
Corporate Social Responsibility (CSR) has evolved from a voluntary corporate ethic to a statutory mandate in India. Under Section 135 of the Companies Act, 2013, eligible companies must spend a portion of their profits on specified social welfare activities. But how can these funds be utilised effectively and legally? This blog delves into the utilisation of Corporate Social Responsibility funds, drawing from key judicial precedents and statutory provisions to provide clarity for businesses, NGOs, and stakeholders.
Understanding permissible uses, court-directed applications, and compliance pitfalls is crucial to avoid penalties and maximise impact. We'll explore real-world examples from Indian courts, ensuring your CSR initiatives align with the law.
Legal Framework for CSR Funds
The Companies Act, 2013 introduced mandatory CSR spending for companies meeting specific financial thresholds: net worth of ₹500 crore, turnover of ₹1,000 crore, or net profit of ₹5 crore in the preceding fiscal year. These companies must constitute a CSR Committee and spend at least 2% of average net profits over three years on scheduled activities listed in Schedule VII.
Rule 4 of the Companies (CSR Policy) Rules, 2014 outlines modalities, including unspent amounts transfer to specified funds or ongoing projects. Adani Vizhinjam Port Pvt. Ltd. VS Nagaroor Grama Panchayat, Represented by its Secretary - 2023 Supreme(Ker) 423 Courts have emphasised that CSR is not discretionary; it's a beneficial provision promoting public welfare. Brabourne Commerce Private Limited VS State of West Bengal - 2024 Supreme(Cal) 532
Key activities include eradicating hunger, promoting education, gender equality, environmental sustainability, rural development, and disaster management. Funds must be utilised transparently, with annual reporting under Section 134(3)(o).
Permissible Utilisations: Insights from Court Cases
Courts have guided CSR fund utilisation across sectors, often directing companies to support public projects. Here's a breakdown:
Infrastructure and Public Projects
CSR funds are frequently utilised for infrastructure like roads, bridges, and public facilities. In a Jharkhand High Court case, the court directed Navayuga Engineering Company Limited to construct a Q-Complex at Deoghar for pilgrimage accommodation using CSR funds, stressing State oversight for quality. DR NISHIKANT DUBEY vs UNION OF INDIA THROUGH SECRETARY MINISTRY OF TOURISM - 2023 Supreme(Online)(JHK) 9915 Nishikant Dubey, S/o. Shri Rahey Shyam Dubey VS Union of India through Secretary, Ministry of Tourism - 2023 Supreme(Jhk) 939
Similarly, for road repairs damaged by mining, courts permitted CSR utilisation for permanent solutions, analysing statutory obligations. Steel Authority of India Limited (SAIL) vs The State of Jharkhand through its Chief Secretary, Government of Jharkhand & Ors. - 2025 Supreme(Online)(Jhk) 2363
- Key takeaway: CSR can fund public infrastructure if aligned with Schedule VII, but requires government approvals. DR NISHIKANT DUBEY vs UNION OF INDIA THROUGH SECRETARY MINISTRY OF TOURISM - 2023 Supreme(Online)(JHK) 9915
Environmental Conservation and Water Management
Environmental protection is a priority. The Rajasthan High Court mandated a Rajasthan CSR framework to engage companies in plantation and water conservation, directing the State to ensure compliance. Suo Motu vs State Of Raj - 2019 Supreme(Online)(RAJ) 11
In river silt removal cases, courts linked CSR to water body restoration. Suo Motu vs State Of Raj - 2019 Supreme(Online)(RAJ) 11
Education, Child Welfare, and Health
Article 21A (right to education) intersects with CSR. Funds support free education for girls and child rehabilitation. Tribunals allowed Section 80G deductions for CSR spends on education if conditions met. GALLAGHER INSURANCE BROKERS PRIVATE LIMITED MUMBAI vs THE PRINCIPAL COMMISSIONER OF INCOME TAX-3 MUMBAI - 2025 Supreme(Online)(ITAT) 3921 Assessee vs Principal Commissioner of Income Tax-3, Ahmedabad - 2024 Supreme(Online)(ITAT) 1128
The Juvenile Justice Fund accepts CSR contributions for child welfare, as per Section 83 of the Juvenile Justice Act, 2015. Courts directed deposits for rehabilitation. Sabir Khan vs State Of Rajasthan - 2025 Supreme(Online)(Raj) 14418
- Donations to approved funds qualify for tax benefits.
- CSR for health initiatives, like under NITI Aayog oversight. UTIMACO TECHNOLOGIES PVT LTD. VS. UNION OF INDIA & ORS. - 2026 Supreme(Online)(Del) 833
Tax Implications and Deductions
CSR expenditure isn't automatically deductible under Section 37(1) of the Income Tax Act but may qualify under Section 80G if donated to eligible entities. Tribunals quashed revisions allowing such deductions when conditions satisfied. GALLAGHER INSURANCE BROKERS PRIVATE LIMITED MUMBAI vs THE PRINCIPAL COMMISSIONER OF INCOME TAX-3 MUMBAI - 2025 Supreme(Online)(ITAT) 3921 Assessee vs Principal Commissioner of Income Tax-3, Ahmedabad - 2024 Supreme(Online)(ITAT) 1128
Disallowances under Section 14A were deleted if no nexus to exempt income. CSR booked as 'other expenses' was upheld. Principal Commissioner of Income Tax VS Security Printing And Mining Corporation of India Ltd. - 2023 Supreme(Del) 5981 However, using amalgamation reserves to evade CSR post-merger is impermissible. Brabourne Commerce Private Limited VS State of West Bengal - 2024 Supreme(Cal) 532
Court Interventions: Mandamus and Directions
Courts issue directions under Article 32/226 for CSR utilisation in public interest:
- No blanket mandamus for exclusive funding to one entity, but liberty to apply. Divyang Samaj Kalyan Samiti’ having its office at village Chateniyabag, P. O. - Saram, P. S. -Gomia, District- Bokaro through its Secretary Mahboob Ansari VS State of Jharkhand through its Chief Secretary, Government of Jharkhand, Ranchi - 2023 Supreme(Jhk) 344
- Directions to companies like PPGCL to use CSR for specific expenses. PUSHPENDER VS - 2024 Supreme(Online)(NGT) 2904 PUSHPENDER VS - 2024 Supreme(Online)(NGT) 2407
- NCLT on oppression: CSR Committee must be properly constituted; misuse constitutes mismanagement. Mr. T.P. Anilkumar vs M/s Indus Motor Company Private Limited - 2025 Supreme(Online)(NCLT) 5032
In quarrying licenses, conditions restraining legal proceedings via CSR were struck down as arbitrary, violating Section 28, Indian Contract Act. Adani Vizhinjam Port Pvt. Ltd. VS Nagaroor Grama Panchayat, Represented by its Secretary - 2023 Supreme(Ker) 423
Unspent funds: Transfer to Unspent CSR Account or penalties up to ₹2 crore. Rockwool (India) Limited vs Government of Andhra Pradesh - 2025 Supreme(Online)(Tel) 68522
Challenges and Best Practices
Common pitfalls:
- Misclassification: Treating public issues as private placements. (Though not direct CSR, analogous in Sahara case SAHARA INDIA REAL ESTATE CORPORATION LIMITED VS SECURITIES AND EXCHANGE BOARD OF INDIA - 2012 6 Supreme 400)
- Non-compliance: Failure leads to trials under Sections 134/135. Brabourne Commerce Private Limited VS State of West Bengal - 2024 Supreme(Cal) 532
- Delayed spending: Courts push for timely utilisation.
Best practices:
1. Form CSR Committee with independent directors.
2. Align projects with Schedule VII; ongoing projects allowed carry-forward.
3. Impact assessment for spends over ₹10 crore (Rule 8).
4. Transparent reporting; leverage for tax benefits where applicable.
5. Partner with government/NGOs for larger impact.
Key Takeaways
- Utilisation of Corporate Social Responsibility funds must prioritise Schedule VII activities like education, health, and environment.
- Courts actively direct CSR for public good, e.g., infrastructure DR NISHIKANT DUBEY vs UNION OF INDIA THROUGH SECRETARY MINISTRY OF TOURISM - 2023 Supreme(Online)(JHK) 9915, roads Steel Authority of India Limited (SAIL) vs The State of Jharkhand through its Chief Secretary, Government of Jharkhand & Ors. - 2025 Supreme(Online)(Jhk) 2363, child funds Sabir Khan vs State Of Rajasthan - 2025 Supreme(Online)(Raj) 14418.
- Tax deductions possible under 80G; scrutiny for 14A disallowances. GALLAGHER INSURANCE BROKERS PRIVATE LIMITED MUMBAI vs THE PRINCIPAL COMMISSIONER OF INCOME TAX-3 MUMBAI - 2025 Supreme(Online)(ITAT) 3921
- Ensure compliance to avoid penalties; CSR enhances corporate image and fulfills constitutional goals like Article 21 (right to life). Brij Mohan Lal VS Union of India - 2012 Supreme(SC) 308
In summary, strategic utilisation maximises social impact while meeting legal obligations. Companies should view CSR as trusteeship of public money. DR NISHIKANT DUBEY vs UNION OF INDIA THROUGH SECRETARY MINISTRY OF TOURISM - 2023 Supreme(Online)(JHK) 9915
Disclaimer: This post provides general information based on judicial precedents and statutes. Legal situations vary; consult a qualified lawyer for advice tailored to your circumstances. Not legal advice.
Search Results for "Utilisation of CSR Funds: Legal Insights"
1979 0 Supreme(SC) 300 • India - Supreme Court
P.N.BHAGWATI, R.S.PATHAK, V.D.TULZAPURKAR
These resources are available for utilisation by private corporations and individuals by way of lease or licence. ... the laissez faire is an outmoded concept and Herbert Spencer's social statics has no place. ... a second class restaurant and two snack bars at the International Airport at Bombay was issued by the 1st respondent which is a corporate
1975 0 Supreme(SC) 79 • India - Supreme Court
A.ALAGIRISWAMI, A.C.GUPTA, A.N.RAY, K.K.MATHEW, Y.V.CHANDRACHUD
Its responsibility generally is to Government. ... ... ** see "Corporate Power. ... The Industrial Finance Corporation is a body corporate.
1985 0 Supreme(SC) 393 • India - Supreme Court
E.S.VENKATARAMIAH, O.CHHINNAPPA REDDY, R.B.MISRA, V.BALAKRISHNA ERADI, V.KHALID
expressed the view that a Corporation, which is engaged in the production of a commodity vitally essential to the community has a social ... taking steps, from time to time, to regulate, to conserve and improve the foreign exchange resources of the country and the proper utilisation ... the import and export of currency and bullion, for the conservation of foreign exchange resources of the country and the proper utilisation
2005 1 Supreme 886 • India - Supreme Court
H.K.SEMA, N.S.HEGDE, S.N.VARIAVA, B.P.SINGH
... It may be that the judgments in Agar, to use the words of Gowans J in Carlton Cricket and Football Social ... A body may be autonomous but with autonomy comes responsibility. ... ... Such responsibility on its part makes it a State actor.
2008 3 Supreme 331 • India - Supreme Court
DALVEER BHANDARI, R.V.RAVEENDRAN, K.G.BALAKRISHNAN, ARIJIT PASAYAT, C.K.THAKKER
Constitution of India – Article 15(5) – Validity – Article 15(5) expressly precludes the application ... Today, the sense that government has affirmative responsibility for elimination of inequalities, social, economic or otherwise, is ... Education is primarily the responsibility of the State Governments. ... In addition to the various incentives by the Government, many a corporate houses and community have also come forward to motivate
2023 0 Supreme(Ker) 423 • India - Kerala
N. NAGARESH
Kerala Panchayat Raj Act, 1994 - Section 232, 233, 191 - Companies Act, 2013 - Section 135 (1), (5), 469 - Companies (Corporate ... Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents of such ... financial years,] shall be inserted;] in pursuance of its Corporate Social Responsibility Policy: Provided ... towards the Corporate #....
2023 Supreme(Online)(JHK) 9915 • India - High Court of Jharkhand
SRI SANJAYA KUMAR MISHRA, CJ, SRI ANANDA SEN, J
(Paras 1-9) ... ... (B) Corporate Social Responsibility - Concept of trusteeship of public money ... Social Responsibility invoked for funding the project by Navayuga Engineering Company Limited - State's approval required for quality ... - Companies have a social responsibility towards citizens - State benefits from CSR initiatives, especially for public projects. ... This increased the social accountability and....
2025 Supreme(Online)(Jhk) 2363 • India - High Court of Jharkhand
Sujit Narayan Prasad, Arun Kumar Rai, JJ
The court analyzed the statutory obligations regarding road maintenance under the Corporate Social Responsibility framework. ... The court found that a permanent solution must be pursued, allowing the use of CSR funds. ... The main question addressed was whether the petitioner could utilize CSR funds for road repairs. ... Social Responsibility (CSR) or other solution said to be permanent in nature....
2023 0 Supreme(Jhk) 939 • India - Jharkhand
SANJAYA KUMAR MISHRA, ANANDA SEN
Cyrus Investments (P) Ltd. to emphasize the concept of corporate social responsibility and the role of companies in social development ... Final Decision: The court allowed the writ application and directed the respondent Nos. 2, 3, and 4 to allow ... This increased the social accountability and social responsibility of corporate entities. ... The Corporate Social Responsibility....
2024 0 Supreme(Cal) 532 • India - Calcutta
SHAMPA DUTT (PAUL)
Social Responsibility (CSR) provisions. ... Companies Act - Corporate Social Responsibility - Section 135, Section 134(3)(o) Fact of the Case: The petitioners ... Ratio Decidendi: The company's continued use of amalgamation reserves to avoid CSR responsibility after the year of amalgamation ... Section 135 – Corporate Social responsibility is a beneficial provision under the Ac....
2023 0 Supreme(Ker) 423 • India - Kerala
N. NAGARESH
The Corporate Social Responsibility Committee shall,— (a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company in areas or subject, specified in Schedule VII; ... Social Responsibility Policy: Provided that the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate#HL....
2024 0 Supreme(Cal) 532 • India - Calcutta
SHAMPA DUTT (PAUL)
Social Responsibility Committee nor incurred any expenditure on “Corporate Social Responsibility Activities”. ... Social Responsibility committee, nor incurred any expenditure with regard to Corporate Society Responsibility Activities”. ... Section 135 – Corporate Social responsibility is a beneficial provision under the Act:– Corporate social ....
2026 Supreme(Online)(Del) 833 • India - IN THE HIGH COURT OF DELHI AT NEW DELHI
Paul, Member (Health), Niti Aayog, Government of India; c) An officer at the level of Joint Secretary, MoCA, Government of India [who is in charge of overseeing implementation of the Companies (Corporate Social Responsibility Policy) Rules, 2014], to be nominated ... c) An officer at the level of Joint Secretary, MoCA, Government of India [who is in charge of overseeing implementation of the Companies (Corporate Social Responsibility Policy) Rules, 2014], to be nominated by the Secret....
2025 Supreme(Online)(Raj) 14418 • India - High Court of Rajasthan (Jodhpur Bench)
Manoj Kumar Garg, Ravi Chirania, JJ
Sub rule (3) of the Rules provides that the Juvenile Justice Fund may receive donations, voluntary contributions, subscriptions or funds under Corporate Social responsibility, whether or not for any specific purpose and shall be directed credited to Juvenile Justice Fund. ... A copy of this order be sent to Nodal Officer, Juvenile Justice Committee, who shall keep the data with regard to the deposits made in the Juvenile Justice Fund under the directions of this Court, for appropriate utilisation of #....
2025 Supreme(Online)(Tel) 68522 • India - IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
THE HONOURABLE SRI JUSTICE K. SARATH
Social Responsibility Policy: xxxxxxxx (6) Any amount remaining unspent under sub-section (5), pursuant to any ongoing project, fulfilling such conditions as may be prescribed, undertaken by a company in pursuance of its Corporate Social Responsibility Policy, shall ... Social Responsibility Account, as the case may be, or two lakh rupees, whichever is less.” ... Learned counsel for the petitioner submits that the petitioner filed the present Writ Petition seeking to....
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