Mumbai ITAT Upholds Taxation of Covid Donation Funds Used for Personal Expenses by Assessee:
Rana Ayyub Shaikh (ITAT 2281, 2282, 2283/ Mum/ 2023)
Facts:
1. Appellant collected donations through three separate fundraising campaigns on the Ketto platform were credited to her personal bank account and those of her family members, without maintaining any separate books of account.
2. These funds were subsequently used for personal expenses and investments, including fixed deposits (FDRs), contrary to the stated charitable intent of the campaigns.
3. Revenue treated donations received through crowd funding as a taxable income under Section 56(2)(x) of the Income Tax Act, 1961.
ITAT Mumbai held as below:
1. Section 3(1)(h) of the Foreign Contribution (Regulation) Act, 2010, prohibits journalists (including correspondents, columnists, cartoonists, and editors) from receiving foreign contributions, Ms. Ayyub violated the law by accepting such funds directly into her personal account and through accounts of her relatives.
2. Donation proceeds were diverted for purposes unrelated to the intended charitable objectives. Also, despite having collected significant funds, the appellant had unutilized amounts exceeding ₹2.4 crore for over a year, portions of which were withdrawn for personal use and invested in fixed deposits.
3. A lack of any legal obligation to return the funds, coupled with the personal use of funds make the receipts taxable under Section 56(2)(x).
The copy of the order is as under:
