What havoc Benami transactions has caused to our system? Exordium
Transactions that qualify as Benami? The exigency for the amendment,2016
Punishment Re-transfer of property Some landmark cases that clear the stand of
law: Field of vision Conclusion Evading taxes through investing in assets with
some other name and also getting a return on investment for your black money?
Seems good right? The amendment of 2016 in Benami transactions bill, you will
not like and this attracts rigorous imprisonments for the said act.
As we are Indians and inventors of great solutions; one such solution for this
is transferring the property again when you get to know that you can be
interrogated and declared it in good faith? Lawmakers too have many solutions.
Let's analyze these situations and make people aware that Benami transactions
will not be easy anymore.
Transactions that qualify as Benami?
- The Benami Transaction (Prohibition Act, 1988) The Benami Transactions
(Prohibition) Act, 1988 was enacted to prohibit Benami transactions and the
right to recover property held by Benami and for matters connected
therewith. Benami literally means without a name.
In this Act, the word Benami is used to refer to a property/asset with no name attached to it. The
actual owner is not the person who has the legal title to the property. This
act is essential to govern the flow of black money invested in assets and
not hoarding cash. Assets in this act comprise property, shares, debentures,
fixed deposits, and bank accounts are held by one person for another.
There are some terms required to begin the journey - \Section 2(10) defines
Benamidar as Benamidar 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) defines a Beneficial
owner as Beneficial owner means a person, whether his identity is known or
not, for whose benefit the Benami property is held by a benamidar. The
beneficial owner provides or pays consideration for the purchase of the
property. A beneficial owner can be any person. Section 2(16) defines Fair
market value as:
- the price that the property would ordinarily fetch on sale in the open
market on the date of the transaction; and
- where the price referred to in subclause (I) is not ascertainable, such price may be determined in such
manner as prescribed in Rule 3 of Prohibition of Benami Transactions Rules,
Let's discuss some of the examples for better understanding
- a transaction where the property is transferred or to held by one person
and the consideration for such property paid by another person and
- property held for immediate or future benefit of the person who gave the
consideration, Except When Property Is Held By:
- Karta or Member of HUF
- a person in a fiduciary capacity for the benefit of another person like
a trustee, partner, director of the company, or depository as an agent of
the actual buyer.
- an individual in name of spouse and child
- Joint owners (brother or sister, lineal ascendant or descendant.
- transaction in a fictitious name.
- a transaction where the owner of the property is unaware or denies
- a transaction where the source of consideration is unknown. (Not
The exigency for the amendment, 2016
- Mr. X, a non-resident Indian, purchased a flat for 10,00,000 in the
joint name of his brother and himself and made the payment from an unknown
- Mr. Y a resident Indian, purchased a flat for 10,00,000 in the name of
his son a USA resident but he denies the ownership of the flat.
- Mr. B a resident Indian sold a flat that was not in his name and was in
an unknown person's name. But deposited the sale proceeds in his own
- Mr. K, a resident Indian, a flat was purchased for 10,00,000, and
payment was made by an unknown person.
Before the amendment, the punishment for Benami transactions was:
3 years of jail, a fine, or both. After the amendment, the punishment faced will
be rigorous imprisonment for up to 7 years and a fine of up to 25% of the fair
market value of such property.
As time grows laws get outdated and inefficient for protecting the rights of
people and rules laid by the government.
Re-transfer of property
If it is re-transferred then it will be declared null and void unless as per
section 190 of Finance Act, 2016, where if the undisclosed property could be
disclosed then it will be valid.
The whole process affects the revenue generation of the government and hampers
the growth and development of the country. Since the percentage of taxpayers in
the country is a miserable low, the government fails to successfully implement
its policies and schemes due to a lack of resources or will. A strong law
against Benami properties is the need of the hour to check corruption.
Some landmark cases that clear the stand of law:
Field of vision
- Bhim Singh & Anr vs Kan Singh (Supreme Court) Key points from the
- The burden to prove a transaction is Benami or not lies on the person who
claims it to be Benami.
- If consideration is paid by a different person other than in whose favor
property is transferred, then purchase is assumed to be for the benefit of
the person who paid consideration.
- The intention of the person who paid consideration is most important.
- The intention is decided on current circumstances, the relationship of
parties, motives behind
- the transaction, and their subsequent conduct.
- Smt. P.Leelavathi vs V. Shankaranarayana Rao Key points:
case of Binapani Paul v. Pratima Ghosh the court had held that the source of
money had never been the sole consideration, and is only merely one of the
relevant considerations but not determinative (deciding) in character. "It is
true that, at the time of purchase of the suit properties, some financial
assistance was given by Late G. Venkata Rao.
However, as observed by this Court
in the aforesaid decisions, that cannot be the sole determinative
factor/circumstance to hold the transaction Benami in nature. It is not a Benami
transaction. Only financial assistance by the father in purchasing the property
will not confer it to be a Benami transaction.
- Niharika Jain W/o Shri Andesh Jain Vs Union of India Key points: The
Rajasthan High Court observed that-Unless a contrary intention is reflected, a
legislation is presumed and intended to be prospective. Where an amendment
affects rights or imposes obligations or casts a new duty or attaches a new
disability is to be treated as prospective. Accordingly, the Rajasthan High
Court threw the entire transactions entered by the petitioner before amendment
out of the purview of the Benami Act.
- The government took a great stance by amending the laws rather than
getting new ones. An amendment was issued instead of a new Act because if a
new Act was introduced then the transaction entered from 1988 to 2016 would
get protection as the law does not allow retrospective punishment
- People intentionally do this to avoid payment to the creditors and by
doing so they are hindering the revenue system in two ways; first for their
creditors by increasing their bad debt and secondly by evading taxes
themselves encouraging the use of black money.
- Benami transactions especially in the real estate market prevail,
skyrocketing the prices of lands because people who purchase lands in this
way are ready to give more prices without disclosing to the government
creating an imbalance between price on paper and price in real.
- Benami transactions in foreign currency are still the regular practice
among businesses and a big loss for the Indian government as we can't trace
the account; the steps have been taken but still much more effort is still
- In India, the currency for Benami is gold also and it has a very wide
scope for embezzlement. There is a practice in markets: people book gold
with some other name and consideration is given by some other person.
Revenue for the government is still embezzled and Indian people actually have
methods but the government now has become stringent in many ways, these days we
are seeing covid frauds and it is also related to our topic; Benami person
booking an injection on some other’s name (prescription) and then black
marketing starts. This example above is the small scenario we have discussed
some really big problems in our article above to curb these transactions and
work for strengthening the economy and people of this country.