Author: Saloni B.L. Sharma
College: Lords Universal College of Law
Abstract
Corporate Social Responsibility (CSR) has transformed the relationship between corporate enterprise and society. In India, CSR is not merely an expression of corporate goodwill; for qualifying companies, it is a statutory responsibility principally governed by Section 135 of the Companies Act, 2013 and the Companies. The Indian framework requires eligible companies to constitute a CSR Committee, formulate a CSR Policy, disclose relevant information and spend at least two per cent of the average net profits of the preceding three financial years on prescribed CSR activities, subject to the statutory framework.
The concept reflects the broader proposition that corporate wealth is generated within society and therefore carries corresponding social obligations. CSR extends to areas such as education, healthcare, poverty alleviation, environmental sustainability, gender equality, rural development and other activities specified in Schedule VII. Judicial developments have also expanded the legal understanding of CSR. Recent Supreme Court decisions have connected CSR with environmental responsibility and disability inclusion. This article examines the statutory foundation, legal principles, evidentiary basis and important Indian decisions relating to CSR.
To the Point
CSR may be understood as the legal and ethical responsibility of a company to contribute to social welfare while conducting its business. The Indian model is distinctive because Parliament has converted CSR, for specified companies, from a largely voluntary philanthropic practice into a regulated corporate obligation.
Section 135 applies to every company meeting any of the prescribed financial thresholds:
Net worth of ₹500 crore or more, Turnover of ₹1,000 crore or more, or Net profit of ₹5 crore or more during a financial year.
Such a company is required to constitute a CSR Committee, subject to the statutory scheme. The Committee formulates and recommends the CSR Policy, recommends expenditure and monitors implementation. The Board considers the Committee’s recommendations, approves the policy and is responsible for ensuring that the approved activities are undertaken.
The central financial requirement is that the Board shall ensure spending of at least two per cent of the company’s average net profits for the three immediately preceding financial years on CSR in accordance with the policy. The statutory provision also expresses a preference for spending in the local area and surrounding areas where the company operates. Where the prescribed amount is not spent, the Board must state the reasons in its report, and the present statutory framework contains specific treatment for unspent CSR amounts.
CSR activities are linked to Schedule VII and include broad social objectives such as eradicating hunger, poverty and malnutrition; promoting healthcare and sanitation; education and vocational skills; gender equality; environmental sustainability; protection of national heritage; measures for the benefit of armed forces veterans; rural development; and other specified areas. Thus, CSR is not simply a donation made at the discretion of management. Its legality depends upon the activity, governance process, disclosure, expenditure and compliance with the statutory framework.
The Indian corporate model also puts duty on the Board of Directors. CSR therefore becomes a matter of corporate governance and fiduciary accountability. A company cannot treat CSR as an isolated public-relations exercise. Effective CSR requires identification of community needs, lawful selection of projects, monitoring, documentation, impact assessment where applicable and transparent disclosure.
Use of Legal Jargon
The legal architecture of CSR is built around statutory obligation, corporate governance and accountability. Section 135 of the Companies Act, 2013 is the Central provision. The CSR Committee performs an advisory and monitoring function, while the Board remains responsible for approval, implementation and disclosure. Schedule VII determines the recognised areas in which CSR activities may be undertaken. The Companies (Corporate Social Responsibility Policy) Rules, 2014 provide further procedural and operational requirements.
Several legal doctrines and expressions are relevant. First, the doctrine of corporate accountability requires companies to justify the manner in which statutory responsibilities are discharged. Secondly, the concept of fiduciary duty is relevant to directors because the Board exercises powers on behalf of the company and must act in accordance with law and the company’s legitimate interests. Thirdly, transparency and disclosure operate as compliance mechanisms, allowing stakeholders and regulators to examine whether CSR obligations have been fulfilled.
The expression “statutory obligation” is particularly important. CSR under Section 135 cannot be equated entirely with an ordinary voluntary charitable donation. Where the statutory conditions apply, the company is required to follow the CSR framework. Indian tax jurisprudence has also distinguished mandatory CSR expenditure from ordinary business expenditure; Explanation 2 to Section 37(1) of the Income-tax Act, 1961 provides that expenditure incurred on CSR activities referred to in Section 135 is not to be treated as expenditure incurred for the purposes of business or profession.
The principles of proportionality, reasonableness and public accountability also have persuasive relevance. CSR measures should correspond to the statutory purpose and should not become a vehicle for private benefit, disguised advertising or diversion of corporate resources. Similarly, the principle of ultra vires becomes relevant where corporate funds are applied beyond the legally permitted CSR objects.
The Proof
The statutory text itself provides the primary proof of India’s CSR framework. Section 135 expressly establishes the eligibility thresholds, CSR Committee mechanism, Board responsibilities, policy disclosure and two-per-cent spending requirement.Section 135 states that qualifying companies must constitute a CSR Committee and that the Board must approve and disclose the CSR Policy. It also records the requirement concerning two per cent of average net profits for the three preceding financial years.
The Companies (Corporate Social Responsibility Policy) Rules, 2014 supplement the statutory provision and provide the regulatory structure for implementation.
Corporate Social Responsibility in India is supported by a clear statutory and judicial framework. It is not merely a voluntary philanthropic activity but, for companies covered under Section 135 of the Companies Act, 2013, a regulated corporate responsibility.
Section 135 of the Companies Act, 2013 requires qualifying companies to constitute a CSR Committee, formulate a CSR Policy and ensure the prescribed CSR expenditure. The Board of Directors remains responsible for approving and monitoring CSR implementation.
The Board must ensure that at least two per cent of the average net profits of the preceding three financial years is spent on CSR activities in accordance with the statutory framework.
In KHS Machinery Private Limited v. Registrar of Companies, the Gujarat High Court dealt with alleged non-compliance concerning CSR policy, CSR initiatives and disclosure under Sections 134 and 135. The case demonstrates that CSR compliance involves more than merely spending money; proper policy formulation and disclosure are also significant.
Similarly, in M.K. Ranjitsinh v. Union of India, the Supreme Court discussed CSR in connection with Corporate Environmental Responsibility, demonstrating the evolving relationship between corporate responsibility and environmental protection.
The ultimate proof of CSR lies in effective implementation. A company may formulate an impressive CSR Policy, but the purpose of Section 135 is fulfilled only when funds are properly utilised for genuine social, environmental and developmental objectives. Thus, compliance, transparency and measurable social impact are the principal indicators of meaningful CSR.
Case Laws
1. Charan Singh Meena v. Union of India — Madhya Pradesh High Court, 2018
This decision is directly concerned with Section 135. The petitioner alleged that companies covered by the provision were failing to discharge their CSR obligations in nearby villages.
The Court recognised the possibility that CSR could remain only on paper without field-level monitoring and directed district authorities to verify actual compliance. It directed district authorities to ascertain whether companies covered by Section 135 were actually discharging their CSR responsibilities and to communicate non-compliance to the Registrar of Companies for appropriate action.
2. Sujata Bora v. Coal India Limited — Supreme Court, 2026
The Supreme Court considered disability rights and referred to CSR and the corporate responsibility to respect human rights. The judgment recognised disability inclusion as part of the social dimension of CSR and linked such responsibility with substantive equality. This decision is important because it illustrates that CSR should not be confined to conventional charity; it can also support inclusion, dignity and equal participation of persons with disabilities.
3. Moil Limited v. Commissioner of Income Tax-I, Nagpur — Bombay High Court, 2017
This is one of the important Indian decisions concerning the treatment of CSR expenditure. The Bombay High Court considered whether the Commissioner of Income Tax was justified in invoking revisional jurisdiction under Section 263 of the Income-tax Act in relation to a CSR expenditure claim. The Court noted that the Assessing Officer had specifically raised a query regarding CSR expenditure and the assessee had furnished detailed information regarding the expenditure.
The Court held that merely because the assessment order did not expressly discuss the CSR claim, it could not automatically be concluded that the Assessing Officer had failed to apply his mind. Consequently, the invocation of Section 263 was not justified in the circumstances. The case demonstrates the importance of proper disclosure, documentation and assessment of CSR expenditure.
4. M/s Indian Rare Earths Limited v. State of Kerala (Kerala High Court), 2009
This case predates the statutory CSR regime introduced by the Companies Act, 2013. The judgment nevertheless contains a reference to CSR in the context of corporate contribution towards social objectives.
Its importance lies in demonstrating that the concept of corporate social responsibility existed in Indian judicial discourse even before Section 135 transformed CSR into a statutory framework. It can therefore be used to explain the evolution of CSR from voluntary corporate responsibility towards statutory corporate accountability.
5. Adani Power Rajasthan Limited v. Assistant Commissioner of Income Tax (Gujarat High Court), 2023
This case concerns the tax treatment of CSR expenditure. The dispute involved CSR expenditure claimed by the company and the application of Explanation 2 to Section 37(1) of the Income-tax Act, 1961.
The statutory position is that expenditure incurred on activities relating to CSR referred to in Section 135 of the Companies Act is not deemed to have been incurred for the purposes of business or profession under Section 37(1). The case is therefore important in understanding the distinction between mandatory CSR expenditure and ordinary deductible business expenditure.
6. KHS Machinery Private Limited v. Registrar of Companies(Gujarat High Court), 2025
The proceedings arose from allegations that KHS Machinery had violated Sections 134(3)(o) and 135 of the Companies Act concerning CSR. The company was alleged to have failed to properly disclose its CSR policy, CSR initiatives and reasons for under-spending its CSR amount in the Board’s Report for the relevant financial year.
The company argued that it had constituted a CSR Committee, formulated a CSR Policy, undertaken CSR activities and made the relevant disclosures. The case is particularly valuable because it demonstrates that CSR compliance involves not merely spending money but also constitution of the appropriate committee, formulation of policy and statutory disclosure.
7. M.K. Ranjitsinh v. Union of India (Supreme Court of India), 2025
The Supreme Court expressly discussed the relationship between Corporate Social Responsibility and Corporate Environmental Responsibility. The Court observed that India’s CSR framework represented a shift from voluntary philanthropy towards a statutory obligation under Section 135 of the Companies Act.
The judgment is important because it places CSR within the broader framework of environmental protection and sustainable development. Corporate responsibility cannot be viewed exclusively through monetary contributions to charitable activities; environmental consequences arising from corporate operations are also relevant to the modern understanding of corporate responsibility.
8. Infosys Green Forum, Bangalore v. Income Tax Officer, 2026
This recent decision concerns the institutional mechanism through which CSR activities may be implemented.
Infosys Green Forum was established as a Section 8 company for undertaking CSR activities on behalf of Infosys Limited. The case considered issues relating to registration under Section 12AB of the Income-tax Act and the legal framework applicable to entities undertaking CSR activities.
The case is important because it demonstrates that CSR implementation can involve a Section 8 company or eligible implementing agency, and that the legal status, registration and statutory compliance of the implementing entity may become significant.
Conclusion
Corporate Social Responsibility in India represents a significant development in corporate law. The statutory framework under Section 135 of the Companies Act, 2013 places social responsibility within the sphere of corporate governance and accountability. By prescribing eligibility thresholds, a CSR Committee, Board responsibility, disclosure requirements and a minimum spending framework, Parliament has sought to ensure that large corporate entities contribute to social development in a structured and transparent manner.
However, effective CSR cannot be measured only by the amount of money spent. The real test is whether the expenditure produces lawful, measurable and sustainable social value. Field-level monitoring, community participation, transparency and proper documentation are therefore essential. The jurisprudence discussed above shows an evolving understanding of CSR: it is connected not only with charity and development but also with environmental protection, human rights, disability inclusion and the responsibilities arising from corporate activity.
CSR should consequently be treated as a component of responsible corporate citizenship. Profitability and social responsibility need not be opposing objectives. A corporation that respects communities, protects the environment, promotes inclusion and complies with statutory requirements can strengthen both public trust and long-term institutional legitimacy. The future of CSR in India will depend upon moving from expenditure-based compliance towards impact-based accountability.
Frequently Asked Questions
1. What is Corporate Social Responsibility?
CSR is the responsibility of eligible companies to undertake prescribed social-development activities and comply with the statutory framework under Section 135 of the Companies Act, 2013.
2. Which companies are covered by Section 135?
Companies meeting any of the prescribed thresholds of ₹500 crore net worth, ₹1,000 crore turnover or ₹5 crore net profit during a financial year are covered, subject to the applicable statutory provisions.
3. How much must a qualifying company spend on CSR?
The Board must ensure spending of at least two per cent of the average net profits made during the three immediately preceding financial years, in accordance with the CSR policy and applicable law.
4. Is CSR merely voluntary?
For companies falling within Section 135, CSR is a statutory obligation. The company must follow the prescribed governance, disclosure and spending framework.
5. Who is responsible for CSR compliance?
The CSR Committee recommends policy and expenditure and monitors implementation, while the Board approves the policy, ensures its implementation and makes the required disclosures.
6. What areas can CSR cover?
CSR activities are linked to Schedule VII and include areas such as healthcare, education, poverty alleviation, sanitation, gender equality, environmental sustainability, rural development and other recognised social objectives.
7. What happens if a company does not spend the prescribed amount?
The statutory framework requires disclosure and reasons for unspent amounts and provides specific treatment for unspent CSR funds. Compliance must therefore be assessed under the applicable version of Section 135 and the CSR Rules.
8. Why is CSR important in India?
CSR is important because corporate activity affects employees, consumers, communities and the environment. A legally compliant and impact-oriented CSR framework helps ensure that corporate growth is accompanied by social development, accountability and responsible use of corporate resources.
