BRIEF BENAMI TRANSACTION ACT, 2013
BRIEF BENAMI TRANSACTION ACT, 2013
The recently cleared amendment to Benami
Transaction (Prohibition) Amendment Act, 2016 indicates the resolve of the
Government of India to control the menace of black money and its by-product
Benami transactions with the new stringent law and its effective
implementation.
It
looks like our PM will be hooking up several shikaars as the current demonetization
drive is just the beginning of anti-corruption stir and will spur on a number
of measures to rid India of its corrupt image: a warning has been issued by our
PM Narendra Modi, who has said clearly in
Goa, “I am not going to stop at this. I will expose the history of corruption
of 70 years since Independence.
The Benami Transactions (Prohibition) Amendment Bill, 2015 was
introduced in the Lok Sabha on May 13, 2015 to amend the Benami Transactions
Act of 1988. The Amendment Bill received the presidential assent on August 10,
2016 and the Benami Transactions (Prohibition) Amendment Act, 2016 (hereinafter
referred as the “Amendment Act, 2016”) was brought into force. The rules and
all the provisions of the Benami Transactions (Prohibition) Act, came into
force on November 1, 2016.
India has a new law on Benami Transactions- STRINGENT Law:
Highlights of the Act:
· Up to seven years'
imprisonment and fine for indulging in benami transactions.
· Furnishing false
information is punishable by imprisonment up to five years and fine.
· Properties held
benami are liable for Confiscation by
government without compensation.
o
holding the property and may then refer case
to Adjudicating Authority.
·
Adjudicating
Authority will then examine evidence and pass an order.
·
Appellate Tribunal
will hear appeals against orders of Adjudicating Authority.
·
High Court to hear
appeals against orders of Appellate Tribunal.
Legislature
Background:
The Benami Transactions
(Prohibition) Amendment Act, 2016 is an amendment of the older Benami Transactions
(Prohibition) Act 1988.
·
The
Amendment Bill, 2015 was first introduced in the Lok Sabha last year, on May
13, 2016 by Finance Minister Arun Jaitley.
·
Then
referred to by a Standing Committee on Finance.
·
The
Committee submitted its report on April 28, 2016.
·
Then
amendments proposed by Government to the Amendment Bill, 2015 on July 22nd
, 2016.
·
Amendment
Bill Passed by the Lok Sabha on July 27, 2016
· Approved
by the Rajya Sabha on August 2, 2016
The Amendment Bill received the presidential
assent on August 10, 2016 and the Benami Transactions (Prohibition) Amendment
Act, 2016 (hereinafter referred as the “Amendment Act, 2016”) was brought into
force.
What is Benami?
Benami essentially means property without
a name. The term “Benami” has its origin from the Persian language.
Benami property or assets, therefore, is a reference to property/assets whose
actual owner is not the person in whose name it is.
Benami deals have been quite common in India; cases date back to the
late nineteenth century, So the practice has got judicial recognition. Not all
benami transactions are illegal.
Benami transactions proliferated during India’s socialist past. Large
scale benami deals happened when land reforms entailed the abolition of
zamindari, giving tillers rights to own the land as well as imposition of
agricultural land ceilings. (In urban areas, this became quite rampant after
the passage of the now-scrapped Urban Land (Ceiling and Regulation) Act, 1976.
The concern on Benami transaction comes into light with full energy, in
the year 2014 “in the election manifesto of the political party now in power at
the Centre, i.e., the Bharatiya Janata Party”
[1]Meaning of Benami
as per ‘Merriam Webster” dictionary: made, held, done, or transacted in the
name of (another person) —used in Hindu law to designate a transaction,
contract, or property that is made or held under a name that is fictitious or
is that of a third party who holds as [2]ostensible
owner for the principal or beneficial owner.
Denotation of Benami property:
As per Clause 2(8) of Benami Transactions (Prohibition) Amendment Act,
2016 Benami Property “means any [3]Property
which is the
§ subject matter of a benami
transaction and
§ also includes the proceeds from such
property”
Legal Meaning of Property: As per
clause 2(26)
“Property"
means assets of any kind, whether
·
movable or immovable,
·
corporeal or incorporeal and
includes any right or interest or legal documents or instruments
evidencing title to or interest in the property and where the property is
capable of conversion into some other form, then the property in the converted
form and also includes the proceeds from the property;
Factual Gist:
The word benami property means the property which has purchased in the
name of some person other than the person who has financed it. The person who
has rendered the required money for the said purchase has not purchased it in
his name but in the name of some other person’s name. The person who financed
the property has not really purchase and/or purchased it to the benefit of the
person on whose name he has purchased it.
Legal impact:
§ The beneficial ownership vests on the real owner.
§ The benamidar bears the ostensible title as described in
the Tranfer of Property Act,1882.
§ There is no intention to benefit the person in whose name the
transaction is made by the person who has financed the purchase of the
said benami property.
§ The name of that person, benamidar, is an alias for that of the person
beneficially interested the real owner.
Rationale of hold the Benami
property:
There are numerous purposes mainly of those are illegal ones and only
to accomplish the illegal intentions of the populace:
§ The Benami transactions were made in order to find a way with the land
ceiling laws, so the real owner can have more landed properties than provided
in the abovementioned laws.
§ The abovementioned transactions are made to transfer the property in
the name of the relatives of the real owner or some other’s name to evade
taxation as provided by the tax laws.
§ Benami transactions were also used as a way to conceal black money
obtained through corrupt practices.
What
is Benami transaction?
As per Section Clause 2(9) of Benami Transactions (Prohibition)
Amendment Act, 2016 Benami Transactions are as follow:
Table-A
S. No.
|
TRANSACTIONS CONSIDERED AS BENAMI TRANSACTION
|
a)
|
(i) A Transaction or an arrangement:
§
where a property is transferred to, or is held by, a [5]person,
and
§
the consideration for such
property has been provided, or paid by, another person; and
(ii)The
property is held for the immediate or future benefit, direct or indirect,
of the person who has
provided the consideration
There are some exemptions in point
(ii) as given below in Table – B
|
b)
|
A transaction or an arrangement in
respect of a property carried out or made in a [6]fictitious
name.
|
c)
|
A Transaction or an arrangement in respect
of a property where the owner of the
property is not aware of, or, [7]denies knowledge of, such ownership;
|
d)
|
A transaction or an arrangement in
respect of a property where the person
providing the consideration is not
traceable or is fictitious
|
Table-B
S. No.
|
TRANSACTIONS NOT CONSIDERED AS BENAMI
TRANSACTION
|
The property is held
for the immediate or future benefit, direct or indirect, of the person who has provided the consideration except
when the property is held by
|
|
i.
|
a Karta, or a
member of a Hindu undivided family,
as the case may be, and the property is held for his benefit or benefit
of other members in the family and the consideration for such property has
been provided or paid out of the known sources of the Hindu undivided family
|
ii.
|
a person standing in a fiduciary capacity for the benefit of another person
towards whom he stands in such capacity and includes a trustee, executor, partner, director of a company, a depository or
a participant as an agent of a depository under the Depositories Act,
1996 and any other
|
iii.
|
[8]any person being an
individual in the name of his spouse
or in the name of any child of such individual and the consideration
for such property has been provided or paid out of the known sources of the individual
|
iv.
|
7any person in the name of his brother or sister or lineal
ascendant or descendant, where the names of brother or sister or
lineal ascendant or descendant and the individual appear as joint-owners in
any document, and the consideration for such property has been provided or
paid out of the known sources of the individual
|
v.
|
any transaction involving the allowing of possession of any property to be taken or retained in
part performance of a contract referred to in section 53A of the
Transfer of Property Act, 1882, if, under any law for the time being in force:
(i) consideration for such property has been provided by the person to
whom
possession of property has
been allowed but the person who has granted
possession thereof
continues to hold ownership of such property;
(ii) stamp duty on such transaction or arrangement has been paid; and
(iii) the contract has been registered.
|
Penalty
Anyone entering into a benami transaction for whatever reason – to
defeat the law, avoid payment of statutory dues or creditors – or abetting such
a transaction is liable for rigorous imprisonment for a period between one and
seven years as well as fine up to 25 per cent of the fair market value of the
property.
Anyone providing false information or providing false documentation
can get rigorous imprisonment of six months to five years and may also have to
pay fine up to 10 per cent of the fair market value of the property.
Conclusion:
This new Benami Transactions (Prohibition) Act
2016 offers a wider scope. With its wider scope the new act will be a
great help to deal with this social fallacy i.e. benami properties. Due to the
narrow and ambiguous scope of the earlier Act many such cases regarding benami
properties could not be solved. But now with the wider and specific
scope of the said such cases can be easily proved in the court of law.
The popular perception of “Benami property”
has now undergone to sea change and it will include all transactions and
arrangements beyond the transactions in respect of immovable property.
There is a saying of Justice Holmes “Taxes
are what we pay for civilized society. I like to pay taxes, with them I buy
civilization .”
The Benami Transactions (Prohibition)
Amendment Act is certainly a very comprehensive piece of legislation and also
very stringent. There could be scope for harassment but how that plays out
remains to be seen
Disclaimer: The entire contents of this document
have been prepared on the basis of relevant provisions and as per the
information existing at the time of the preparation. The observations of the
author are personal view and the authors do not take responsibility of the same
and this cannot be quoted before any authority without the written permission
of the author. Users of this information are expected to refer to the relevant
existing provisions of applicable Laws. The user of the information agrees that
the information is not a professional advice and is subject to change without
notice. I assume no responsibility for the consequences of use of such
information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT,
SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION
WITH THE USE OF THE INFORMATION. This is only a knowledge sharing initiative
and author do not intend to solicit any business or profession.
[3]
The term
`property’ is not confined to a piece of real estate. The definition covers
assets of any kind – moveable or immoveable, tangible or intangible, corporeal
or incorporeal.
[4]
The
transactions relating to shares, securities in limited companies or in
partnership firms or the sale proceeds of such shares will also attract the
provisions of the new law.
[5]
As per Clause 2(24) Person shall include- (i) an
individual, (iI) a Hindu undivided family, (iii) a Company, (iv) a firm an association of persons or a body of individuals, (v) whether incorporated or
not, every artificial juridical person, not falling under sub-clauses (i) to (v)
[6]
As per Merriam Webster law dictionary fictitious meaning “a supposed but in
fact nonexistent person referred to in some legal documents or proceedings”.
In other words
“A fictitious name is an assumed name that differs from an individual's actual name”
[7]
mean to refuse to accept as true or valid
[8]
This provision is new under Amendment Act, 2016, it was not in The Benami
Transaction (Prohibition) Act, 1988
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