Benami Transactions

The Parliament has passed the Benami Transactions (Prohibition) Amendment Bill, 2015.

These include cases when a property is held by: (i) a member of a Hindu undivided family, and is being held for his or another family member’s benefit, and has been provided for or paid off from sources of income of that family; (ii) a person in a fiduciary capacity; (iii) a person in the name of his spouse or child, and the property has been paid for from the person’s income.

Reasons for benami transactions

1. 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 by laws.

2. 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.

3. Benami transactions were also used as a way to conceal black money obtained through corrupt practises.

Institutional structure for curbing the benami transactions

1. The Bill seeks to establish four authorities to conduct inquiries or investigations regarding benami transactions: (i) Initiating Officer, (ii) Approving Authority, (iii) Administrator and (iv) Adjudicating Authority.

2. If an Initiating Officer believes that a person is a benamidar, he may issue a notice to that person.  The Initiating Officer may hold the property for 90 days from the date of issue of the notice, subject to permission from the Approving Authority.  At the end of the notice period, the Initiating Officer may pass an order to continue the holding of the property.

3. If an order is passed to continue holding the property, the Initiating Officer will refer the case to the Adjudicating Authority.  The Adjudicating Authority will examine all documents and evidence relating to the matter and then pass an order on whether or not to hold the property as benami.

4. Based on an order to confiscate the benami property, the Administrator will receive and manage the property in a manner and subject to conditions as prescribed.

5. The Bill also seeks to establish an Appellate Tribunal to hear appeals against any orders passed by the Adjudicating Authority.  Appeals against orders of the Appellate Tribunal will lie to the high court.

The penalty for providing false information to be rigorous imprisonment of six months up to five years, and a fine which may extend to 10% of the fair market value of the benami property will also be placed.