With reference to Corporate Social Responsibility (CSR) rules in India, consider the following statements: 1. CSR rules specify that expenditures that benefit the company directly or its employees will not be considered as CSR activities. 2. CSR rules do not specify minimum spending on CSR activities. Which of the statements given above is/are correct?

1. A. 1 only
2. B. 2 only
3. C. Both 1 and 2
4. D. Neither 1 nor 2

Answer: A

Explanation

The Companies (CSR Policy) Rules, 2014, clearly state that activities exclusively benefiting the employees of the company or their families are not considered eligible CSR activities. This ensures that CSR initiatives are directed towards broader societal welfare rather than internal company benefits. Therefore, statement 1 is correct. However, Section 135 of the Companies Act, 2013, mandates that eligible companies must spend at least 2% of their average net profits from the preceding three financial years on CSR activities. This directly contradicts statement 2, which claims no minimum spending is specified. Hence, statement 2 is incorrect. The UPSC often tests knowledge of key provisions of important acts and policies like the Companies Act, especially those with significant economic and social implications.