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The Benami Transactions Prohibition (Amendment) Act 2016 has taken shape and is no longer referred to as a “Paper Tiger.” Before it was passed, the act was the subject of much debate and deliberation. Much has been said both for and against the enactment, demonstrating its complication and vexed nature. Despite differing viewpoints, the legislation is based on a strong belief in the evil of “Benami,” which the legislature has repeatedly stated. The legislature’s zeal to go to great lengths to eradicate the evil raises concerns for those who have been harmed in these transactions and will most likely face serious consequences, as well as those who acted out of habit or psychology.
It is critical that the legislation is viewed in its proper context and that the goal for which it was enacted is met. The Act’s peculiar operation can be seen as a conflict between a larger public interest (the abolition of illegal means and resources) and equity and justice (exclusion of genuine transactions).
This makes our job as professionals very difficult, and it necessitates our core expertise and skill for its implementation. An attempt is made to examine the Enactment from a broader perspective in order to extract the important principles that are likely to emerge from the process.
Benami – Meaning
Benami is a Japanese word that means “without a name.” It refers to the transfer of a property into a person’s name without the intention of transferring the beneficial interest to that person. While he has only ostensible title to the property and no beneficial interest in it, such a person is known as a benamidar or a name lender. The real owner retains beneficial ownership.
Background
In 1973, after reviewing various laws and the existing Benami system, the Indian Law Commission recommended that a law be drafted to address the issue. Consequently, the Benami Transactions (Prohibition) Act 1988 was passed by Parliament and came into force on 19 May 1988.
However, due to various flaws in the law, the necessary rules to implement the law have not yet been determined. To address these shortcomings, the Government of India has passed the Benami Transactions (Prohibition) Act 2011
In order to curb black money, the Modi government decided in July 2016 to amend the original law, which was later passed by the Indian Parliament as the “Benami Transaction Amendment (Prohibition) 2016”. Subsequently, the government notified that the law came into effect on November 1, 2016. The Mint newspaper reported that the Benami Act, along with the Dark Money (Undisclosed Foreign Income and Assets) and Taxation Act of 2015, would help the government combat dark money at home and abroad. The 2016 law also provides safeguards such as judicial competence and appeal procedures.
The law “prohibits Benami’s illegal dealings and provides for imprisonment of up to seven years and fines for violations of up to 25% of the fair market value of Benami’s property.
Provisions for Mitigation and/or Modification
As a result, provisions under various laws were enacted that modified the above-mentioned Benami Doctrine. The purpose of such provisions was to address dishonest or illegal motives in benami transactions. The Code of Civil Procedure and the Income Tax Act both contain these provisions. No suit shall be maintained against any person claiming title under a purchase certified by the Court in such manner as may be prescribed on the ground that the purchase was made on behalf of the plaintiff or on behalf of someone through whom the plaintiff claims, according to Section 66 of the Civil Procedure Code.
This provision made it illegal for anyone to file a suit to claim any right in property held as benami or to use Benami as a defence. For such transactions, legal remedies have been removed. Similar provisions were addressed in sections 64, 281 and 281A. Although Section 281A did not expressly prohibit Benami Transactions, it did require that the prescribed authorities be notified if Benami was to be used as the basis of a lawsuit. This ensured that the income tax authorities were aware of the alleged Benami transaction.
Conclusion
To curb the flow of black money in the economy, the government is proposing a series of measures to curb it. And this act takes precedence among them. An action under any law (the Benami Transactions (Prohibition) Amendment Act 2016 or the Income Tax Act 1961) will not exempt the person from the strictures of other laws. The scope of the Act has been expanded by making HMRC the centre for oversight of the Act’s provisions. Using the latest data mining tools can bite people trading and facing the economy and make it hard to sleep for those involved in Benami trading.
