Correct option is A
Statement 1 is correct.
The rules governing CSR in India, as outlined in the Companies Act, 2013, and related guidelines, specify that CSR activities should be directed toward broader social, environmental, and community welfare. The intent of CSR is to contribute to the social good, going beyond the company's immediate business interests and the welfare of its employees. Any activities that are exclusively for the benefit of employees or their families, such as employee welfare schemes, cannot be counted as CSR. The focus must be on initiatives that benefit the larger community, such as projects in health, education, poverty alleviation, environmental sustainability, and rural development.
Statement 2 is incorrect.
Section 135 of the Companies Act, 2013, specify that companies meeting certain financial thresholds must engage in CSR activities, the requirement is not a strict mandate to spend 2% of profits on CSR. Instead, it is a "comply or explain" rule. Companies are required to spend at least 2% of their average net profits from the last three years on CSR activities. However, if a company fails to spend the required amount, it must provide an explanation for the shortfall in its annual report. This explanation is reviewed by regulatory authorities, but it is not strictly punitive if the company has a valid reason for not meeting the 2% target. Therefore, the requirement is not an absolute mandate but a strong expectation with provisions for accountability.
