Prohibition of Benami Property Transactions Act, 1988 Presented before the members of Ahmedabad Branch of WIRC of ICAI On November 24, 2017 at Rajkot By CA Bharat R. Popat CA Bharat R. Popat, Partner of B.R. Popat & Co., Ahmedabad and Bhavnagar 1
“Benami Erstwhile transactions (Prohibition) Act, 1988 ” containing only 9 sections has been completely “Prohibition revamped in the form of of Benami Properties Transactions Act, 1988 ”, with 72 sections, with effect from 1 st November, 2016 The earlier law was only a paper tiger and a defective legislation, which was never implemented in real sense Need for continuing with the 1988 Act, instead of repealing the same and bringing in a new Act by itself CA Bharat R. Popat, Partner of B.R. Popat & Co., Ahmedabad and Bhavnagar 2
Precautions for ensuring that the provisions of the Act, especially the penal ones, are not struck down (in relation to the existing benami properties), holding the same to be retrospective thus against Article 20 of the Constitution of India (providing that if an act is not an offence on the date of its commission, a law enacted in future cannot make it so ): 1 Continuation of the 1988 law, albeit with amendments 2. Declaration of the Income Declaration Scheme and corresponding insertion of section 190 in the Finance Act, 2016, which stated as under: “The provisions of the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) shall not apply in respect of the declaration of undisclosed income made in the form of investment in any asset, if the asset existing in the name of a benamidar is transferred to the declarant, being the person who provides the consideration for such asset, or his legal representative, within the period notified by the Central Government. ” CA Bharat R. Popat, Partner of B.R. Popat & Co., Ahmedabad and Bhavnagar 3
Effective date of implementation of new Benami Law Though the notified date of this Act is 1 st November, 2016, it also applies to all earlier Benami transactions as well, if not declared and subjected to subsequent compliance under Income Disclosure Scheme (IDS), 2016 CA Bharat R. Popat, Partner of B.R. Popat & Co., Ahmedabad and Bhavnagar 4
‘Property’ to include the following: Movable and immovable properties Tangible and intangible properties Corporeal and incorporeal properties Right, interest, legal documents or instruments evidencing title to or interest in any such properties Converted form of the property Proceeds from the property CA Bharat R. Popat, Partner of B.R. Popat & Co., Ahmedabad and Bhavnagar 5
Meaning of the term ‘Beneficiary owner’ A person for whose benefit the property is held by the Benamidar It is not material as to whether the identity of the beneficiary owner is revealed / known or not CA Bharat R. Popat, Partner of B.R. Popat & Co., Ahmedabad and Bhavnagar 6
‘Benamidar’ Benamidar can be under any status – individual, HUF, Firm, Company etc. Benamidar can also be a ‘Non - person’ i.e fictitious or non - existent persons or one who is already dead CA Bharat R. Popat, Partner of B.R. Popat & Co., Ahmedabad and Bhavnagar 7
Categories of Benami Transactions Benami transactions can be divided into four categories: Category-1 Transaction or arrangement where the consideration is provided by a person other than the transferee or the person in whose name the property is held CA Bharat R. Popat, Partner of B.R. Popat & Co., Ahmedabad and Bhavnagar 8
The exceptions to category-1 of the Benami transactions: Property of HUF held by Karta / Members Property held in fiduciary capacity Property held in name of spouse / child Property held in name of Brother / Sister / Lineal ascendant or descendant if name of the person is appearing as joint owner and the consideration is paid from known sources. CA Bharat R. Popat, Partner of B.R. Popat & Co., Ahmedabad and Bhavnagar 9
Category-2 Where the transaction or an arrangement in respect of a property is carried out in fictitious name CA Bharat R. Popat, Partner of B.R. Popat & Co., Ahmedabad and Bhavnagar 10
Category-3 A transaction or an arrangement in respect of a property where the owner of the property is not aware of or, denies knowledge of, such ownership CA Bharat R. Popat, Partner of B.R. Popat & Co., Ahmedabad and Bhavnagar 11
Category-4 A transaction or an arrangement in respect of a property where the person providing the consideration is not traceable or is fictitious CA Bharat R. Popat, Partner of B.R. Popat & Co., Ahmedabad and Bhavnagar 12
Explanation to section 4(9) Benami transaction shall not include any transaction involving the allowing of possession of any property to be taken or retained in part performance of a contract referred to in section 53A of the Transfer of Property Act, 1882, if, under any law for the time being in force,- i Consideration for such property has been provided by the person to whom possession of any property has been allowed but the person who has granted possession thereof continues to hold ownership of such property ii Stamp duty on such transaction or arrangement has been paid and iii The contract has been registered CA Bharat R. Popat, Partner of B.R. Popat & Co., Ahmedabad and Bhavnagar 13
Section 53A of Transfer of Property Act, 1882 When any person contracts to transfer for consideration any immovable property in writing, and the transferee in part performance has taken possession of property or any part thereof or continues in possession and already has / is willing to perform his part of the contract, then, notwithstanding that the contract required to be registered is not so registered or that the transfer has not been completed, the transferor shall be debarred from enforcing against the transferee any rights in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided for in the terms of contract. CA Bharat R. Popat, Partner of B.R. Popat & Co., Ahmedabad and Bhavnagar 14 14
Authorities under the Act The designated officers of the Income-tax Department have been entrusted the roles of Administrator, Initiating Officer (IO) and Approving Authority (AA) The designated ITOs, ADITs/ACITs/DDITs/DCITs and Joint/Additional DITs/CITs are thus to play the roles of the Administrator (Section 2(2)), IO (Section 2(19)) and AA (Section 2(4)) respectively The designated authorities under PMLA have been notified as the Adjudicating Authority and Appellate Tribunal (AT) under the Transitional Provisions, as contained under section 71 of the Act, till separate appointments in this regard are made CA Bharat R. Popat, Partner of B.R. Popat & Co., Ahmedabad and Bhavnagar 15
Administrative set up of the Authorities Administrator, IO and AA are cumulatively denoted as Benami Prohibition Units (BPUs) and they function under the control of the Principal Director of Income tax (Investigation) At present, two such BPUs are notified, one in Ahmedabad while the other one in Surat. They control the entire State of Gujarat and the Union territories of Daman and Diu; and Dadra and Nagar Haveli CA Bharat R. Popat, Partner of B.R. Popat & Co., Ahmedabad and Bhavnagar 16
Adjudication and Appellate Jurisdiction under the Benami Law In exercise of the powers conferred under section 71 of 8 th the Act, Central Government has notified on December, 2016 that the Adjudicating Authority and the Appellate Tribunal established under the Prevention of Money Laundering Act, 2002 shall discharge the respective functions even under the Benami Act, until the Adjudicating Authorities are appointed and the Appellate Tribunal is established under that Act CA Bharat R. Popat, Partner of B.R. Popat & Co., Ahmedabad and Bhavnagar 17
Overriding powers of the Adjudicating Authority and AT in regulating their own procedures Sections 11 and 40 of the Act specifically provide that these Authorities shall not be bound by the procedures laid down by the Code of Civil Procedure, 1908 and shall have powers to regulate their own procedures, albeit guided by the principles of natural justice Section 16 further provides that the act or the proceedings of the Adjudicating Authority shall not be invalidated by reason inter alia of any irregularity in the procedure not affecting the merits of the case CA Bharat R. Popat, Partner of B.R. Popat & Co., Ahmedabad and Bhavnagar 18
Certain Officers to assist an inquiry etc. The following officers to assist the authorities under the Benami Law for enforcement of the law: The officers under Income-tax Department, Custom and Central Excise and Narcotic Drugs Departments The officers of stock exchange, Reserve Bank, Police, FEMA and SEBI Officers of any other Body Corporate constituted or established under any Central or State Acts Any other officers of Central / State Government, Local authorities or banking companies as may be notified CA Bharat R. Popat, Partner of B.R. Popat & Co., Ahmedabad and Bhavnagar 19
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