Validity of Amendments Proposed to FCRA – Supreme Court Upholds in Noel Harper

[2022] 137 taxmann.com 291 (Article)

Certain amendments made to Foreign Contribution (Regulation) Act, 2010 were made vide Foreign Contribution (Regulation) Amendment Act, 2020 and the same were given effect from 29.09.2020. The Government has proposed the said amendments after taking into the consideration the rampant misusage and abuse of the Foreign Contribution (Regulation) Act, 2010 (for brevity ‘FCRA’).

The Government after noticing that allowing the transfer of foreign contribution by recipient to another transferee has created a huge layers of transactions, thereby found it difficult to trace and find whether the donations are being used for the reason that they were being received. Further, the current law allows utilisation of 50% of the amount received qua donation for meeting the administrative expenses. With the above two provisions in place, certain entities deployed strategies to divert the donations and expend the majority amount towards administrative expenses, leaving a miniscule amount to be spent for the ultimate purpose for which the donation was received. The amendment act proposed to prohibit the transfer of foreign contributions (donations) to another third party/transferee, thereby putting the complete onus of spending on the recipient. Further, the cap on the administrative expenses was brought down to 20% from the existing 50%. In addition to the above changes, the amendment act also proposed the persons who are willing to take registrations or prior permission for receipt of foreign contribution, to open an account with a designated bank unlike the current procedure of opening the bank account at the choice of applicant.

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