The Benami Transactions (Prohibition) Act, 1988 was amended by the Benami Transaction (Prohibition) Amendment Act, 2016, in which substantial provisions were added to the existing Act to provide extraordinary powers to keep a limit on the Benami Transactions and impound the Properties which are Benami in nature. The act is also renamed as Prohibition of Benami Property Transactions Act, 1988 and came into force on 1st November 2016. Through the amended Act, the term Benami Transaction is expanded and provides the rigorous imprisonment for up to seven years along with the fine which may extend to 25 percent of the fair market value of the Benami Property.
BENAMI PROPERTY
Before we proceed further, it is necessary to understand the term Benami Property. The basic meaning of Benami is the property which is bought by an individual but not under his or her name but at somebody else's name is known as Benami property. It includes all the property which is held in the name of third person like children or spouse and the amount for that property is paid by unknown sources of income. The transaction involved in the same is called Benami transaction. People invest their money in buying Benami property to evade taxation. Furthermore, the true owners of these properties are hard to find due to fake identities and name. The person on whose name the property is bought is called 'benamdar'. The Benami transactions include buying any kind of assets — movable, immovable, tangible, intangible, any right or interest, or legal documents.
CONCEPT OF BENAMI PROPERTY AND BENAMI TRANSACTION UNDER THE 2016 ACT
Under the 2016 Act, the term "Benami Property" under section 1(8) has been defined as under:
A Benami Property means any property which is the subject matter of a Benami transactionAlso includes the proceeds from such property.
The definition of property under 2016 Act include assets of any kind, whether movable or immovable, tangible or intangible, corporeal or incorporeal.
Under Section 1 (9) of the 2016 Act, the term "Benami Transaction" has been defined as under:
A Benami Transaction means,-
a transaction or an arrangement-
where a property
is transferred to, or is held by, a person,the consideration for such property has been provided, or paid by, another person;
the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration, except when the property is held by-
Therefore, the following transactions shall fall under the scope of Benami Transaction:
Where the property is held by or transferred to another person, and the property is held by that another person, for the immediate or future benefit of the person who has provided the consideration for such property; Where a transaction has been made under a fictitious name; Where the owner is not aware or denies knowledge of the ownership of the property;
Two types of Benami Transactions which are generally recognized in India
Where a person buys a property with his own money but in the name of another person without any intention to benefit such other person, the transaction is called Benami. In that case, the transferee holds the property for the benefit of the person who has contributed the purchase money, and he is the real owner.
The second case which is loosely termed as a Benami transaction is a case where a person who is the owner of the property executes a conveyance in favor of another without the intention of transferring the title to the property thereunder. In this case, the transferor continues to be the real owner.
The difference between the two kinds of Benami transactions referred to above lies in the fact that whereas in the former case, there is an operative transfer from the transferor to the transferee though the transferee holds the property for the benefit of the person who has contributed the purchase money, in the latter case, there is no operative transfer at all and the title rests with the transferor notwithstanding the execution of the conveyance. One common feature, however, in both these cases is that the real title is divorced from the ostensible title and they are vested in different persons."
