Recent Ruling On Benami Law May Bring Past Transactions To Light

Benami deal is the one in which the holder of the asset is not the same as its true beneficial owner
Benami Law
Benami Law

According to a recent ruling on Benami Transactions (Prohibition) Amendment Act, even if a benami transaction happened before November 2016 when the Act came into force, the law will still be applicable to parties if the property or asset under consideration is still being ‘held’.

"If somebody is 'holding' a benami property subsequent to the amendment, it would come in the sweep of benami transaction(s)," the appellate tribunal told ET on disputes on benami matters.

A transaction or an arrangement, in which an asset or a property is 'transferred' to or 'held' by a person but its consideration is provided or paid by another person, is called a benami deal. In simple words, benami deal is the one in which the holder of the asset is not the same as its true beneficial owner.

The enactment of the 28-year-old dormant law triggered a slew of notices and attachment of properties. However, after the Supreme Court declared the retrospective use of the law unconstitutional, many who were pulled up escaped the scrutiny of the law.

The present tribunal ruling may bring the past sins back to light by clarifying that the existence of a transaction, reflected in holding of an asset after November 2016, would be interpreted as the continuance of the offence under the law.

The ruling came in a case involving Bhageria Industries and two companies, Prism Scan Express and Futurage Corporate Care. The tribunal observed that there are inconsistencies in the funds and the credentials of directors. It also indicated that these companies were still holding the shares obtained in a benami transaction after the amendment in the law. The ruling may set a precedent as the companies which purchased the shares were holding them even at the time of survey by the IT department for 2018–19.

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