ABC Pvt. Ltd. who has been granted certificate to receive foreign contribution, receives foreign contribution for administrative purpose but it invests whole amount of contribution in the mutual funds. Discuss whether AB

According to Section 8 of the Foreign Contribution (Regulation) Act, 2010, every person, who is registered and granted a certificate or given prior permission under the Act and receives any foreign contribution, (a) shall utilise such contribution for the purposes for which the contribution has been received: Provided that any foreign contribution or any income arising out of it shall not be used for speculative business: Provided further that the Central Government shall, by rules, specify the activities or business which shall be construed as speculative business for the purpose of this Section; (b) shall not defray as far as possible such sum, not exceeding twenty percent of such contribution, received in a financial year, to meet administrative expenses. Provided that administrative expenses exceeding twenty percent of such contribution may be defrayed with prior approval of the Central Government. The Central Government may prescribe the elements which shall be included in the administrative expenses and the manner in which the administrative expenses shall be calculated. Administrative Expenses as per Rule 5 of Foreign Contribution Regulation Rules, 2011 includes salaries, rent, utilities, travel, legal and professional fees, etc. Investment in mutual funds is not considered an administrative expense and is not a permissible use of foreign contribution. ABC Pvt. Ltd. received foreign contribution for administrative purposes but invested the entire amount in mutual funds, which does not qualify as administrative expenditure. Therefore, this is not permissible under Section 8 of the of the Foreign Contribution (Regulation) Act, 2010.