Presentation of CSR Expenditure By a Corporation Should Not Be Through P&L Appropriation A/c
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- Last Updated on 20 January, 2024
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A corporation satisfies the criteria of eligibility for Corporate Social Responsibility and Sustainability Development expenditure (CSR expenditure) given in the Department of Public Enterprises (DPE) Guidelines The management of the corporation has appropriated CSR expenditure out of profits through the Profit and Loss Appropriation Account. The contention of management for appropriating CSR expenditure from the Profit and Loss Appropriation Account is based on the following points-
(a) CSR spending is not an expenditure related to business and hence not to be considered in arriving at the profits of the entity.
(b) CSR expenditure is not considered as allowable expenses for computation of profit under the Income Tax Act.
(c) CSR spending is co-related with the net profits and not to be considered as part of Profit and Loss Account.
(d) CSR spending is not a part of Profit and Loss Account but it is appropriation out of the net profits arrived at in Profit and Loss Account.
However, auditor believes that profit and loss appropriation account is prepared for allocation and distribution of net profit among partners, reserves and dividends and not for CSR expenditure.
Thus, the management has approached the Expert Advisory Committee (EAC) for its opinion on correct presentation of CSR spending.
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