CORPORATE SOCIAL RESPONSIBILITY IN INDIA

[Mr. M. GOVINDARAJAN]

Introduction

The concept of corporate social responsibility (CSR) has a long history associated with how it impacts on organizations' behavior.  In the 1950s the primary focus was on businesses' responsibilities to society and also for doing good deeds for the society at large. In the 1960s the key events, people and ideas were instrumental in characterizing the social changes made during this ten years of period. In the 1970s, the next decade, the business managers applied the traditional management functions when dealing with CSR issues. In the 1980s, business and social interest came closer and firms became more responsive to their stakeholders. In the 1990s the concept of CSR became almost universally approved.   In the 2000s, CSR became definitively an important strategic issue.

CSR in India

The importance of inclusive growth is widely recognized as an essential part of India's quest for development.   CSR was conceived as an instrument for integrating social, environmental and human development concerns in the entire value chain of corporate business. Ministry of Corporate Affairs had issued 'Voluntary Guidelines on Corporate Social Responsibility, 2009' as a first step towards mainstreaming the concept of Business Responsibilities. This was further refined subsequently, as 'National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business, 2011'.

The National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business, 2011’ is a set of nine principles offering Indian businesses an understanding and approach to include responsible business conduct.   The said principles are as follows-

(i) to  conduct and govern themselves with ethics, transparency and accountability;

(ii) to provide goods and services that are safe and that contribute to sustainability throughout their life cycle;

(iii) to promote the well-being of all employees;

(iv) to respect the interests of, and be responsive towards all stakeholders, especially those who are disadvantaged, vulnerable and marginalized;

(v) to respect and promote human rights;

(vi) to protect and make efforts to restore the environment;

(vii) when engaged in influencing public and regulatory policy, they should do so in a responsible manner;

 (viii) to support inclusive growth and equitable development;

(ix) to engage with and provide value to their customers and consumers in a responsible manner.

Companies Act, 2013

The principle (viii) of the voluntary guidelines on 'inclusive growth and equitable development' focuses on encouraging business action on national development priorities, including community development initiatives and strategic CSR based on the shared value concept. This said principle was subsequently translated into a mandatory provision of Corporate Social Responsibility (CSR) in Section 135 of the Companies Act 2013.  .   The Companies (Corporate Social Responsibility Policy) Rules, 2014 was framed for the purpose of section 135which has been amended from time to time.

High level committee

The Government constituted a High Level Committee on 03.02.2015 to suggest measures for improved monitoring of the implementation of CSR policies by the companies required to comply with the provisions of Section 135.  Many of the recommendations have been accepted by the Government and incorporated in the Rules.

Corporate Social Responsibility - definition

Rule 2(1)(a) defines the expression ‘corporate social responsibility’ as and including but not limited to-

• projects or programs relating to activities areas or subjects specified in Schedule VII to the Act; or
• projects or programs relating to activities undertaken by the board of directors of a company (Board) in pursuance of recommendations of the CSR Committee of the Board as per declared CSR Policy of the company subject to the condition that such policy will include activities, areas or subjects specified  in Schedule VII of the Act.

Applicability

Every company including its holding or subsidiary, and a foreign company having its branch office or project office in India, which fulfills the criteria specified in sub-section (1) of section 135 of the Act shall comply with the provisions of section 135of the Act and these rules.   No specific exemption to section 8 companies is available.  Therefore such companies have to comply with the provisions of CSR if they fulfill the criteria.

Non applicability

Every company which ceases to be a company covered under  section 135(1) of the Act for three consecutive  financial years shall not be required to –

• constitute a CSR Committee; and
• comply with the provisions contained in sub-section (2) to (5) of the said section, till such time it meets the criteria specified in sub-section (1) of section 135.

The holding or subsidiary company does not have to comply with the provisions of CSR unless the holding or subsidiary itself fulfills the criteria. 

CSR Committee

Section 135 (1) of the Act provides that every company having-

• net worth of ₹ 500 crore or more; or
• turnover of ₹ 1000 crore or more; or
•  a net profit of ₹ 5 crore or more during the immediately preceding financial year (with effect from 19.09.2018; before that ‘any financial year’)

shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.  Where a company is not required to appoint an independent director it shall have in its Corporate Social Responsibility Committee two or more directors.   A private company having only two directors on its Board shall constitute its CSR Committee with two such directors.    With respect to a foreign company covered under these rules, the CSR Committee shall comprise of at least two persons of which one person shall be as specified under clause (d) of sub-section (1) of section 380 of the Act and another person shall be nominated by the foreign company.

The expression ‘net profit’ is defined under Rule 2(1) (f) as the net profit of a company as per its financial statement prepared in accordance with the applicable provisions of the Act, but shall not include the following-

• any profit arising from any overseas branch or branches of the company, whether operated as .a separate company or otherwise; and
• any dividend received from other companies in India, which. Are covered under and complying with the provisions of section135 of the Act.

 Net profit in respect of a financial year for which the relevant financial -statements were prepared in accordance with the provisions of the Companies Act, 1956  shall not be required to be re-calculated in accordance with the provisions of the Act.

In case of a foreign company covered under these rules, net profit means the net profit of such company as per profit and loss account prepared in terms of   section 381(1)(a) read with section 198 of the Act.

CSR Policy

Rule 2(1)(e) defines the expression ‘CSR Policy’ as relates to the activities to be undertaken by the company in areas or subjects specified in Schedule VII to the Act and the expenditure thereon, excluding activities undertaken in pursuance of normal course of business of a company.

 The Corporate Social Responsibility Committee shall,-

• 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 as detailed below-

• eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water;
•  promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly, and the differently abled and livelihood enhancement projects;
• promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centers and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups;
• ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agro forestry, conservation of natural resources and maintaining quality of soil, air and water including contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga;
• protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional arts and handicrafts;
• measures for the benefit of armed forces veterans, war widows and their dependents;
•  training to promote rural sports, nationally recognized sports, paralympic sports and Olympic sports; 
• contribution to the Prime Minister's National Relief Fund or any other-fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women;
• contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government;
• rural development projects;
• slum area development.

• recommend the amount of expenditure to be incurred on the activities referred to above; and
• monitor the Corporate Social Responsibility Policy of the company from time to time.
• institute a transparent monitoring mechanism for implementation of the CSR projects or programs or activities undertaken by the company.
• not include the activities undertaken in pursuance of normal course of business of a company.
• not contravene the provisions of the land including the Cigarettes and other Tobacco Products Act, 2003.

The Board of Directors shall ensure that activities included by a company in its Corporate Social Responsibility Policy are related to the areas or subjects specified in Schedule VII of the Act. The CSR Policy of the company shall specify that the surplus arising out of the CSR projects or programs or activities shall not form part of the business profit of a company.

Implementation of CSR Policy

• The Board of every company shall after taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company.
• The company shall ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company.
• The Board shall ensure that the company spends, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.
• The company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities.
• If the company fails to spend such amount, the Board shall, in its report made under, specify the reasons for not spending the amount.

Carrying out the CSR activities

• The CSR activities shall be undertaken by the company, as per its stated CSR Policy, as projects or programs or activities (either new or ongoing), excluding activities undertaken in pursuance of its normal course of business.
• The Board of a company may decide to undertake its CSR activities approved by the CSR Committee, through-

• a company established under section 8 of the Act or a registered trust or a registered society, established by the company, either singly or along with any other company; or
• a company established under section 8 of the Act or a registered trust or a registered society, established by the Central Government or State Government or any entity established under an Act of Parliament or a State legislature;
• if, the Board of a company decides to undertake its CSR activities through a company established under section 8 of the Act or a registered trust or a registered society, other than those specified in the rule, such company or trust or society shall have an established track record of three years in undertaking similar programs or projects and the company has specified the projects or programs to be undertaken, the modalities of utilization of funds of such projects and programs and the monitoring and reporting mechanism.

•  A company may also collaborate with other companies for undertaking projects or programs or CSR activities in such a manner that the CSR Committees of respective companies are in a position to report separately on such projects or programs in accordance with these rules.
• The CSR projects or programs or activities undertaken in India only shall amount to CSR Expenditure.
• The CSR projects or programs or activities that benefit only the employees of the company and their families shall not be considered as CSR activities in accordance with section 135 of the Act.
• Companies may build CSR capacities of their own personnel as well as those of their Implementing agencies through Institutions with established track records of at least three financial years but such expenditure including expenditure on administrative overheads shall not exceed five percent of total CSR expenditure of the company in one financial year.
• Contribution of any amount directly or indirectly to any political party under section 182 of the Act, shall not be considered as CSR activity.
• Contribution to private funds such as those set up by a not for profit company etc., is not allowed.

CSR Expenditure

CSR expenditure shall include all expenditure including contribution to corpus, or on projects or programs relating to CSR activities approved by the Board on the recommendation of its CSR Committee, but does not include any expenditure on an item not in conformity or not in line with activities which fall within the areas or subjects, specified in Schedule VII of the Act.

Section 37(1) of the Income Tax Act, 1961 provides that any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession".  Explanation 2 to this section provides that any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the  shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession.

Any expenditure spent more than 2% cannot be carried forward to the subsequent years and adjusted against that year’s CSR expenditure.

Expenditure incurred by Foreign Holding Company for CSR activities in India will qualify as CSR spend of the Indian subsidiary if, the CSR expenditures are routed through Indian subsidiaries and if the Indian subsidiary is required to do so as per section 135 of the Act.          

Salaries paid by the companies to regular CSR staff as well as to volunteers of the companies (in proportion to company’s time/hours spent specifically on CSR) can be factored into CSR project cost as part of the CSR expenditure.

Contribution to Corpus of a Trust/ society/ section 8 companies etc. will qualify as CSR expenditure as long as (a) the Trust/ society/ section 8 companies etc. is created exclusively for undertaking CSR activities or (b) where the corpus is created exclusively for a purpose directly relatable to a subject covered in Schedule VII of the Act and has an established track of 3 years in undertaking similar programs or projects.

The following expenditure will not amount to CSR expenditure-

• The CSR projects or programs or activities that benefit only the employees of the company and their families;
• One-off events such as marathons/awards/charitable contribution/ advertisement/ sponsorships of TV programs etc.,
• Expenses incurred by the company for the fulfillment of any other Act/Statute of regulations such as Labor Laws, Land Acquisition Act, 2013, Apprentice Act, 1963 etc.,
• Contribution of any amount directly or indirectly to any political party;
• Activities undertaken by the company in pursuance of its normal business;
• The projects or programs taken outside India.

Carry forward the unspent amount

The Board of the Company is free to decide whether any unspent amount from out of the minimum required CSR expenditure is to be carried forward to the next year.  However the carried forward amount should be over and the above the next year’s allocation equivalent to at least 2% of the net profit of the company immediately preceding financial year.

CSR Reporting

The Board's Report of a company covered under these rules pertaining to a financial year commencing on or after the 1st day of April, 2014 shall include an annual report on CSR containing particulars specified in Annexure.   In case of a foreign company, the balance sheet filed under  shall contain an Annexure regarding report on CSR.

The Board’s report shall contain the following-

1. A brief outline of the company's CSR policy, including overview of projects or programs proposed to be undertaken and a reference to the web-link to the CSR policy and projects or programs.
2. The Composition of the CSR Committee.
3. Average net profit of the company for last three financial years.
4. Prescribed CSR Expenditure (2% of the amount as in item 3 above)
5. Details of CSR spent during the financial year-

(a) total amount to be spent for the financial year;

(b) amount unspent, if any;

(c) nanner in which the amount spent during the financial year is detailed below-

• CSR project or activity identified;
• sector in which the project is covered;
• projects or programs-

• local area or other;
• specify the State, District where the project or programs was undertaken;

• amount outlay (budget) project or project wise;
• amount spent on the projects or programs-

• direct expenditure on projects or programs;
• overloads

• cumulative expenditure up to the reporting period;
• amount spent direct or through implementing agency.

6.  In case the company has failed to spend the two per cent, of the average net profit of the last three financial years or any part thereof, the company shall provide the reasons for not spending the amount in its Board report.

7.  A responsibility statement of the CSR Committee that the implementation and monitoring of CSR Policy, is in compliance with CSR objectives and Policy of the company duly signed by the CSR Committee members.

Display of CSR activities on its website

The Board of Directors of the company shall, after taking into account the recommendations of CSR Committee, approve the CSR policy for the company and disclose contents of such policy in its report and the same shall be displayed on the company's website, if any.

National CSR award

The Government constituted the Steering Committee on 15.09.2016 to oversee the whole process of the execution of ‘National Corporate Social Responsibility Award’.  This award seeks to-

• increase competition in various categories of companies to infuse excellence in their CSR activities;
• encourage companies to spend the entire amount i.e. eligible CSR spend;
• recognize the impact, innovation, usage of technology, gender and environment issues, sustainability, scalability and replicability of CSR activities;
• channelize CSR activities of corporate so that the benefits of their activities reach the marginalized sections of society and in remote areas of the country.

20 awards are given under this scheme as detailed below-

• four awards for Excellence in CSR, based on CSR spend;
• five awards for CSR projects in aspirational districts; and
• eleven awards for CSR projects in National Priority Areas.

Three separate awards are for micro, small and medium enterprises (MSMEs) which are included in 20 awards.

The Ministry of Corporate Affairs has instituted this National CSR Award to recognize corporate social responsibility for inclusive growth and sustainable development. This Award seeks to recognize the companies that have made a transformative impact on society.   For the year 2018 nominations have been received by 15^th October 2018.  The Department will cause for the National award at the earliest.

High Level meeting

The Government constituted a High Level Committee on 28.09.2018 to review the existing framework and guide and formulate the road map for a coherent policy on CSR.  The Committee will submit its reports and recommendations to the Ministry of Corporate Affairs.

CSR Cell

The CSR Cell operates under the jurisdiction of the Ministry of Corporate Affairs. The Cell collates and maintains data related specifically to CSR in India. Their office is located at Shasthri Bhawan in New Delhi.

Statistics on CSR

Table – 1

Statement showing the details of CSR for the years from 2014-15 to 2016 - 17

Year	Total No. of Companies	Total amount spent on CSR (in crores	States/Union Territories covered	Total No. of CSR Projects	Development sectors by companies
2014-15	16785	10066	36	9391	29
2015-16	14366	14366	36	18044	29
2016-17	13465	13465	36	21171	29

Source: https://csr.gov.in/CSR/index17.php

From the above table it can be inferred the total number of companies adopting CSR is on decrease side. The year 2015-16 witnessed the highest amount of CSR incurred by the companies.  The total number of CSR projects is on the increase in these three years.

Table – 2

Statement showing the expenditure incurred by Government companies and other companies & number of listed companies and unlisted companies adopting CSR Policy

Year	Government companies (in Rs. crores)	Other than Government companies (in Rs. crores)	Listed companies	Unlisted companies
2014-15	2816	7250	2278	14507
2015-16	4179	10187	2555	18943
2016 – 17	3241	10222	2347	17586

Source: https://csr.gov.in/CSR/index17.php

From the above table it can be inferred that Government companies incurred more or less one third of the total CSR expenditure and the remaining by the companies other than the Government companies.  The above table shows the number of listed companies and unlisted companies contributed to CSR for 3 years from 2014-15 to 2016 -17. 

Table - 3

STATEWISE/UNION TERRITORY WISE CSR CONTRIBUTION

Amount spent in crore

Sl. No.	States	2014-15	2015-16	2016-17
1	Andaman & Nicobar	0.29	0.55	0.83
2	Andhra Pradesh	414.27	1241.97	729.97
3	Arunachal Pradesh	11.04	1.48	23.61
4	Assam	134.78	167.47	268.87
5	Bihar	36.68	108.67	94.40
6	Chandigarh	1.77	5.12	21.30
7	Chhattisgarh	161.30	237.94	80.36
8	Dadra and Nagar Haveli	4.41	12.02	5.12
9	Daman and Diu	20.05	2.13	2.63
10	Delhi	237.43	479.13	478.63
11	Goa	27.11	30.53	34.95
12	Gujarat	313.44	559.14	779.88
13	Haryana	187.40	367.33	346.56
14	Himachal Pradesh	10.94	52.35	16.40
15	Jammu & Kashmir	43.70	103.03	41.05
16	Jharkhand	79.56	118.17	94.63
17	Karnataka	403.46	778.88	843.49
18	Kerala	68.23	143.88	117.54
19	Lakshadweep	0.00	0.30	0.00
20	Madhya Pradesh	141.88	183.26	282.03
21	Maharashtra	1445.91	2013.01	2222.25
22	Manipur	2.44	6.27	11.71
23	Meghalaya	3.53	5.62	7.54
24	Mizoram	1.03	1.07	0.08
25	Nagaland	1.11	0.96	0.92
26	Odisha	252.18	618.90	311.96
27	Puducherry	2.02	6.34	7.48
28	Punjab	55.60	69.04	67.19
29	Rajasthan	299.75	493.95	318.88
30	Sikkim	1.19	1.89	4.86
31	Tamil Nadu	539.63	615.70	470.54
32	Telengana	101.96	254.01	221.26
33	Tripura	1.33	1.47	1.25
34	Uttar Pradesh	148.90	417.12	312.74
35	Uttarakhand	74.79	72.42	94.64
36	West Bengal	194.85	411.70	274.70
37	NEC/Not mentioned	26.94	0.00	6.72
38	PAN India	4614.89	4783.26	4867.42
Grand total		10065.93	14366.29	13464.60

Source: https://csr.gov.in/CSR/statelist.php.

           The above table shows the CSR contribution of 36 States for the years from 2014 – 15 to 2016 – 17.

Table – 4

SECTORWISE CONTRIBUTION

Amount spent in crores

Sl. No.	Development sectors	2014-15	2015-16	2016-17
1	Clean Ganga Fund	5.47	32.65	24.23
2	Education, differently abled, livelihood	3188.09	4881.26	5123.83
3	Encouraging sports	57.61	137.58	172.53
4	Environment, Animal Welfare, Conservation of resources	853.99	963.22	1282.34
5	Gender Equity, Women Empowerment, Old Age Homes, Reducing inequalities	189.92	337.44	434.75
6	Health, Eradicating hunger, Poverty and malnutrition, Safe drinking water, Sanitation	2525.92	4545.00	3397.00
7	Heritage art and culture	117.37	117.58	296.85
8	Other sectors (technical incubator and benefits to armed forces and admin overheads)	9.50	37.15	58.71
9	Prime Minister’s National Relief Fund	228.18	213.70	150.70
10	Rural Development	1059.34	1369.52	1507.45
11	Slum area development	101.14	14.30	49.81
12	Swacch Bharat Kosh	113.86	324.72	165.09
13	Any other fund	277.09	326.88	412.38
14	NEC/Not mentioned	1338.39	1065.22	388.86
Grand Total		10065.93	14366.29	13464.60

Source: https://csr.gov.in/CSR/developmentlist.php. 

The above table shows the contribution of CSR by each sector for three years from 2014 – 15 to 2016 – 17.

Table - 5

CSR SPENT – TOP 10 STATES – 2014 - 15

State Name	Amount (Rs. in crores)
Maharashtra	1445
Tamil Nadu	549
Andhra Pradesh	414
Karnataka	403
Gujarat	313
Rajasthan	299
Odisha	252
Delhi	237
West Bengal	194
Haryana	187

Source: https://csr.gov.in/CSR/developmentlist.php.

The above table shows the top ten States in the year 2014 – 15 contributing CSR.

Table - 6

CSR SPENT – TOP 10 STATES – 2015 - 16

State Name	Amount (Rs. in crores)
Maharashtra	2013
Andhra Pradesh	1241
Karnataka	778
Odisha	618
Tamil Nadu	615
Gujarath	559
Rajasthan	493
Delhi	479
Uttar Pradesh	417
West Bengal	411

Source: https://csr.gov.in/CSR/developmentlist.php.

The above table shows the top ten States in the year 2015 – 16 contributing CSR.

Table – 7

CSR SPENT – TOP 10 STATES – 2016 - 17

State Name	Amount (Rs. in crores)
Maharashtra	2222
Karnataka	843
Gujarat	779
Andhra Pradesh	729
Delhi	478
Tamil Nadu	470
Haryana	346
Rajasthan	318
Uttar Pradesh	312
Odisha	311

Source: https://csr.gov.in/CSR/developmentlist.php.

The above table shows the top ten States in the year 2014 – 15 contributing CSR.

Table – 8

CSR SPENT – TOP 10 COMPANIES – 2016 - 17

Company Name	Amount (Rs. in crores)
Reliance Industries Limited	649.26
ONGC Limited	504.91
TATA Consultancy Services Limited	380.00
HDFC Bank Limited	305.42
Infosys Limited	289.44
NTPC Limited	277.81
ITC Limited	275.96
Oil India Limited	216.74
Indian Oil Corporation Limited	213.99
WIPRO Limited	186.31

Source: https://csr.gov.in/CSR/index17.php  

The above table shows the first top ten companies incurring CSR expenditure and the amount spent by each company is shown in this table.

Punishment

There is no direct punishment for the contravention of the provisions of the CSR.  section 134 provides that the Board’s report shall include the details about the policy developed and implemented by the company on corporate social responsibility initiatives taken during the year.   Section 134(8) provides that if a company contravenes the provisions section 134, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both.

Section 450 provides punishment where no specific penalty or punishment is provided.  According to this section if a company or any officer of a company or any other person contravenes any of the provisions of this Act or the rules made there under, or any condition, limitation or restriction subject to which any approval, sanction, consent, confirmation, recognition, direction or exemption in relation to any matter has been accorded, given or granted, and for which no penalty or punishment is provided elsewhere in this Act, the company and every officer of the company who is in default or such other person shall be punishable with fine which may extend to ten thousand rupees, and where the contravention is continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the contravention continues. 

Section 451 provides that where the same offence is committed for the second or subsequent occasions within a period of three years, then, that company and every officer thereof who is in default shall be punishable with twice the amount of fine for such offence in addition to any imprisonment provided for that offence.

Conclusion

In the present business environment the companies are highly required to have a social responsibility to make it in a better place in the business sector concerned.  CSR is a collective philanthropy.  It is a collective responsibility which supplements the Government’s efforts to achieve inclusive growth which includes broad based benefits and ensures quality of opportunity for all.

Discussions to this article

[AJAY KUMAR]

Whether CENVAT/ITC under GST can be availed for CSR activities ?

[DR.MARIAPPAN GOVINDARAJAN]

In my view, NO

[KASTURI SETHI]

Sir,

I have come across a case law on this issue. Pl. throw light in view of case law.

2018 (11) TMI 1447 - CESTAT CHENNAI  = M/S. GE T&D INDIA LTD., (FORMERLY M/S. ALSTOM (T&D) INDIA LTD.) VERSUS THE COMMISSIONER OF G.S.T. & CENTRAL EXCISE, SALEM COMMISSIONERATE

5.5 This Court, followed the view of the Division Bench of the Karnataka High Court in Commissioner of Central Excise, Bangalore-II v. Millipore India Pvt. Ltd. [2012 (26) S.T.R. 514 (Kar.)] = 2011 (4) TMI 1122 - KARNATAKA HIGH COURT. The relevant observations of this Court in Rane TRW Steering Systems Limited case are extracted hereinafter :

“7. In Commissioner of Central Excise, Bangalore-II v. Millipore India Pvt. Ltd. [2012 (26) S.T.R. 514 (Kar.)] = 2011 (4) TMI 1122 - KARNATAKA HIGH COURT , the Division Bench of the Karnataka High Court had occasion to consider similar issue and in the facts of the said case, while considering the definition ‘input services’ as defined under Section 2(l) of the Cenvat Credit Rules, 2004, the Karnataka High Court held as under :-

“7. That apart, the definition of input services is too broad. It is an inclusive definition. What is contained in the definition is only illustrative in nature. Activities relating to business and any services rendered in connection therewith, would form part of the input services. The medical benefit extended to the employees, insurance policy to cover the risk of accidents to the vehicle as well as the person, certainly would be a part of the salary paid to the employees. Landscaping of factory or garden certainly would fall within the concept of modernization, renovation, repair, etc., of the office premises. At any rate, the credit rating of an industry is depended upon how the factory is maintained inside and outside the premises. The Environmental law expects the employer to keep the factory without contravening any of those laws. That apart, now the concept of corporate social responsibility is also relevant. It is to discharge a statutory obligation, when the employer spends money to maintain their factory premises in an eco-friendly manner, certainly, the tax paid on such services would form part of the costs of the final products. In those circumstances, the Tribunal was right in holding that the service tax paid in all these cases would fall within the input services and the assessee is entitled to the benefit thereof. In that view of the matter, we do not see any infirmity in the order passed by the Tribunal. Accordingly, the substantial questions of law framed in this appeal are answered in favour of the assessee and against the Revenue. The appeal is dismissed.”

8. A cursory reading of the said judgment reveals that the facts in issue therein are similar to the facts in the present case. It is clear from the decision that where an employer spends money to maintain their factory premises in an eco-friendly manner, the tax paid on such services would form part of the cost of the final products and the same would fall within the ambit of “input services” and, therefore, the assessee is entitled to claim the benefit. This Court is in agreement with the ratio laid down in Millipore India Pvt. Ltd. case (supra), which is equally applicable to the case on hand and following the said decision, this appeal is liable to be dismissed. Accordingly, the substantial question of law is answered in favour of the assessee/respondent and against the appellant/Revenue.”

Thanks & regards.

K.L.Sethi