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BENAMI TRANSACTION
Vis a Vis
Demonetisation !!!!!Presented by:
CA Ashish Kapoor
ContentofPresentation
1. Highlights of demonetisation
2. Prohibition of Benami Property Transactions Act, 1988 – Key points
3. What is a Benami Property ? Can Cash or Stock be treated as a Benami Property ?
4. What is “ Benami Transaction ” ?
5. Exceptions to the Benami Transactions
6. Impact of Benami Transaction
Highlightsofdemonetisation With Demonetisation of ₹ 500 and ₹ 1000 notes w.e.f. 8th of
November, 2016, every person is required to deposit all his cash inhand in his Bank Account before 31/12/2016.
Such Deposition could be enquired by Income Tax Department, w.r.t
Income Tax Act, 1961 and / or
Prohibition of Benami Property Transactions Act, 1988
Prohibition of Benami Property Transactions Act, 1988 – Key points
This Act was introduced on 5th September, 1988 (having only 9Sections)
The said Act has been DRASTICALLY amended with effect from 1st
November, 2016. (Now having 72 Section)
Demonetisation was declared 7 days after the said amended actwas notified!!!
The said act shall be monitored by Ministry of Finance GOI.
The “Initiating officer” & “Approving Authority” shall be officers ofIncome tax Department.
“Adjudicating Authority” & “Appellate Tribunal” shall be off thePrevention of Money-Laundering Act, 2002.
What is a “Benami Property” ? Can CASH or STOCK be treated as a Benami Property ?
“Benami Property” means any PROPERTY which is the subjectmatter of a “BENAMI TRANSACTION” and also includes theproceeds from such property. (Section 2(8)).
“Property” means an asset of any kind, whether movable orimmovable (Thus, Cash is a Property and Stock in Trade is also aProperty as per this Act),
tangible or intangible, corporeal orincorporeal and includes any right or interest or legal documentsor instruments evidencing title to or interest in the property andwhere the property is capable of conversion into some other form,then the property in the converted form and also includes theproceeds from the property. (Section 2(26)).
What is “ Benami Transaction ” ?Benami Transaction - Section 2(9)
A. A transaction or an arrangement in respect of a property carriedout or made in a fictitious name;For Eg: Sale of stock in trade is made to a fictitious person.
or B. A transaction or an arrangement in respect of a property where
the owner of the property is not aware of, or, denies knowledgeof, such ownership;For Eg: A sum of ₹ 50,000 is deposited in the Bank Account of Mr A. But MrA is unware about such deposition or he denies ownership of such cash sodeposited into his account. 8
What is “ Benami Transaction ” ?C. A transaction or an arrangement in respect of a property, where
the person providing the cash is not traceable or is fictitious.
For Eg: Where a sum of ₹ 50,000 is deposited into Mr A’s account.But the depositor is either untraceable or fictitious.
Where sale is made on or after 1st November 2016, but the buyer is not traceable or is fictitious.
Or
What is “ Benami Transaction ” ?
D. Where a property is transferred to, or is held by, a person, and
such property has been provided, or paid by, another person
And
the property is held for the immediate or future benefit, direct
or indirect, of the person who has provided the such property.
Exceptions to the Benami Transactions
Following transactions shall not be treated as “Benami”, Anyproperty held by:- The karta /members of the HUF for his benefit or for the benefit of
members and such amount is paid out of the known sources of theHUF. The person standing in ‘fiduciary capacity’ for the benefit of those
for whom he stands in this capacity and includes a trustee,executor, partner, director etc. A person being an individual in the name of his spouse or in the
name of any child of such individual and the consideration forsuch property has been provided or paid out of the known sourcesof the individual
Exceptions to the Benami Transactions
Any property held by, any 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 descendent 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.
Exceptions to the Benami Transactions Any transaction involving the allowing of possession of any
property to be taken or retained in part performance of a contractreferred to in section 53A of the Transfer of Property Act, 1882 (4 of1882), if, under any law for the time being in force,
i. consideration for such property has been provided by the personto whom possession of property has been allowed but the personwho has granted possession thereof continues to hold ownershipof such property;
ii.Stamp duty on such transaction or arrangement has been paid;and
iii.the contract has been registered;10
Impact of Benami TransactionBefore we discuss the Impact lets understand the meaning of
“Benamidar"
It means 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. (Section 2(12)
“Beneficial owner"
It means a person, whether his identity is known or not, for whose benefit the benami property is held by a benamidar;
Impact of Benami Transaction Any person found guilty of offence under this act shall bear following
consequences:
100% of the benami property will be confiscated. (Section 5)
Rigorous imprisonment for a term ranging from 1 year to 7 years
Levy of fine amounting to at most 25% of fair market value of thebenami property (Section 53)
Any person who gives false information:
Shall be punishable with rigorous imprisonment for a term rangingfrom 6 months to 5 years
Levy of fine amounting to at most 10% of fair market value of thebenami property.
No prosecution shall be instituted without the previous sanction of theBoard. 11
Impact of Benami Transaction Prohibition on re-transfer of property by benamidar. No person, being a benamidar shall re-transfer the benami property
held by him to the beneficial owner or any other person acting on hisbehalf.
Where any property is re-transferred in contravention of theprovisions of sub-section (1), the transaction of such property shall bedeemed to be null and void.
The above provision shall not apply to a transfer made in accordancewith the provisions of section 190 of the Finance Act, 2016.
Prohibition of the right to recover property held benami. No suit, claim or action to enforce any right in respect of any property
held benami against the benamidar shall lie by or on behalf of theBeneficial owner.
