Foreign Funds, Family Accounts & Fixed Deposits: ITAT Dismantles Rana Ayyub’s COVID Relief Drive

The Income Tax Appellate Tribunal (ITAT) in Mumbai has upheld that ₹2.7 crore raised by journalist Rana Ayyub through online donation campaigns during the COVID-19 pandemic is taxable under Indian income tax law.

The Tribunal held that the funds, raised via the crowdfunding platform Ketto, constituted “income from other sources” under Section 56(2)(x) of the Income Tax Act, 1961.

It also backed the tax department’s decision to act swiftly under Section 175, a special provision invoked when authorities believe someone may attempt to dispose of assets to avoid paying tax.

Rana Ayyub, a journalist and columnist for The Washington Post, launched three donation drives between 2020 and 2021, raising a total of ₹2.69 crore, including ₹80.5 lakh in foreign currency. The stated goal was to provide COVID-19 relief, assist migrant workers, and fund healthcare and flood relief efforts.

However, the income tax department initiated an investigation following complaints about the misuse of funds. It found that the donations were not deposited in a separate account for relief work but were instead routed into Ayyub’s personal savings account as well as those of her father and sister. From there, substantial amounts were transferred back to Ayyub. The authorities noted that only a small portion of the funds, ₹28 lakh, could be directly linked to relief efforts.

Additionally, ₹50 lakh was invested in a fixed deposit in Ayyub’s name, and around ₹19 lakh was allegedly used for personal expenses. At the time of the investigation, nearly ₹2.4 crore remained unutilized and lying in personal accounts.

In July 2021, the tax department invoked Section 175 of the Income Tax Act, which allows for immediate tax assessment if there’s suspicion that a person may try to avoid liabilities by transferring or hiding assets. Ayyub’s lawyers argued that the department should only have taxed income received between April and July 2021 the window before the notice was issued.

But the Tribunal rejected this argument, finding the use of Section 175 appropriate due to the lack of financial transparency and the intermingling of personal and donation funds. It also emphasized that no charitable trust or legal entity had been used to manage the donations, an important factor when determining whether exemptions from taxation apply.

Ayyub has consistently maintained that the funds were collected for relief work and were not meant for personal gain. She stated that a portion of the money was used for helping migrant workers return home and for medical aid, food, and other essentials. 

After receiving a summons under Section 131 of the Income Tax Act, Ayyub returned around ₹70 lakh in foreign donations, claiming the refunds were processed via Ketto and not withdrawn into personal accounts. However, the Tribunal found that these actions appeared to be reactive, following the probe, and did not prove the absence of personal benefit.

The Tribunal also flagged a possible violation of the Foreign Contribution Regulation Act (FCRA), 2010. Under Section 3(1)(h) of the FCRA, journalists are not allowed to receive foreign contributions. By using her father’s and sister’s accounts to accept international donations, the Tribunal said Ayyub appeared to be circumventing this restriction.

The ITAT noted that Ayyub did not maintain separate accounts for the donations, made no clear disclosures, and had not documented her expenditures in a way that could verify how the money was used.

"If the intention of the assessee was pious then, what explanation she could offer for purchasing fixed deposit receipts of Rs.50,00,000/- in her personal name. From the first campaign, the assessee raised Rs. 1,23,12,484/- out of which Rs.68,84,560/- was in Indian currency and Rs.54,27,924/- in foreign currency converted into INR. When the assessee realised that she has been cornered in the tax net, she returned funds received from foreign reserves from Ketto platform but even after the passage of almost one year from the first donation campaign in which the assessee garnered Rs.1.23 Crores approximately, she could only produce evidence of Rs.18,00,000/- of relief expenditure. When confronted with this, the assessee took a plea that the same has been kept in reserve for constructing a hospital which was never mentioned during the fund-raising campaign," the bench said

The Tribunal ruled that the funds did not qualify for tax exemption and were rightly taxed as income in her hands. It dismissed all three of Ayyub’s appeals for the assessment years 2021–22 and 2022–23.

Case Title: Rana Ayyub Shaikh Vs. DCIT

Download Judgment here: