NEW DELHI: The government will introduce amendments to the Benami Transactions (Prohibition) Act, which will give it the power to confiscate any property that is declared benami. Although the Parliament had passed a law in 1988 prohibiting benami deals, it was never implemented as the rules were not framed. But facing an outcry over black, or untaxed, money, there is now urgency in the government to tighten the provisions in the legislation against benami transactions. "The bill may be introduced in the monsoon session of Parliament," a finance ministry official told ET.
If the proposed changes in this law are approved by the Parliament, benami transactions would become difficult to execute and where discovered, the authorities would have greater powers to act against the offenders. The present law empowers the government to make rules that would provide for a competent authority to acquire such properties. But experts say unless the main law provides for such powers, the rules are meaningless. "Rules can only prescribe what is there in a law," said Srinivas Kotni, managing associate of law firm Corporate LEXport . "They cannot go beyond the law as it would be unconstitutional."
These issues are being addressed in the redrafting exercise, the finance ministry official said. The new law will set up an authority and empower it to confiscate an asset deemed to be benami if the owner fails to provide proven source of earning. "The premise is very simple," said a government official. "If you do not have a proven source of income, you cannot be holding an asset." Benami transactions are most prevalant in the real estate sector, but the 2G scam has also revealed that some of the companies that received telecom licenses in 2008 were actually fronts for others. The government has also come across many instances of benami ownership of petrol pumps and gas agencies.
The licenses for such ownerships are cancelled under the rules framed by the oil marketing companies. The Bombay high court has also asked the Central Bureau of Investigation to investigate benami transactions in the Adarsh Housing Society case. The new law will spare the dealings between family members from its scope. This would make it easier for the confiscating authority to prove a benami transaction.
The present Act defines a benami transaction as one in which a property is transferred to one person for a consideration paid or provided by another person. To put it simply, it means a transaction in which property is not transferred in the name of the person who actually pays the purchase price, but is held in the name of some other person. Any asset, movable or immovable, tangible or intangible, can be termed benami as per the provisions of the Act.
Law only on papers
Benami buys are in the name of a person who doesn't pay for the deal but merely lends his name The current law, the Benami Transaction (Prohibition) Act, 1988, prohibits benami transactions But the more stringent provisions of the law have not been operationalised The Act gives the government powers to frame rules to provide for an authority to confiscate benami properties But, such an body has not been notified.
If the proposed changes in this law are approved by the Parliament, benami transactions would become difficult to execute and where discovered, the authorities would have greater powers to act against the offenders. The present law empowers the government to make rules that would provide for a competent authority to acquire such properties. But experts say unless the main law provides for such powers, the rules are meaningless. "Rules can only prescribe what is there in a law," said Srinivas Kotni, managing associate of law firm Corporate LEXport . "They cannot go beyond the law as it would be unconstitutional."
These issues are being addressed in the redrafting exercise, the finance ministry official said. The new law will set up an authority and empower it to confiscate an asset deemed to be benami if the owner fails to provide proven source of earning. "The premise is very simple," said a government official. "If you do not have a proven source of income, you cannot be holding an asset." Benami transactions are most prevalant in the real estate sector, but the 2G scam has also revealed that some of the companies that received telecom licenses in 2008 were actually fronts for others. The government has also come across many instances of benami ownership of petrol pumps and gas agencies.
The licenses for such ownerships are cancelled under the rules framed by the oil marketing companies. The Bombay high court has also asked the Central Bureau of Investigation to investigate benami transactions in the Adarsh Housing Society case. The new law will spare the dealings between family members from its scope. This would make it easier for the confiscating authority to prove a benami transaction.
The present Act defines a benami transaction as one in which a property is transferred to one person for a consideration paid or provided by another person. To put it simply, it means a transaction in which property is not transferred in the name of the person who actually pays the purchase price, but is held in the name of some other person. Any asset, movable or immovable, tangible or intangible, can be termed benami as per the provisions of the Act.
Law only on papers
Benami buys are in the name of a person who doesn't pay for the deal but merely lends his name The current law, the Benami Transaction (Prohibition) Act, 1988, prohibits benami transactions But the more stringent provisions of the law have not been operationalised The Act gives the government powers to frame rules to provide for an authority to confiscate benami properties But, such an body has not been notified.
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