'The Bill may create unrest as land ownership is highly unregulated'

The Benami Transactions (Prohibition) Amendment Bill, 2015, recently approved by the Cabinet seeks to amend the existing central law relating to benami transactions, The Benami Transactions (Prohibition) Act 1988. The implementation of the 1988 law sought to curb tax evasion and prevent unregulated and illegal use of property.

Background and key features of the Bill

• First introduced before the Lok Sabha by Finance Minister Arun Jaitley on May 13, 2015
   
• The Bill seeks to create a more inclusive statute by amending definitions of key terms and constituting specialised adjudicatory authorities to better regulate benami transactions
  
   
• A "benami transaction", currently defined as one where property is held or transferred by a person but paid or provided for by another, has been widened under the Bill to include properties purchased under fictitious names, situations where owners are not aware of their titles, and to cases involving untraceable persons who have provided consideration for purchases made
  

   

Subject to certain exceptions such as property owned by a member of a Hindu Undivided Family for the benefit of the family, a person holding property in a fiduciary capacity for another property owned by children or spouses, which are paid for by income of the parent or partner, all classes of property are now proposed to be subject to benami regulations
 

Under the Act, a singular authority was to be created by framing appropriate rules. The proposed Bill now envisages establishing a four-fold regulatory mechanism consisting of an initiating officer, an approving authority, an administrator and an adjudicatory authority

 

The Bill enhances penalties for entering into benami transactions (up to seven years of imprisonment), or for providing false information to authorities (up to five years in jail)
 

The amendment also introduces an appellate tribunal to act as an additional mechanism for appeal, prior to the high court jurisdiction

Issues identified by experts

• May create unrest in large parts of the country where land ownership and utility is still highly unregulated
   
• No provision for a compliance window to regularise prior benami transactions
   
• Though there is a provision for protection of bonafide buyers of benami property, the same has not been extended to corporate entities
  

 

Confiscated properties are to rest with the central government, even though land is a state subject under the Constitution