Rule 7(3) of CSR rules state that, "Where a company spends an amount in excess of requirement provided under sub-section (5) of section 135 , such excess amount may be set off against the requirement to spend under sub-section (5) of section 135 up to immediate succeeding three financial years subject to the conditions that –
(i) the excess amount available for set off shall not include the surplus arising out of the CSR activities, if any, in pursuance of sub-rule (2) of this rule.
(ii) the Board of the company shall pass a resolution to that effect"
As rule 7(3) set off can be claimed where a company spends in excess of its csr obligations. MCA vide it's amendment notification dt: January 22, 2021 has inserted this rule. MCA further vide it's FAQ dt: August 25, 2021 has stated that set off can be claimed for excessive spend of CSR obligation from FY 2021 onwards and not for excessive CSR spend prior to FY2021. So taking a scenario wherein A ltd had CSR obligation of Rs 300,000 in FY 2020-21. It spent Rs 350,000 on CSR. So there is an excessive spend of Rs 50,000.
Now the question is can this amount be claimed as set off by A Ltd in FY2021-22?
The answer is yes.
So if obligation for FY 2021-22 is Rs 400,000 then company need to spend Rs 350,000 only during FY 2021-22.
Now what if A Ltd has spent Rs 400,000 in FY2021-22? Then can we say A Ltd has not claimed set off or can we say we have claimed set off but we have again spent excess?
This can viewed either ways and both ways it is Correct.
To claim set off A ltd will have to pass board resolution and CFO certificate needs to mention it. One thing needs to be seen that set off is of actual CSR amount spent and not of surplus arising out of CSR.
