An Act which prohibits Benami transactions and right to recover property held as Benami by benamidar and also proceeds from the property.

Article explains What is a Benami Transaction, Transactions Which Are Not to be Treated as Benami, What are Consequences of Benami Transactions and What is the Fair Market Value for Benami transactions?

What is a Benami Transaction

Benami transaction means; a transaction or an arrangement:-

  • where the property is transferred to or held by a person, and consideration for such property has been provided or paid by another person.
  • the property is held, by a person, for the immediate or future benefit, direct or indirect, of the person who has provided or paid consideration.
  • property is held, carried out or made in a fictitious name.
  • where the owner of the property is not aware of, or, denies knowledge of such ownership.
  • Where person providing consideration for the property is not traceable or is fictitious.

Transactions Which Are Not to be Treated as Benami

Where property is held by

  • Karta, or a member of an HUF, as the case may be, and property is held for his benefit or benefit of other members of HUF and consideration for such property has been provided or paid by out of known sources of the HUF.
  • a person, on behalf of another person, in a fiduciary capacity and includes a trustee, executor, partner, director of a company etc.
  • an individual in the name of his spouse or in the name of any child of such individual and consideration for such property has been provided or paid out the known sources of the individual.

Where property is held by

  • any person in joint name(s), where the name of his brother or sister or lineal ascendant or descendant appear in any document, and consideration for such property has been provided or paid out the known sources of the individual.
  • any person in part performance of a contract referred to in section 53A of the Transfer of Property Act, 1882, (property held under Power of Attorney,
    • where possession has been provided to a person after providing consideration but the owner of property continues to hold ownership of such property;
    • Stamp duty on such transaction has been paid; and
    • The contract has been registered.)

What are Consequences of Benami Transactions

Where person enters into Benami transaction shall be punishable with

  • Imprisonment: minimum 1 year to 7 years and/or with the fine up to 25% of the fair market value of Benami property.
  • Confiscation of Benami property by the central government.
  • Prohibition on re-transfer of property by Benamidar to the beneficial owner.

What is the Fair Market Value?

As per section 2(16), Fair Market Value in respect of a property as on date of transaction means

♦ price that property would ordinarily fetch on sale in the open market

♦ where price not ascertainable, price determine in accordance with such manner as may be prescribed

(Author can be reached at cadakshpanchal@gmail.com)

Disclaimer: The contents of this article are for information purposes only and does not constitute advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer to relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

(Republished with Amendments by Team Taxguru)

Author Bio

Qualification: CA in Practice
Company: PANKAJ K SHARMA &CO
Location: New Delhi, New Delhi, IN
Member Since: 19 May 2017 | Total Posts: 5
Mr. Pankaj Kumar Sharma is founder of the firm. He is an associate member of Institute of Chartered Accountants of India (ICAI) since July, 2012 and practicing from Oct, 2012. He did his graduation in Bachelors of Commerce from Delhi University in 2010. Later on, completed Diploma in Information Sys View Full Profile

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