Rana Ayyub transferred COVID-19 funds to accounts of her family members, made a personal fixed deposit of ₹50 lakhs, tribunal directs her to pay taxes: Details
In May this year, the Mumbai-based Income Tax Appellate Tribunal (ITAT) directed [pdf] ‘journalist’ Rana Ayyub to pay income tax on funds collected for Covid-19 relief work, which were misappropriated by her for personal use.
Rana Ayyub had amassed a whopping ₹2,69,50,695 through 3 crowdfunding campaigns on the platform ‘Ketto’ during the Covid-19 pandemic.
Out of the funds totalling ₹2.69 crores, about ₹80,49,856 were received in foreign currency in violation of the Foreign Contribution Regulation Act (FCRA) of 2010.
Screengrab of the funds raised by Rana Ayyub during the COVID-19 pandemic
Interestingly, Rana Ayyub collected funds meant for COVID-19 relief work in the bank accounts of her father, Mohammed Ayyub Shaikh and sister Iffat Shaikh to the tune of ₹1.60 crores and ₹37.15 lakhs.
The controversial ‘journalist’ had claimed before the Income Tax Department that she could not find her PAN card and therefore used her father’s and sister’s PAN cards for withdrawing money from Ketto platform.
Screengrab of the funds received in the bank accounts of Rana Ayyub, her father and her sister
Later, Rana Ayyub transferred ₹84.40 lakhs from her father’s account and ₹36.40 lakhs from her sister’s account to her personal bank account. In total, a sum of ₹1,20,80,000 was transferred to the account of Rana Ayyub.
Interestingly, she had downplayed the embezzlement of such a large sum of money in April 2022 as a ‘small amount of $20000.’ This is despite the fact that the amount in question is ₹2.69 crores (~$3,14,500).
Money transferred by Rana Ayyub to her personal bank account from that of her father and sister
The Income Tax Appellate Tribunal (ITAT), in its order, noted that about ₹2.4 crores of the crowdfunded amount remained unutilised despite a year of the campaign.
It noted, “The account in which the money was withdrawn by the assessee or her family members were personal savings account. Moreover, instead of carrying out any relief work, the assessee opened a new current account and made investment of a fixed deposit in her name and also incurred personal expenditure from the same savings account in which the funds were received.“
Misappropriation of funds by Rana Ayyub left exposed
ITAT stated that Rana Ayyub did not maintain separate accounts for personal funds and the money generated through crowdfunding for COVID-19 relief work.
The latter was transferred to the bank accounts of her family members (during the course of the 1st and 2nd campaigns) and to her personal account during the 3rd campaign.
“Throughout the proceedings, the assessee took a stand that she is not a beneficiary of those funds but the same cannot be exhibited because the funds have been mixed up with her personal funds as no separate account was maintained. The stand of the assessee that, in case of Ketto, the beneficiary is clearly identified by Ketto to whom the funds are to be transferred, is also not acceptable as the funds have been transferred in the personal account of the assessee, her father and her sister,” the Income Tax Appellate Tribunal pointed out.
“When the assessee was cornered by the Tax Department, she offered the entire donations raised from Ketto platform as “income from other sources”,” it further added.
Rana Ayyub had claimed before the Income Tax Department that a ‘small part (₹28 lakhs)’ of ₹2.69 crores was used for sending migrant workers home and purchasing ration, hospitalisation, procuring transportation and purchasing tarpaulin sheets for those affected in West Bengal floods.
Additionally, she spent ₹19 lakhs to cover her ‘personal expenses’. It also came to light that the controversial ‘journalist’ made a personal fixed deposit of ₹50 lakhs from the funds received for COVID-19 relief work.
“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,” ITAT emphasised.
It found that only ₹18 lakhs were used for relief work out of ₹1.23 crores that Rana Ayyub received through the first campaign on Ketto. The controversial ‘journalist’ had attempted to justify the non-utilisation of funds as ‘reserve for constructing a temple.’
ITAT pointed out, 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 fundraising campaign.”
Violation of FCRA Rules
The Income Tax Appellate Tribunal further noted that Rana Ayyub violated the Foreign Contribution Regulation Act (FCRA) of 2010.
Ayyub, who identified as a ‘journalist’ for Washington Post, does not qualify for foreign donations under Section 3(1)(h) of the FCRA.
“Since the assessee is herself a journalist, it is clear that the as per the Foreign Contribution (Regulation) Act, 2010, she could not have received foreign contribution directly in her account,” ITAT stated.
Funds collected for charitable activities remain unproved: ITAT
The Income Tax Appellate Tribunal stated that funds were collected by Rana Ayyub in the name of COVID-19 relief, slum dwellers and farmers.
“But all the donations collected were parked in the savings bank account of the assessee and family members and no separate accounts were maintained. The funds were also used for personal purposes and also for investment in FDR and substantial amount of donation received remained un-utilized in spite of long time gap,” it stated,
It concluded, “The claim that the end use of these funds was initiated for charitable activities remains unproved. The manner in which the funds were collected, is also not understandable as the donations were collected and parked in the bank accounts of the relatives of the assessee.”
The Tribunal noted that the funds crowdsourced by Rana Ayyub did not qualify for ‘tax exemption’ and has been rightly taxed as her income for the Assessment years 2021–22 and 2022–23.
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