Real Estate sector is evolving at a tremendous pace after the introduction of the Real Estate Act, 2016 and the Goods and Services Tax, Act. Adding steam to this is the new add on to the platter, the Benami Transactions (Prohibition) Amendment Act, 2016 (“Benami Amendment Act, 2016”). The first question that strikes our mind is why there is so much buzz about the Benami Amendment Act, 2016, when we already had the Benami Transactions (Prohibition) Act, 1988 (Benami Act, 1988) in force?
The Benami Act, 1988 was framed with the objective of banning transfer of benami properties and recovery of such properties. However, the act failed to achieve its purpose due to the absence of a clear definition for benami property and the lack of defined procedures for the strict implementation of the Act. This gave immense discretionary powers to the authorities and consequently, it was bluntly violated. Hence the need was felt to bring about a more stringent law to help bring an end to tax evasion and laundering of black money.
Here is a quick glance at the new amendments:
- What is a Benami Property?
The previous Benami Act, 1988, missed the sanctity of the whole objective as there was no clear-cut definition of the Benami Property. The amendment has brought life to the Act by defining the Benami Property. The act not only factor in the Benami property but also covers the proceeds from such property.
Let us understand the term ‘benami property’. It refers to a property held by one person (beneficial owner) with the title deed of the property in the name of another person (benamidar). Here is an example: ‘A’ buys a property, pays consideration and takes possession of the property. But in the Sale Deed, “A” shows the buyer’s name as ‘B’ while B is either a fictitious entity or a person not connected to the property. Such type of transactions are termed as benami transactions and the properties declared as benami properties.
- Exceptions are clearly outlined
Don’t get worried, all the properties which are bought in someone else’s name are not Benami Properties. Let’s look at the exceptions below:
- Karta or any member of the Hindu Undivided Family (HUF), holding a property wherein the consideration is paid by HUF;
- A Person paying consideration but purchasing the property in the name of his spouse or children;
- A Person paying consideration from his known source of income, but purchasing the property under joint ownership i.e. in his name and his brother’s or sister’s or lineal ascendants or decedents [lineal ascendant include father, mother, grandfather and grandmother and similarly the lineal descendant will include children and grandchildren];
- A Person representing the benefit of another person or entity, for instance Trustee of a Trust, Partner of a Firm, Director of a Company or any other person for such purpose;
- Part Performance of a Contract. For instance, A has been allowed to take possession of the Property but the ownership has not been transferred from B to A.
- Punishment Extended
In the earlier Benami Act, the punishment was up to 3 years which is now extended up to 7 years. The liability to fine increased to 25% of the market value of the property.
- Roles and Responsibilities of the Authorities
One of the biggest drawbacks of the earlier Benami Act, 1988 was that while it aimed at prohibiting benami transactions, it left room for procedural ambiguity. That has been addressed in the Benami Amendment Act, 2016 by defining the roles and responsibilities of each authority. Let us see how.
|Authorities||Roles and Responsibilities|
|Initiating Officer||Conducts inquiry on person, place, property, documents etc. and attaches the property as benami.|
|Approving Authority||Grants approval to the Initiating Officer prior to initiation of the inquiry or attachment.|
|Adjudicating Authority||On any attachment inquiry being conducted by the Initiating Officer, the Adjudicating Authority hears the affected parties and passes an Order. If the Authority finds such property to be a benami property, it can pass an Order for confiscation of the property.|
|Administrator||To receive, possess and manage the property once an Order of Confiscation is passed.|
- Provision of Appeal
By virtue of the new amendment, the affected parties can challenge the order of the Adjudicating Authority by filing an appeal before the Appellate Tribunal formed under the Act to exclusively deal with the matters pertaining to the transaction of benami property. Further, the order of the Appellate Tribunal can be appealed against in High Courts.
- To set Special Courts
To expedite the trial proceedings and conclude the trial within six months from the date of filing of the complaint.
We hope this article would have helped you understand the new Benami Amendment Act better. We hope to publish more such articles on property and related matters in this space in the coming days.