India: Benami Transactions (Prohibition) Amendment Act, 2016

Last Updated: 3 January 2017
Article by Lucy Rana and Sanchi Malhotra

Introduction:

In a regime to wash off black money from the Country, the Indian Government took another laudable leap by initiating the Benami Transactions Bill, 2015 for amending the Benami Transactions (Prohibition) Act, 1988. The Benami Transactions (Prohibition) Amendment Act, 2016(hereinafter referred to as the "Act") received the President's assent on August 10, 2016 and has come into force from November 1, 2016. The Act provides for expedite procedures to deal with benami property, authorities to execute such procedures and stringent punishment for offenders. In other words, the Act makes the erstwhile Act more executable and practicable.

There are many forms of transactions where people prefer to deal in another person's name instead of their own, either to evade taxation, to surpass property ceiling laws or to invest their black money etc. It was also a prevalent custom in traditional Hindu families to buy properties in the name of daughters, sons, fathers or wives. The Act seeks to deal with all such transactions which are carried out by a certain person but the consideration is provided and benefits are availed by some other person. With this, the beneficiary/financer enjoys the property but does not fulfill legal responsibilities towards such properties. This article discusses the major implications of the amended Act.

What is a Benami Transaction? Who is a Benamidar?

A benami transaction, as defined under Section 2(9) of the Act is a transaction in which:

  1. the property is held by one person and paid for by another; or
  2. it is held in a fictitious name; or
  3. the owner of such property is unaware of or denies having knowledge of such ownership; or
  4. the person financing such transaction is not traceable.

However, the Act prescribes certain exceptions to benami transactions under Section 2(9). These exceptions include property held by:

  1. karta for his or his family member's benefit; or
  2. a person standing in fiduciary capacity for the benefit of another, including a trustee, an executor, a partner, a company director or a depository participant or agent; or
  3. a person for the benefit of his spouse or child; or
  4. a brother or sister or lineal ascendant or descendent.

Provided the consideration paid for such transactions comes from known and traceable resources.

Also, the Central Government may, by notification, exempt any property relating to charitable or religious trusts from the operation of this Act.

A Benami transaction applies to properties (assets) whether movable or immovable, tangible or intangible, corporeal or incorporeal. A Benamidar is a person or a fictitious person, as the case may be, in whose name the benami property is transferred or held and includes a person who lends his name.

What are the Authorities established under the Act?

The Act provides for 4 major Authorities ie. The Initiating Officer, the Approving Authority, the Administrator and the Adjudicating Authority as appointed by the Central Government. The office of the Initiating Officer will be held by an officer who is the Assistant Commissioner or a Deputy Commissioner as required by the Income Tax Act, 1961. The authorities will have the same powers as those of the Civil Courts under Civil Procedure Code, 1908.

What will happen to the Benami Property?

1. Issuing a show cause notice:

If, upon the material available to the Initiating Officer, he has reason to believe that any person is a benamidar in respect of a property, he may, issue a notice to the person to show cause why the property should not be treated as benami property within the time specified in the notice. He must record the reasons in writing.

2. Effect of Alienation after notice:

If any person, after receiving a show cause notice from the Initiating Officer in respect of any property, attempts to alienate that property, such a transaction will be held null and void.

3. Provisional Attachment:

If the Initiating Officer has reason to believe that the property held is a benami property and the notified person may alienate such property during the period specified in the notice, he may, by order in writing, attach provisionally the property in the manner as may be prescribed, for a period not exceeding ninety days from the date of issue of notice. Before attaching the property, he must seek the approval of the Approving Authority. This provisional attachment can be continued by an order passed by the Initiating Officer.

4. Reference to Adjudicating Authority:

Where the Initiating Officer passes an order continuing the provisional attachment of the property

or passes an order provisionally attaching the property, he shall, within fifteen days from the date of the attachment, draw up a statement of the case and refer it to the Adjudicating Authority.

5. Attachment and Confiscation:

Upon providing notice (within a period of 30 days of receiving reference) and a subsequent reasonable opportunity of hearing to the benamidar the Adjudicating Authority may pass an order either revoking or confirming the order of Attachment. The Adjudicating Authority shall, after giving an opportunity of being heard to the person concerned, make an order confiscating the property held to be a benami property.

Where an order of confiscation has been made, all the rights and title in such property shall vest absolutely in the Central Government, free from all encumbrances and no compensation shall be payable in respect of such confiscation.

An appeal from the order of the Adjudicating Authority can be made to the Appellate Tribunal established under the Act, within 45 days of the date of such order.

6. Administration

The Administrator shall have the power to receive and manage the property, in relation to which an order of confiscation is made. He is empowered to take such measures as are necessary for managing such property. He also has the powers to enforce possession by giving reasonable notice to the occupier of such property.

What are the Penalties under this Act?

The Act prescribes that whoever is found guilty of the offence of a benami transaction shall be punishable with rigorous imprisonment for a term which shall not be less than 1 year, but which may extend to 7 years and shall also be liable to fine which may extend to 25 % of the fair market value of the property. Further, if any person knowingly provides false information to any authority or furnishes any false document he/she shall be punishable with rigorous imprisonment for a term which shall not be less than 6 months but which may extend to five years and shall also be liable to fine which may extend to 10% of the fair market value of the property.

These provisions of penalty are stricter than those given in the erstwhile Act, which prescribed penalty by way of imprisonment only upto 3 years. Also, there was no provision related to fine in the earlier Act.

Conclusion:

The detailed procedure and authorities prescribed under the Act are appreciable as they will

expedite the process of adjudication. The Act is a considerable leap in the regime for eradication of black money. The subsequent rapid developments of demonetization, amendments to the income tax laws and introduction of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 altogether form a tough barricade for cornering corruption and making it difficult for the corrupt to escape. There is evident optimism in the Nation and even the remotest of places are showcasing support Indian Government's regime against black money.

It is further notable, that all these new policies of the Government directly or indirectly lead towards a cashless (transactions) society (and maybe later towards a classless one!).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Lucy Rana
Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions