The Two Unspent Categories
Section 135 distinguishes between unspent amounts relating to ongoing projects and unspent amounts not relating to ongoing projects. An ongoing project is a multi-year project where the company has a board-approved timeline and the project is being implemented. The unspent amount for an ongoing project must be transferred to a separate bank account called the “Unspent CSR Account” within thirty days from the end of the financial year. The amount must be spent within three financial years from the date of transfer.
An unspent amount that does not relate to an ongoing project must be transferred to a fund specified in Schedule VII within six months from the end of the financial year.
The Separate Bank Account
The Unspent CSR Account must be opened with a scheduled bank and used only for the specified ongoing project. The account should be reconciled monthly, and the utilisation should be reported to the CSR committee. A company that commingles the unspent amount with its general bank account has not complied with the statutory segregation requirement.
The 30-Day Timeline and Penalty Exposure
The transfer to the Unspent CSR Account must be completed within thirty days from the end of the financial year. A delayed transfer—even if the amount is subsequently transferred—attracts the Section 135(7) penalty. The company is liable to a penalty of twice the amount required to be transferred, and each officer in default is liable to one-tenth of the amount or ₹2 lakh, whichever is less. Post-facto payment is not a defence; the violation is complete on the expiry of the thirty-day period.
The Ongoing Project Criteria
To qualify as an ongoing project, the project must: be a multi-year project; have a board-approved timeline; and be identified as an ongoing project in the annual action plan. A project that is not board-approved as multi-year cannot be treated as ongoing merely because it has spilled over into the next financial year. The board resolution should specifically record the project’s multi-year character and the expected completion date.
Monitoring and Reporting
The CSR committee should review the progress of ongoing projects at each meeting. The board’s report must disclose the amount unspent, the transfer to the Unspent CSR Account, and the project-wise utilisation. The annual CSR report (Form CSR-2) must reconcile the unspent amount with the bank account balance.
Remediation
If the company has missed the thirty-day transfer deadline, it should transfer the amount immediately, file a suo motu compounding application, and document the corrective steps. The compounding application should include the board resolution, the bank statement showing the transfer, and an affidavit explaining the delay. A company that waits for the ROC notice loses the benefit of proactive remediation.
Call to Action: For CSR unspent amount remediation or ongoing project documentation review, contact office@anujdesaiassociates.com or 9619456656. Website: https://anujdesaiassociates.com. LinkedIn: linkedin.com/in/ca-anuj-desai-122547230.