Lok Sabha passed the Benami Transactions (Prohibition) Amendment Bill, 2015, that seeks to check generation of black money on July 27. The bill provides for confiscation of benami properties and assets held in the name of another person or under a fictitious name to avoid taxation and conceal ill-gotten wealth.
Who is a Benami?
- Benami is a Persian language word that means “property without a name” or “no name”. In this Act, the word is used to define a transaction in which the real beneficiary is not the one in whose name the property is purchased. As a result, the person in whose name the property is purchased is just a mask of the real beneficiary.
- Benami transaction’ means any transaction in which property is transferred to one person for a consideration paid or provided by another person.
The person on whose name the property has been purchased is called the benamidar and the property so purchased is called the benami property and the person who has financed the said purchased is referred to as the real owner.
- 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.
Some points to be noted under these transactions:-
i. The beneficial ownership vests on the real owner.
ii. The benamidar bears the apparent title as described in the Tranfer of Property Act,1882.
iii. 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.
iv. The name of that person, benamidar, is an alias for that of the person beneficially interested the real owner.
Prohibition Bill, 2015:-
This bill governs:-
- To amend the definition of benami transactions,
- To establish adjudicating authorities and an Appellate Tribunal to deal with benami transactions, and
- To specify the penalty for entering into benami transactions.
The bill provides for a fine of up to 25% of the fair value of the asset and imprisonment of up to seven years, unlike an earlier lapsed version of the bill, which stipulated either a fine or imprisonment.
♦ Under the Act, the penalty for entering into benami transactions is imprisonment up to three years, or a fine, or both. The Bill seeks to change this penalty to rigorous imprisonment of one year up to seven years, and a fine which may extend to 25% of the fair market value of the benami property.
♦ The Bill also specifies 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.
♦ There is Section 58 under the law which clearly states that charitable or religious organisation properties, the government has power to exempt those.
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.
This bill is considered as the summarizer of government’s efforts to curb black money and provides for confiscation of assets held in the name of another person or under a fictitious name to avoid taxation and to conceal illegally obtained wealth.