Chapter At A Glance

The Benami Transactions (Prohibition) (Amendment) Bill, 2015

The Benami Transactions (Prohibition) Amendment Bill, 2015 was introduced in Lok Sabha on May 13, 2015 by the Minister of Finance Mr. Arun Jaitley.  The Bill seeks to amend the Benami Transactions Prohibition Act, 1988 to: (i) amend the definition of benami transactions, (ii) establish adjudicating authorities and an Appellate Tribunal to deal with benami transactions, and (iii) specify the penalty for entering into benami transactions. The Standing Committee on Finance examined the Bill and submitted its report on April 28, 2016. The government has proposed amendments to the Bill on July 22, 2016. The following table compares the recommendations of the Standing Committee to the proposed amendments.

Table 1: Comparison of the Benami Transactions Bill 2015, recommendations of the Standing Committee, and amendments circulated

Benami Transactions (Prohibition) Amendment Bill 2015

Recommendations of the Standing Committee

Amendments proposed by the government (July 22, 2016)

Exemptions for benami transactions – Clause 4

The Act defines a benami transaction as a transaction where a property is held by or transferred to a person, but has been provided for or paid by another person.

The definition should be amended to exempt bonafide transaction where the consideration has been paid. A transaction should not be considered benami if it involves transfer of immovable property, and is entered by: (i) a registered agreement of sale, (ii) a registered General Power of Attorney, or (iii) registered development agreement on payment of stamp duty.

Standing Committee (SC) recommendation accepted.

Following transaction is not considered benami: A contract for transfer of property which has been partly executed under the Transfer of Property Act, 1882. However, certain conditions should be met, including: i) stamp duty on such a transaction has been paid, and ii) the contract has been registered.

Exemptions for benami transactions – Clause 4

Certain transactions are exempted from being considered as benami transactions. These include an individual purchasing property in the name of his family members using his ‘known sources of income’.

Replace ‘known sources of income’ with ‘known sources’.

SC recommendation accepted.

Conformity to Income Declaration Scheme, Finance Act 2016 – Clause 8

A benami property shall not be re-transferred by the benamidar (who is holding the property) to the beneficial owner (who provided the consideration for the transaction), or any person representing him. If the benami property is re-transferred, it is considered void.

No recommendation.

If the benami property is disclosed as part of the Income Disclosure Scheme of the Finance Act, 2016, then the corresponding provisions of the Bill will not be applicable.

Rights on confiscated properties – Clause 27(3)

When benami property is confiscated all the rights and titles shall vest with the central government.

Since land is a state subject, it would be appropriate for rights on confiscated properties to vest with state governments.

No amendment proposed.

Time limit for Initiating Officer to initiate an investigation – Clause 24(1)

If the Initiating Officer suspects a particular transaction is a benami transaction, he may initiate investigation against such transaction by issuing a notice against the benamidar.

The investigation should be initiated and completed within a specified time frame.

No amendment proposed.

Notice to beneficial owner – Clause 24(2)

If the Initiating Officer believes a transaction to be a benami transaction, he shall issue a notice to the benamidar, and the beneficial owner.

No recommendation.

Notice shall be served to the beneficial owner, if his identity is known.

Time provided by Adjudicating Authority to furnish documents – Clause 26(1) proviso

The Adjudicating Authority may require a benamidar, or a beneficial owner to furnish documents necessary for an investigation within a 30 day time period.

The 30 day time period should be extended to 3 months, considering the state of land records in rural India.

No amendment proposed.

Time limit for disposing of the appeal by an Appellate Tribunal - Clause 46(1)

Appeals against the decisions of the Adjudicating Authority may be filed with the Appellate Tribunal.

A time limit of two years should be imposed for the disposal of the appeal.

No amendment proposed.

Qualifications of Chairperson of the Appellate Tribunal – Clause 32(1)

A sitting or former Judge of the High Court will be qualified to be Chairperson of the Appellate Tribunal.

The Chairperson should have at least five years of experience as a High Court Judge.

SC recommendation accepted.

Right to representation during adjudication of benami property – Clause 28(8) (new section added)

During adjudication of benami properties, the Adjudicating Authority shall provide the benamidar or any person claiming to be the owner of the property, an opportunity to be heard.

An authorised representative should be allowed to represent the benamidar or any person claiming to be the owner of the property.

SC recommendation accepted. An authorised representative will include:

  • A person who is relative of the benamidar, or regularly employed by the benamidar, or

  • Any officer of the scheduled bank with which the benamidar maintains an account, or

  • Any legal practitioner who is entitled to practice in any civil court in India, or

  • Any person who has passed any accountancy exam, or

  • Any person who has acquired such educational qualifications as specified by the Board (Central Board of Direct Taxes).

Sources: Benami Transactions Prohibition (Amendment) Bill, 2015; 28th Report of the Standing Committee on Finance; Notice of Amendments – The Benami Transactions (Prohibition) Amendment Bill, 2015; PRS.

Other observations of the Standing Committee

The Sta

nding Committee made the following additional recommendations:

  • Need for a new legislation: The Income Tax Act, 1961 has adequate provisions to deal with issues of tax evasion and unaccounted wealth, which the Bill is seeking to address. The proposed Bill might result in multiplicity of such provisions. Certain amendments to the Income Tax Act, 1961 to account for unexplained investments made under benami names, will achieve the objectives of the Bill, instead of creating a separate law.

  • Digitization of land records: The Committee noted that benami transactions could be preempted and eliminated by digitization of land records. It noted that amendments in the Transfer of Property Act, 1882 and Registration Act, 1908 may be made to provide for: i) online registration of all immovable properties, ii) linkage of Aadhar and PAN numbers of all parties involved in purchase of a property, and iii) sharing of data by the registration authorities with tax authorities.