The Law and Practice of The Prohibition of Benami Property Transaction Act, 1988 by Bloomsbury India Professional

THE PROHIBITION OF BENAMI PROPERTY TRANSACTION ACT, 1988 [as amended by Act No.43 of 2016]

PAV Law Offices HIGHLIGHTS • Section wise analysis of all important issues under the Prohibition of Benami Property Transaction Act, 1988 and the Prohibition of Benami Property Transactions Rules, 2016 • Illustrative regulatory framework and bodies authorized under the Income Tax, 1961 and Prevention of Money Laundering Act, 2002 • Comprehensive analysis of the Pradhan Mantri Jan- Dhan Yojana • Discussion on the Pradhan Mantri Garib Kalyan Yojana

Bloomsbury India Professional

The Law and Practice of

Contents at a glance Acknowledgement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 About the author. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Table of contents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Chapter 1

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Chapter 2

Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Chapter 3

Prohibition of Benami Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Chapter 4

Authorities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Chapter 5

Attachment, Adjudication and Confiscation . . . . . . . . . . . . . . . . . . . . . 73

Chapter 6

Appellate Tribunal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Chapter 7

Special Courts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

Chapter 8

Offences and Prosecution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

Chapter 9

Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

Chapter 10

The Prohibition of Benami Property Transactions Rules, 2016 . . . . . 131

Chapter 11

Manner of provisional attachment and disposal of confiscated property - Income Tax Act, 1961. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

Chapter 12

Money laundering in India. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155

Chapter 13

Pradhan Mantri Jan-Dhan Yojana . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161

Chapter 14

Pradhan Mantri Garib Kalyan Yojana . . . . . . . . . . . . . . . . . . . . . . . . . 175

Annexure I Annexure II Annexure III Annexure IV Annexure V

187 191 221 229

259

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Annexure VI

Annexure VIII Annexure IX Annexure X

CBDT Notification No. 98/2016 dated 25th October, 2016 notifying the effective date of the Benami Transaction (Prohibition) Amendment Act, 2016. . . . . . . . . . . . . . . . . . . . . . . . . CBDT Notification No. 100/2016 dated 25th October, 2016 notifying the territorial authorities with respective jurisdictions. . . Second Schedule of the Income Tax Act, 1961. . . . . . . . . . . . . . . . . Pradhan Mantri Garib Kalyan/ Deposit Scheme, 2016. . . . . . . . . . Pradhan Mantri Jan Dhan Yojana (PMJDY). . . . . . . . . . . . . . . . . .

Bibliography Webliography

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311

Annexure VII

261 263 271 297 307

Table of contents Acknowledgement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 About the author. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Contents at a glance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Chapter 1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 1.1 What is property?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 1.2 Kinds of property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 1.3 Meaning of Benami. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 1.4 History of Benami Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 1.5 Salient features of Benami Transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 1.6 Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Chapter 2 Benami Transaction-Defination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 2.1 Kinds of Benami Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 2.1.1 Having two mutually conclusive facets. . . . . . . . . . . . . . . . . . . . . . . 33 2.1.2 Where property is transferred or held in a fictitious name. . . . . . . . . 34 2.1.3 Where property is transferred/ held by a person who is not aware about such property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 2.1.4 Where the person who paid the consideration for property is fictitious/not traceable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 2.2 Other Benami Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 2.2.1 Un-Registered Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 2.2.2 Transfer of Property Act, 1882 - Sale of Immovable Property. . . . . . 35 2.3 Contracts for sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 2.4 Properties held on the basis of power of attorney. . . . . . . . . . . . . . . . . . . . . . . . 35 2.5 Other definations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 2.5.1 Adjudicating Authority [Section 2(1)]. . . . . . . . . . . . . . . . . . . . . . . . 37 Administrator [Section 2(2)] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 2.5.2 2.5.3 Appellate Tribunal [Section 2(3)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 2.5.4 Approving Authority [Section 2(4)]. . . . . . . . . . . . . . . . . . . . . . . . . . 38 2.5.5 Attachment [Section 2(5)] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 2.5.6 Authority [Section 2(6)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 13

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2.5.7 2.5.8 2.5.9 2.5.10 2.5.11 2.5.12 2.5.13 2.5.14 2.5.15 2.5.16 2.5.17 2.5.18 2.5.19 2.5.20 2.5.21 2.5.22 2.5.23 2.5.24 2.5.25 2.5.26 2.5.27 2.5.28 2.5.29 2.5.30

Banking Company [Section 2(7)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Benami Property [Section 2(8)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Benamidar [Section 2(10)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Bench [Section 2(11)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Beneficial Owner [Section 2(12)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Board [Section 2(13)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Director [Section 2(14)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Executor [Section 2(15)] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Fair Market Value [Section 2(16)]. . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Firm [Section 2(17)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 High Court [Section 2(18)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Initiating Officer [Section 2(19)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Member [Section 2(20)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Notification [Section 2(21)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Partner [Section 2(22)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Partnership [Section 2(23)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Person [Section 2(24)] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Prescribed [Section 2(25)] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Property [Section 2(26)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Public Financial Institution (Section 2(27)]. . . . . . . . . . . . . . . . . . . . 47 Special Court [Section 2(28)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Transfer [Section 2(29)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Trustee [Section 2(30)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Interpretation clause [Section 2(31)] . . . . . . . . . . . . . . . . . . . . . . . . . 49

Prohibition of Benami Transactions . . . . . . . . . . . . . . . . . . . . . . . 51 Chapter 3 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 3.1 Prohibition on Benami Transactions (Section 3). . . . . . . . . . . . . . . . . . . . . . . . . 51 3.2 Prohibition of the right to recover property held benami (Section 4). . . . . . . . . 53 3.3 Property held benami liable to be confiscated (Section 5) . . . . . . . . . . . . . . . . . 56 3.4 Prohibition on re-transfer of property held benami (Section 6) . . . . . . . . . . . . . 56 3.5 FAQs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Authorities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Chapter 4 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 4.1 Adjudicating authority (Section 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 4.2 Composition of adjudicating authority (Section 8). . . . . . . . . . . . . . . . . . . . . . . 60 4.3 Qualification for appointment of chairperson and members (Section 9). . . . . . . 60 4.4 Benches of adjudicating authority (Section 10) . . . . . . . . . . . . . . . . . . . . . . . . . 61 4.5 Power of adjudicating authority (Section 11). . . . . . . . . . . . . . . . . . . . . . . . . . . 61 4.6 Term of office of the chairperson and members (Section 12). . . . . . . . . . . . . . . 62 14

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4.7

Terms and conditions of services of chariperson and members of adjudicating authority (Section 13). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 4.8 Removal of chairperson and members of adjudiciting authority (Section 14). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 4.9 Member to act as chaiperson in certain circumstances (Section 15). . . . . . . . . . 63 4.10 Proceedings not to be invalidiated for any vacancy (Section 16). . . . . . . . . . . . 64 4.11 Officers and employees of the adjudicating authority (Section 17) . . . . . . . . . . 65 4.12 Authorities and jurisdiction (Section 18). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 4.13 Powers of the authorities (Section 19). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 4.14 Officers to assist in inquiry (Section 20). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 4.15 Power to call for information (Section 21). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 4.16 Power to impound documents (Section 22). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 4.17 Power of authority to conduct inquiry (Section 23) . . . . . . . . . . . . . . . . . . . . . . 70 4.18 FAQs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Attachment, Adjudication and Confiscation . . . . . . . . . . . . . . . . 73 Chapter 5 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 5.1 Attachment of Benami Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 5.2 Adjudication of Benami Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 5.3 Confiscation of Benami Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 5.3.1 Confiscation and vesting of benami property. . . . . . . . . . . . . . . . . . . 81 5.3.2 Management of the property confiscated. . . . . . . . . . . . . . . . . . . . . . 82 5.3.3 Possession of confiscated property. . . . . . . . . . . . . . . . . . . . . . . . . . . 83 5.4 FAQs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Appellate Tribunal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Chapter 6 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 6.1 Establishment of Appellate Tribunal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 6.2 Composition of Appellate Tribunal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 6.3 Qualification for appointment of Chairman and other members. . . . . . . . . . . . . 89 6.4 Terms and conditions of services of Chairperson and members of Appellate Tribunal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 6.5 Term of office of Chairperson and members. . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 6.6 Removal of Chairperson and members from office in certain circumstances. . . 90 6.7 Vacancy etc. not to invalidate proceedings of Appellate Tribunal . . . . . . . . . . . 91 6.8 Resignation and removal of Chairperson and member. . . . . . . . . . . . . . . . . . . . 92 6.9 Members to Act as Chairperson in certain circumstances. . . . . . . . . . . . . . . . . . 92 6.10 Staff of Appellate Tribunal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 6.11 Procedure and power of Appellate Tribunal . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 15

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6.12 Distribution of business amongst the benches of the Appellate Tribunal. . . . . . 95 6.13 Power of Chairperson of Appellate Tribunal to transfer cases . . . . . . . . . . . . . . 96 6.14 Decision to be by majority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 6.15 Members etc to be public servant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 6.16 Bar of jurisdiction of Civil Courts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 6.17 Appeals to Appellate Tribunal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 6.18 Rectification of Mistake. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 6.19 Right to representation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 6.20 Appeals to High Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 6.21 FAQs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 Special Courts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 Chapter 7 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 7.1 Definition of Special Courts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 7.2 Application of Code of Criminal Procedure, 1973 to proceedings before Special Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 7.3 Appeal and revision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 7.4 FAQs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 Offences and Prosecution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 Chapter 8 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 8.1 Penalty for Benami Transaction (SectionÂ 53 of theÂ Act). . . . . . . . . . . . . . . . . . 113 8.2 Penalty for false information (Section 54) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 8.3 Previous sanction (Section 55) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 8.4 FAQs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 Chapter 9 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 9.1 Repeal of provisions of certain Acts (Section 56 of the Act) . . . . . . . . . . . . . . 117 9.2 Certain transfers to be null and void (Section 57). . . . . . . . . . . . . . . . . . . . . . . 118 9.3 Exemption (Section 58). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 9.4 Power of central government to issue directions, etc (Section 59). . . . . . . . . . 119 9.5 Application of other laws not barred (Section 60) . . . . . . . . . . . . . . . . . . . . . . 120 9.6 Offences to be non-cognizable (Section 61). . . . . . . . . . . . . . . . . . . . . . . . . . . 120 9.7 Offences by companies (Section 62). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 9.8 Notice, etc not to be invalid on certain grounds (Section 63). . . . . . . . . . . . . . 122 9.9 Protection of action taken in good faith (Section 64). . . . . . . . . . . . . . . . . . . . 122 9.10 Transfer of pending cases (Section 65). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 9.11 Proceedings, etc against legal representative (Section 66). . . . . . . . . . . . . . . . 124 9.12 Act to have overriding effect (Section 67) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 16

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9.13 Power to make rules (Section 68). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 9.14 Laying of rules and notifications before parliament (Section 69). . . . . . . . . . . 127 9.15 Power to remove difficulties (Section 70). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 9.16 Transitional provision (Section 71). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 9.17 Repeal and savings (Section 72 of the Act). . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 9.18 FAQs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 The Prohibition of Benami Property Transactions Rules, 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 10.1 Scope and extent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 10.2 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 10.3 Setting up the legislative framework. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 10.3.1 Designating the chairperson and the member of the adjudicating authorities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 10.3.2 Power and duties of the authorities. . . . . . . . . . . . . . . . . . . . . . . . . . 133 10.3.3 Power of the appellate tribunal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 10.3.4 Power of the appellate tribunal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 10.4 Furnish information to the authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 10.5 Attachment and management of benami property. . . . . . . . . . . . . . . . . . . . . . . 137 10.5.1 Temporary attachment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 10.5.2 Confiscation of benami property . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 10.5.3 Receive and manage benami property. . . . . . . . . . . . . . . . . . . . . . . 139 10.5.4 Process of transfer of benami property. . . . . . . . . . . . . . . . . . . . . . . 140 10.6 Manner of determination of fair price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140 10.7 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 10.8 FAQs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 10.9 Prescribed forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145 Chapter 10

Manner of provisional attachment and disposal of confiscated property - Income Tax Act, 1961. . . . . . . . . . . . . . . . 149 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 11.1 Provisional attachment of benami property in the interest of the revenue . . . . 150 11.2 Attachment of movable property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 11.3 Sale of movable property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 11.4 Attachment of immovable property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 11.5 Sale of immovable property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 11.6 Judicial precedents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 Chapter 11

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Chapter 12 Money laundering in India. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 12.1 Statutes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156 12.2 Salient Features of the Statutes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156 12.3 Linkage between Prevention of Money Laundering Act and Prohibition of Benami Property Transaction Act . . . . . . . . . . . . . . . . . . . . . . . 160 Chapter 13 Pradhan Mantri Jan-Dhan Yojana . . . . . . . . . . . . . . . . . . . . . . . . 161 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161 13.1 Documents required to open an account under PMJDY. . . . . . . . . . . . . . . . . . 162 13.2 PMJDY account opening forms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162 13.3 Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 13.4 Ineligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 13.5 Benefits under PMJDY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 13.6 Small account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 13.7 Change of old accounts under PMJDY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 13.8 Contact details of PYJDM officials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 13.9 Reserve Bank of Indiaâ&#x20AC;&#x2122;s notification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 13.10 FAQs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 Chapter 14 Pradhan Mantri Garib Kalyan Yojana. . . . . . . . . . . . . . . . . . . . . 175 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 14.1 Salient features of explanatory note on provisions of the taxation and investment regime for PMGKY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 14.1.1 Opportunity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 14.1.2 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 Tax, surcharge, penalty and deposit under PMGKY . . . . . . . . . . . . 176 14.1.3 14.1.4 Time limits for declaration and making payment. . . . . . . . . . . . . . . 176 14.1.5 Form for declaration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 14.1.6 Filing of declaration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 14.1.7 Declaration not eligible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 14.1.8 Invalid declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 14.1.9 Non-refundable taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 14.1.10 Effect of valid declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 14.2 Salient features of PMGKDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 14.2.1 Applicability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 14.2.2 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 14.2.3 Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 14.2.4 Subscription and mode of investment in account. . . . . . . . . . . . . . . 179 14.2.5 Effective date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 18

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14.2.6 Application(s). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 14.2.7 Authorised bank(s). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 14.2.8 Nomination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 14.2.9 Transferability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 14.2.10 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 14.2.11 Tradability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 14.2.12 Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 14.2.13 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 14.3 FAQs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181

Annexure VIII Annexure IX Annexure X

ANNEXURES The Benami Transactions (Prohibition) Act, 1988. . . . . . . . . . . . . . The Benami Transactions (Prohibition) Amendment Act, 2016. . . . The Prohibition of Benami Property Transactions Rules, 2016. . . . The Prohibition of Benami Property Transactions Act, 1988 [as amended by Act No.43 of 2016]. . . . . . . . . . . . . . . . . . . . . . . . . CBDT Notification No. 97/2016 dated 25th October, 2016 notifying the Adjudicating Authority and the Appellate Tribunal until specifically established under the Benami Law. . . . . CBDT Notification No. 98/2016 dated 25th October, 2016 notifying the effective date of the Benami Transaction (Prohibition) Amendment Act, 2016. . . . . . . . . . . . . . . . . . . . . . . . . CBDT Notification No. 100/2016 dated 25th October, 2016 notifying the territorial authorities with respective jurisdictions. . . Second Schedule of the Income Tax Act, 1961. . . . . . . . . . . . . . . . . Pradhan Mantri Garib Kalyan/ Deposit Scheme, 2016. . . . . . . . . . Pradhan Mantri Jan Dhan Yojana (PMJDY). . . . . . . . . . . . . . . . . .

Bibliography Webliography

Annexure I Annexure II Annexure III Annexure IV Annexure V

Annexure VI

Annexure VII

187 191 221 229

259

261 263 271 297 307

Chapter 1

Introduction

Property has it duties as well as its rights. Thomas Drummond

INTRODUCTION The name of “The Benami Transaction (Prohibition) Act, 1988” has now changed to “The Prohibition of Benami Property Transaction Act, 1988”. This change in the name was pursuant to the enactment of the “The Benami Transactions (Prohibition) Amendment Act, 2016”. This new legislation provides for procedures and the appellate mechanism against the orders of the Adjudicating Authority. “The Benami Transactions (Prohibition) Amendment Act, 2016” is the outcome of “The Benami Transactions (Prohibition) Amendment Bill, 2015” which was introduced in the th Lok Sabha on 13 May, 2015. It was passed by both the houses of Parliament and th received the ascent of the President of India on 10 August, 2016. The Benami st Transactions (Prohibition) Amendment Act, 2016 came into force w.e.f 1 November, 2016. As per provisions of sec68 of the Act, the Central Government framed the Prohibition of Benami Transactions Rules, 2016 to carry out the st provisions of the Act, which come into force w.e.f. the 1 day of November, 2016.

1.1

WHAT IS PROPERTY?

There are many definitions and interpretations of the word “property”. It could include something as basic as a shirt and as important as the house in which you reside. It could be: •

a corporal property (which includes includes land chattels etc);or

•

an incorporeal property (which includes patents copyrights etc).

In its widest sense, property includes a person’s legal rights, of whatever description. In older days, a master’s servant or a person’s child used to be the master’s property however in today’s world, this view is obsolete. Among material things, the most important distinction is that between movables and immovables. Under law, both kinds of property are recognised and are afforded protection under various legal statutes. There are some traditional rights assigned to a property, for instance, the owner of the property has: 21

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•

control over the property,

•

right to take benefit (if any) out of the property,

•

right to transfer or sell the property,

•

right to exclude others from the use of that property.

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The Transfer of Property Act, 1882 is the first practical law in India to cover real estate and is a complete code of law for transacting in immovable property. This Act validates the transfer of property by way of acts of the parties itself and not by the operation of law. For a transfer to be effective, the transferor must have a valid interest in the property, whether vested or contingent. A transfer of property may have conditions, covenants or restraints attached to it. Apart from the above, there are additional conditions to make an immovable property transaction legally valid. For instance, a transferee must be competent to transfer (i.e. he should not be a minor and should be mentally fit) and the transfer can be made only to living persons.

1.2

KINDS OF PROPERTY

Property can be broadly divided into two categories: 1.

Movable property; and

Immovable property

Movable property Section 3(36) of the General Clauses Act defines movable property as: “Movable property shall mean property of every description, except immovable property”. Section 2(9) of the Registration Act, 1908 defines property as: “Moveable property includes standing timber, growing crops and grass, fruit upon and juice in trees, and property of every other description, except immovable property.” So, the words “moveable property” is intended to include corporeal property of every description, except land and things attached to the earth or permanently fastened to anything, which is attached to the earth. Immovable property According to sec 3 of the Transfer of Property Act, 1882:

“Immoveable property does not include standing timber, growing crops or grass.” Regarding buildings these constitute immovable property and machinery, if embedded in the building for the beneficial use of the owner or occupier of the

Chapter 1

Introduction

Building. Therefore this machinery is deemed to be a part of the building and the land on which the building is situated. Under the General Clauses Act 1897, “immovable property” is defined as follows: “Immovable property shall include land, benefits to arise out of land and things attached to the earth, or permanently fastened to anything attached to the earth”. As per sec 2(6) of the Registration Act, 1908: “Immovable Property includes land, building, hereditary allowances, rights to ways, lights, ferries, fisheries or any other benefit to arise out of land, and things attached to the earth or permanently fastened to anything which is attached to the earth but not standing timber, growing crops nor grass”. To attract the protection of law from property which belongs to an individual the ownership has to be vested in that individual this ownership has to be clear and unquestionable. If this ownership is subject to any doubt then the law will not provide the required protection for the concerned property. Immovable property from time immemorial has always had a value attached to it because it is a source of food and shelter for human beings and other flora and fauna Immovable property is also a type of asset which does not grow but given the nature of demand and supply, it actually shirks in a manner of speaking. It is a known fact that the human race over centuries have been expanding in some countries more than the other and this rapid growth has put tremendous pressure on the resources which are available for the use of human beings living in those countries. In view of this tremendous need, the value of immovable property has grown by leaps and bounds in such countries. Right to property is our constitutional right. At the inception of the Constitution under Article 19(f), the Right to Property was a fundamental right and therefore, it was placed at a very high pedestal. Article 19(1)(f), along with Article 31 of the Constitution, (which now stands repealed) prevented the Government from depriving a person of his property without the “authority of the law” and further stated that such law should provide “for compensation for the property taken possession of or acquired and either fixes the amount of compensation, or specifies the principles on which, and the manner in which, the compensation has to be determined and given”. In case of the landmark judgment of the Hon’ble Supreme Court in Kesava Nanda Bharti v State Of Kerala - AIR 1973 SC 1461, the Supreme Court declared that the Parliament had no right to amend the basic structure of the Indian Constitution. That’s why this case is said to be “the Case that saved Indian th Democracy”. By the 44 amendment, the Right to Property ceases to be a fundamental right and became a legal right vide Article 300A of the Indian

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Chapter 1

Constitution. Article 300A was inserted to affirm that no person shall be deprived of his property save by authority of law. With passage of time, the immovable property can often be bought and sold many times. This sale and purchase creates a chain of documents which sets out the pattern of ownership of that immovable property as long as there is a proper flow in the chain of title which is based on the ownership[of an immovable property], there is typically no room for dispute. However, if there is a doubt at any point on the title/ownership, then the property will not have a saleable value because it may be disputed. This dispute will arise if another party have an interest in the property and hence, any buyer of such property will not be able to have peaceful and quiet possession of such property. The ownership of an immovable property is also disputed when individuals and organisations deliberately create third party interest to avoid paying revenue to the government. This is perpetrated by buying an immovable property in the name of a third property who does not pay the price of such property. Often this method is used by organisations to defraud their creditors by siphoning of the money of organisations to buy property in the name of unrelated parties. This has been recognised as a crime and government has also enacted a law to address this issue. It is also important to highlight that this kind of transaction has been prevalent since the British rule was prevalent in India. It has been implemented very sporadically and there is a huge land bank which could be classified as benami property.

1.3

MEANING OF BENAMI

The word “benami” is Persian word which means “no name” or “without name”. The benami property transaction is the transaction of property where one person buys the property in the name of another person or in the name of fictitious person. That another person or fictitious person does not pay the consideration for the property. The real owner of the transacted property is the person who provides the consideration of the property. The person in the name of whom the property is transferred or held is known as benamidar whereas the beneficial owner is the person who paid the consideration and with whom the real title rests and he thus enjoys the property. Benami transactions are not only confined to purchase of property but it also applies in cases of lease and mortgage. Benami transactions are being taken place to commit fraud, to evade tax, to avoid political or social risks and to utilize black money into productive use.

1.4

HISTORY OF BENAMI TRANSACTIONS

Benami transactions were common in India since long. In 1778 in the matter of Gopeekrist Gosain v Gunga Persaud, 1854 (6) M.I.A 53, Lord Justice Knight Bruce of Privy Council had held that benami transaction is a custom of a country

Chapter 1

Introduction

and law of the country must recognize it. The law therefore will allow the actual owner of the property to claim his ownership and enjoy the fruits of the property. In 1882, sections 81 and 82 of the Indian Trust Act, 1882 gave legal status to the practice of benami transactions. Further, in case of Radhakrishnan v Union of India, AIR 1959 Bom 102 the Honâ&#x20AC;&#x2122;ble Court held as follows: â&#x20AC;&#x153;Now it is true that under section 81 and 82 of the Trusts Act a benamidar holds the property for and on behalf of the real owner in consequence of which there would be a resulting trusts in respect of the property in favour of the real owner. But then, it would be fallacious to urge from those sections that the legal ownership in such property vests in the benamidar as it does in the case of trustee. What those sections really mean is that the benamidar is in a fiduciary relationship with the real owner and therefore has all the obligations of a person in such fiduciary position towards real owner. A benamidar is no more than an ostensible owner of the property he holds benami, though his acts in certain circumstances would be binding upon the real owner.â&#x20AC;? Having been supported by the judiciary, the benami transactions defrauded the public revenue without any restriction. In the beginning of 19thcentury, a few provisions were made under various statutes to defeat the menace of benami transactions like: In the Code of Civil Procedure, 1908, sec 66 provides that no suit shall be maintained against any person claiming the title under a purchase certified by the Court in such a manner, as may be prescribed, on the ground that the purchase was made on behalf of the plaintiff or on behalf of someone claiming through the plaintiff. Under the Transfer of Property Act, 1882, sec 41 deals with transfer by ostensible (superficial) owner and provides that if an ostensible transferor transfers the property for a consideration, it shall not be voidable on the ground that the transferor was not authorized to do so. Section 53 of same Act makes the transfers made with intent to defraud or delay the creditors to be voidable. In 1976, Parliament took the issue and introduced sec281A in the Income Tax Act, 1961, prohibiting institution of suits to enforce rights relating to any property held benami, if a notice in the prescribed form has not been given to the Commissioner of Income Tax within one year from the date of acquisition of the property. Despite the above mentioned provisions under various statutes, there was still a need to bring legislation to prohibit benami transactions effectively. The Law Commission vide its 57th report suggested that benami transactions though should not be made an offence, the law should refuse to recognize the benami transactions. The law should provide benamidar as the real owner. By doing so, benami transactions would be discouraged. Based on the recommendations of Law Commission, in the year 1988, the President of India, while accepting the 25

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recommendations of Law Commission of India promulgated an ordinance on 19th May 1988, namely “Benami Transactions (Prohibition of the Right to Recover Property) Ordinance, 1988”. Before enactment of the Benami Transactions (Prohibition of the Right to Recover Property) Ordinance, 1988 into an Act, the Law Commission was again requested to give its views on proposed legislation. The Law Commission vide its 130th report submitted several other recommendations on the issues to the Government. Finally, the Benami Transactions (Prohibition of the Right to Recover Property) Ordinance, 1988 was converted into an Act, namely the Benami Property Transactions (Prohibition) Act, 1988 by introduction of a Bill in the Parliament. The Act came into force on 5th September, 1988 barring a few sections of the Act which came into effect on 19 May 1988. The objective of the Act was to prohibit benami transactions and prohibit recovering property held benami. This Act, however, could not be enforced, since the rules to the Act were never framed. The Benami Transactions (Prohibition) Bill, 2011 To provide teeth to the Benami Property Transactions (Prohibition) Act, 1988 another Bill namely “The Benami Transactions (Prohibition) Bill, 2011” was introduced in the Lok Sabha on 18 August, 2011 by the Ministry of Finance. This Bill was to replace the Benami Property Transactions (Prohibition) Act, 1988.The Bill defines certain necessary terms including benami transactions. It provides for certain authorities to enforce the provisions of Bill. The Bill prohibits persons entering into benami transactions and the benami property is liable to be confiscated by the Central Government. If the benami property is claimed by the Central Government then no compensation was payable. The Bill also prohibits the right of person claiming to be a beneficial owner of the property. Further, the Bill prohibits the retransfer of such property to the real owner and also provides for penalty for benami transactions and for furnishing false information. The Bill was referred to the Standing Committee of Parliament on finance for its comments. Though the Standing Committee submitted its report in 2012, this Bill lapsed because of th dissolution of 15 Lok Sabha. The Benami Transactions (Prohibition) Amendment Bill, 2015 Though the Benami Transactions (Prohibition) Act, 1988 become an Act, it was ineffective because of various infirmities as reported by the Standing Committee of Parliament on finance during 2015. While taking into consideration the infirmities of the Act of 1988, the Benami Transactions (Prohibition) Amendment Bill, 2015 th was introduced in the Lok Sabha on 13 May, 2015 to seek amendment in the Benami Transactions (Prohibition) Act, 1988. This Bill seeks to:

•

amend definition of benami transactions,

•

establish adjudicating authorities and Appellate Tribunal,

Chapter 1

Introduction

â&#x20AC;˘

specify penalty for persons entering into benami transactions; and

â&#x20AC;˘

confiscation of benami property without paying compensation.

The Benami Transactions (Prohibition) Amendment Bill, 2015 has been passed by the Parliament and the Benami Transactions (Prohibition) Amendment Act, 2016come into effect on 1 November, 2016. The Central Government in exercise of powers conferred undersec68 of the Prohibition of Benami Property Transaction Act, 1988 made the relevant Rules known as the Prohibition of Benami Transactions Rules, 2016 to carry out the provisions of the Act.

1.5

SALIENT FEATURES OF BENAMI TRANSACTION

There are a number of reasons which has given rise to benami transaction, amongst the salient are: A.

Dual control: The immovable property in itself is a centre and state subject as per The Indian Constitution, 1949. This has given rise to a plethora of laws which are applicable on central laws as well as in different states. Therefore, apart from a central legislation, there can be a state legislation which govern the immovable property. Due to two sets of control recording of title for immovable property, it is not as streamlined as it would have been if all titles of immovable property is centralised and recorded in one data.

Chaotic records: Immovable property has been recorded at the level of local administrative offices where such records are maintained in a very chaotic manner due to lack of resources.

Different units of measurement: It is also noteworthy that the units of measurements in different states method of keeping the records and payment of stamp duty are so varied that it is very difficult for the common man to transact for an immovable property as there is no one single modus operandi which can be used across the country.

Different practices: Given the aforesaid reasons often benami transactions due to the prevailing differences in the manner of acquiring property in various parts of the country, has also helped in giving rise to benami transactions.

1.6

OBJECTIVES

The Act provides a legislative framework for seizing properties, which are being used as a mechanism to park unaccounted money. This would help in achieving the twin objectives of strictly enforcing the law against the defaulters who have bought benami properties in a systematic and effective manner and also, help in inducting the money used to buy these properties back into the financial network. There was certain lacuna in the existing law prior to the enactment of this Act.

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Some of them are: (a)

Lack of a strong legislative infrastructure.

(b)

No appellate mechanism was available.

(c)

Lack of a well organised implementation mechanism along with teeth to actually enforce the penalties against the law breakers.

(d)

Authority to actually seize benami property etc.

To address these issues, the Act now provides the following provisions: Under the Act, four authorities have been established to conduct inquiries or investigations regarding benami transactions: (1)

The Initiating Officer;

(2)

The Approving Authority;

(3)

Administrator, and

(4)

Adjudicating Authority.

At the outset if an Initiating Officer is of the opinion that a person owns a benami property, he/she may issue a notice to that person. The Initiating Officer may hold the property for 90days from the date of issue of the notice, subject to obtaining a written permission from the Approving Authority. Upon the completion of the notice period, the Initiating Officer may pass an order to continue the holding of the property. If an order is passed to continue holding the property, the Initiating Officer will then refer the case to the Adjudicating Authority. The Adjudicating will consequently examine all documents and evidence relating to the matter and then pass an order on whether or not to hold the property as it is classified as benami. The Act also provides for setting up an Appellate Tribunal to hear appeals against any orders passed by the Adjudicating Authority. Appeals against orders of the Appellate Tribunal will then be escalated to the High Court. Further, the Act provides for strong penal provisions which empower the implementing authority. The penalty under the Act has been increased to rigorous imprisonment of one year up to seven years, and a fine which may extend to 25% of the fair market value of the benami property. Additionally, the penalty for providing false information about a benami property has been set out, as rigorous imprisonment of six months up to five years, and a fine which may extend to 10% of the fair market value of the benami property. To fast track these proceedings, the Act seeks to designate Special Courts for trying any offences which are punishable Act and to which the Code of Criminal Procedure 1973 would be applicable. The Act has also given the power to the Administrator who is actually an Income Tax Officer representing the Government to receive and manage the property in a manner and subject to conditions as prescribed, subject to an order passed to confiscate benami property. 28

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The long term benefits of the reforms introduced under this Act are manifold. Some of these benefits are detailed hereunder: •

The much needed transparency in the real estate area will get a fillip as the wrong owners would get removed and going forward the deterrents created by a strong legislation would discourage such practices.

•

There is an artificial hype created in prices of property by individuals and organisations by using this route of benami transactions. With this step, only more and more of the end users would be typically buying and selling properties and this would provide a much needed correction to the prices of property.

•

As the ownership of property will become more certain and easy to ascertain, it will help the financial institutions to provide credit to the buyers on better terms and conditions.

•

Further, for the sellers it would be easier to sell, since, the ownership issues would stand reduced, instilling confidence in the buyers.

•

On macro front, for the Government, the fight against removing illgotten funds from the economic system would get a boost; and

•

This would also help other ancillary sectors like the construction industry etc to grow, by acquiring clean properties at better rates and deliver these benefits to the consumers.

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Chapter 2

Definitions

“I am not a lawyer, and may be I should have used more specific legal language.” Sonny Bono

BENAMI TRANSACTION-DEFINATION Benami Transaction is defined under sec 2(9) of the Act as: “(A) a transaction or an arrangement— (a) where a property is transferred to, or is held by, a person, and the consideration for such property has been provided, or paid by, another person; and (b) the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration, except when the property is held by— (i) a Karta, or a member of a Hindu undivided family, as the case may be, and the property is held for his benefit or benefit of other members in the family and the consideration for such property has been provided or paid out of the known sources of the Hindu undivided family; (ii) a person standing in a fiduciary capacity for the benefit of another person towards whom he stands in such capacity and includes a trustee, executor, partner, director of a company, a depository or a participant as an agent of a depository under the Depositories Act, 1996 and any other person as may be notified by the Central Government for this purpose; (iii) any person being an individual in the name of his spouse or in the name of any child of such individual and the consideration for such property has been provided or paid out of the known sources of the individual; (iv) any person in the name of his brother or sister or lineal ascendant or descendant, where the names of brother or sister or lineal ascendant or descendant and the 31

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individual appear as joint-owners in any document, and the consideration for such property has been provided or paid out of the known sources of the individual; or (B) a transaction or an arrangement in respect of a property carried out or made in a fictitious name; or (C) 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; (D) a transaction or an arrangement in respect of a property where the person providing the consideration is not traceable or is fictitious; Explanation.—For the removal of doubts, it is hereby declared that 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 sec 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 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.” The word “benami” is a South Asian word that means “without name” or “no name”. In this Act, the word “benami” is used to describe a transaction in which the actual beneficiary is not the person in whose name the property is purchased. The real beneficiary is the person who provides the consideration for the property transacted. As a result, the person in whose name the property is purchased remains as a mask of the actual beneficiary. It is seen that many times property is purchased in the names of close relatives, servants, drivers, etc. to avoid taxes or hiding it from public eyes. Such benami transactions are conducted on faith and there is no writing of deed on stamp papers and as such not registered. Such benami transactions are illegal in the eyes of law and risky as well.

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2.1

Definitions

KINDS OF BENAMI TRANSACTIONS

As per the definition of benami transaction, there are four kinds of transactions or arrangements.

2.1.1

Having two mutually conclusive facets

First kind of benami transactions or arrangements has two mutually conclusive facets, which are: (a)

where a property is transferred to, or is held by, a person, and the consideration for such property has been provided, or paid by, another person; and

(b)

the property is held for the immediate or future benefit, (direct or indirect), of the person who has provided or paid the consideration.

Before the Benami Transaction (Prohibition) Amendment Act, 2016, the definition of benami transaction covered the word “transaction” only. However, after amendment in the year 2016, besides the word “transaction” the word “arrangements” has also been included. Further, not only the word arrangement has been added to the word transaction, but also holding of property has also been covered in the definition of benami transaction. Accordingly, the properties which were “held” by persons for which consideration has been paid by some other persons will also come under the purview of a benami transaction. Here “held by” means the property is held by for the benefit of the person who has paid the consideration. Where this condition is not fulfilled, the transaction will not be called a benami transaction. For these kinds of benami transactions, there are four exemptions i.e. when the property is held by: (i)

A Karta, or a member of a Hindu Undivided family, for his benefit or benefit of other members in the family and the consideration for such property is paid out of the known sources of the Hindu Undivided family;

(ii)

A person standing in a capacity of trust for the benefit of another person towards whom he stands in such capacity, like a trustee, executor, partner, director of a company, a depository or a participant as an agent of a depository (under the Depositories Act, 1996) or any other person notified by the Central Government;

(iii)

Any person being an individual in the name of his spouse or in the name of any child of such individual and the consideration for such property has been provided or paid out of the known sources of the individual. The word “spouse” has been used in place of wife after the amendment in the year 2016; as such the exemption is available both 33

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ways. Earlier, it was available for wife only and not vice-versa. Further, after amendment in the Act in 2016; all children are covered in exemption whereas earlier i.e. before the amendment in the year 2016, only unmarried daughters were covered. (iv)

2.1.2

any person in the name of his brother or sister or lineal ascendant or descendant, where the names of brother or sister or lineal ascendant or descendant and the individual appear as joint-owners in any document, and the consideration for such property has been provided or paid out of the known sources of the individual. This exemption refers to property held jointly by brothers and sisters or lineal ascendant or descendant.

Where property is transferred or held in a fictitious name

Second kind of benami transactions or arrangements is that where a property is transferred or held in a fictitious name. Such kind of benami transactions were not covered by earlier enactment. A fictitious or assumed name does not create an identity but the fictitious name in business helps the business being noticed by the customers. No liability or taxes can be imposed on fictitious entity.

2.1.3

Where property is transferred/ held by a person who is not aware about such property

Third kind of benami transactions are those where a property is transferred or held by a person but such person/owner is not aware about the property or denies knowledge of, such ownership. Such benami property may be confiscated without giving any compensation to the holder of the said property.

2.1.4

Where the person who paid the consideration for property is fictitious/not traceable

The fourth kind of benami transactions refer to those transactions where the person who provided the consideration for the property is fictitious or is not traceable.

2.2

OTHER BENAMI TRANSACTIONS

Apart from the four categories mentioned hereinabove above, following transactions may also be covered under the purview of benami transactions:

2.2.1

Un-Registered Property

Where possession of property is given on the basis of unregistered agreements, the transaction may be called a benami transaction. In this regard certain provisions of the Transfer of Property Act, 1882 (sec 54), and the Registration Act, 1908 (sec 17) are relevant.

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2.2.2

Definitions

Transfer of Property Act, 1882 - Sale of Immovable Property

As per sec 54 of the Transfer of Property Act, 1882, sale is a transfer of ownership in exchange of a price or a promise to be paid or partly paid or partly promised. The transfers, where tangible immovable property is of value INR 100 or more or in case of a reversion or other intangible thing, the same shall only be done by a registered instrument. However, in case of tangible immoveable property of a value less than INR 100, such transfer may be made either by a registered instrument or by delivery of the property.

2.3

CONTRACTS FOR SALE

A contract for sale of immoveable property is a contract where sale of such property shall take place on terms settled between parties. Contract for sale in itself does not create any interest in or charge on such property unless it is registered under the Registration Act, 1908. In view of the above, any possession given without any registered instrument does not give any ownership rights to the purchaser. As per sec 53A of the Transfer of Property Act, 1882, part performance is also relevant. Section 53A reads as under: “Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from whom the terms necessary to constitute the transfer can be ascertained with reasonable certainty. And the transferee has, in part performance of the contract taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract”. Agreement to sale on the basis of which possession has been provided as per sec 53 A of the Transfer of Property Act, 1882 was recognized as “deemed ownership” under the Income Tax Act, 1961. However, in the year 2001, after amendment to sec 17 of the Registration Act, 1908, sub-section 1A has been added, according to which benefit of sec 53A will not be available if the contract or agreement to sale is not registered.

2.4

PROPERTIES HELD ON THE BASIS OF POWER OF ATTORNEY

As per definition of benami transaction a property held by a person for a consideration provided by another person will be benami transaction only if it is held for the benefit of another person who has provided the consideration. However, where the holder of the property holds the said property for his own

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benefits, it will not be treated as a benami transaction. Further, specific exemption has been provided where the property is held by a member of Hindu Undivided family. The Hon’ble Supreme Court vide its judicial pronouncement has held that the property purchased through a power of attorney is unlawful. In the case of Suraj Lamp & Industries Private Limited vs State of Haryana, the Supreme Court has held that: “We therefore reiterate that immovable property can be legally and lawfully transferred /conveyed only by a registered deed of conveyance. Transactions of the nature of ‘GPA sales’ or ‘SA/GPA/WILL transfers’ do not convey title and do not amount to transfer, nor can they be recognized or valid mode of transfer of immoveable property. The courts will not treat such transactions as completed or concluded transfers or as conveyances as they neither convey title nor create any interest in an immovable property”. In view of the legal proposition explained above, the transactions or arrangements done on the basis of unregistered agreements or on the basis of a power of attorney may fall within the definition of benami transactions, if it does not fall under any of the exempted category. Further, when we go by the definition of benami transactions, besides transactions, “arrangements” are also covered in benami transactions. Holding of property implies that in case transaction has taken place when transactions were not benami i.e. transaction carried out before 1988, it will still be covered under benami transaction because the property is “held by” a person for which consideration has been paid by other person. The words “held by” qualifies that property is held for immediate or future benefit of the person who has paid the consideration. As per new definition of benami transaction, the act of holding the property is also covered. Earlier, only transfer of transaction was covered. Because of words “held by”, all those transactions carried out before the year 1988 may come under the definition of benami transactions. The word ‘held’ means ‘to possess’. The Hon’ble Supreme Court in the matter of State of Andhra Pradesh v Mohd. Ashrafuddin AIR 1982 SC 913 has held that: “The expression ‘held’ connotes both ownership as well as possession. In the context of the definition it is not possible to interpret term ‘held’ only in the sense of possession. The explanation to the definition of ‘holding’ clearly contemplates that the same land can be the holding of two different persons holding the land in two different capacities. The respondent in the instant case is holding the land as owner although he was not in possession.”

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In another Judgement, Hon’ble Supreme Court in case of Jilubhai Nanbhai Khachar vs State of Gujrat AIR 1995 SC 142 has held that: “Held means possession of legal title and does not require actual connected occupation.” In view of the above judicial pronouncements, the legal owner will be held benami if he holds the property for the immediate or future benefit of other person who has provided the consideration for the said property.

2.5

OTHER DEFINATIONS

2.5.1

Adjudicating Authority [Section 2(1)]

Section 2(1) of the Act states that: “Adjudicating Authority means the Adjudicating Authority appointed under section 7.” As per sec 7 of the Act, the Central Government shall appoint one or more adjudicating authorities to exercise jurisdiction, powers and authority conferred by or under the Act. An Adjudicating Authority is a body consisting of one chairperson and at least two members. It means that adjudicating authority is a body consisting of minimum three members of which one shall be the chairperson. Till a separate adjudicating authority is appointed under the Act, the Central Government in exercise of powers conferred under sec 71 of the Act, has notified that the Adjudicating Authority appointed under sec 6(1) of the Prevention of Money Laundering Act, 2002 will be deemed to the Adjudicating Authority under the Act. Such authority in addition to functions under the Prevention of Money Laundering Act, 2002 shall also exercise the jurisdiction, powers and authority under the Prohibition of Benami Property Transaction Act, 1988 and perform the duties as envisaged under the Act.

2.5.2

Administrator [Section 2(2)]

Section 2(2) of the Act states that: “Administrator means an Income-tax Officer as defined in clause (25) of section 2 of the Income Tax Act, 1961.” The Income-tax Officer appointed as per provisions of the Income Tax Act, 1961 has been given the responsibility of being an administrator under this Act. The main function of the administrator is to manage the property confiscated as per the provisions of the Act, in a manner prescribed by Rules. The administrator shall be responsible for the identification of the property confiscated, receiving the property and management of the property including disposal of the said property in a manner prescribed by Rules.

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Appellate Tribunal [Section 2(3)]

Section 2(3) of the Act states that: “Appellate Tribunal means the Appellate Tribunal established under section 30.” As per sec 30 of the Act, the Central Government shall by notification establish an Appellate Tribunal to hear the appeals against the orders of the Adjudicating Authority. The jurisdiction of the Appellate Tribunal shall be exercised by its benches. A bench of appellate tribunal may be constituted by a Chairperson and at least two other members. The Chairperson of the Appellate Tribunal may be a sitting or retired judge of a High Court. Out of two members of the Appellate Tribunal, one member shall be a judicial member and other member shall be an administrative member. Till the Appellate Tribunal is established by the Central Government under the Act, the Central Government in exercise of powers conferred under sec 71 of the Act has notified the Appellate Tribunal established under sec 25 of the Prevention of Money Laundering Act, 2002 to discharge the functions of the Appellate Tribunal under the Prohibition of Benami Property Transaction Act, 1988.

2.5.4

Approving Authority [Section 2(4)]

Section 2(4) of the Act states that: “Approving Authority means an Additional Commissioner or a Joint Commissioner as defined in clauses under (1C) and (28 C) respectively of section 2 of the Income Tax Act, 1961.” The Approving Authority is a senior officer in the hierarchy. The initiating officer is basically in the rank of assistant or deputy commissioner of Income Tax. Accordingly, the Approving Authority is senior in hierarchy i.e. additional commissioner or the joint commissioner of Income Tax. The initiating officers are required to get approval of the Approving Authority before initiating any action under the Prohibition of Benami Property Transaction Act, 1988.

2.5.5

Attachment [Section 2(5)]

Section 2(5) of the Act states that: “Attachment means the prohibition of transfer, conversion, disposition or movement of property, by an order issued under this Act” Attachment is an act or process of taking, apprehending or seizing a property by way of a judicial order. An attachment in reference to the provisions of the Prohibition of Benami Property Transaction Act, 1988 is an order of prohibition of transfer, conversion, disposition or movement of property. There is a provision of provisional attachment for the purpose of sec 24(3) of the Act where the initiating officer may provisionally attach the property held benami after taking prior 38

Chapter 2

Definitions

approval of the Approving Authority in a manner as provided in detail in the Second Schedule of the Income Tax Act, 1961 [Refer Annexures at the end of the book for the schedule].

2.5.6

Authority [Section 2(6)]

Section 2(6) of the Act states that: “Authority means an authority referred to in sub-section (1) of section 18” There are four authorities as referred to in sec18 of the Act. They are (i)

Initiating officer;

(ii)

Approving Authority;

(iii)

Administrator; and

(iv)

Adjudicating Authority.

The initiating officer is the lowest officer in the hierarchy i.e. assistant commissioner or the deputy commissioner. Initiating officer is required to conduct or initiate inquiry or investigation in respect of property after seeking prior approval of the Approving Authority who is a senior level officer in the hierarchy. The administrator is appointed by the Central Government usually the Income-tax Officer which is defined under sec 2(25) of the Income Tax Act, 1961. He is also responsible for managing the said property which has been confiscated. The Adjudicating Authority is a body of at least three members who are responsible for adjudication of the issues relating to the benami property transaction.

2.5.7

Banking Company [Section 2(7)]

Section 2(7) of the Act states that: “Banking Company means a company to which the provisions of the Banking Regulations Act, 1949, applies and includes any bank or banking institution referred to in section 51 of that Act.” So far as the application under the Banking Regulation Act, 1949 is concerned, banking company means accepting for the purpose of lending or investment of deposits of money from the public and repayable on demand.. It is however stated that nothing in the Banking Regulation Act, 1949 shall apply to: (a)

a primary agricultural credit society;

(b)

a co-operative land mortgage bank; and

(c)

any other co-operative society, except in the manner and to the extent specified in Part V.

As per the provisions of the Banking Regulation Act, 1949,“banking company” means any company which transacts the business of banking in India. As per the explanation provided herein, to understand the banking company, it clearly states 39

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that any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause.

2.5.8

Benami Property [Section 2(8)]

Section 2(8) of the Act states that: “Benami Property means any property which is the subject matter of a benami transaction and also includes the proceeds from such property.” The word “benami” in Persian language means “no name” or “without name” which is the subject matter of benami transaction. The benami property transaction therefore, is a transaction of property where one person buys the property in the name of another person or in the name of a fictitious person. That another person or fictitious person does not pay the consideration for the property. The real owner of the transacted property is the person who provides the consideration of the property.

2.5.9

Benamidar [Section 2(10)]

Section 2(10) of the Act states that: “Benamidar means a person or a fictitious person as the case may be , in whose name the benami property is transferred or held and includes a person who lends his name” Benamidar in reference to a benami property is the person in the name of whom property is purchased/ transacted but such person has not paid the consideration for the property transacted. The real owner of the property is the person who paid the consideration for the property transacted and therefore the person who paid the consideration for the property enjoys the fruits of the said property. The benamidar is the property holder just for the name sake. He cannot enjoy the property. This benamidar sometimes is not even aware that the property has been transacted in his name as neither has he paid the consideration for the property in question nor he is in possession of the property.

2.5.10 Bench [Section 2(11)] Section 2(11) of the Act states that: “Bench” means a Bench of the Adjudicating Authority or the Appellate Tribunal, as the case may be; Bench of Adjudicating Authority or the Appellate Tribunal consists of a Chairperson and minimum two members. The Adjudicating Authority delivers the order after following adjudicating process and the orders of the Adjudicating 40

Chapter 2

Definitions

Authority is challenged before the Appellate Tribunals. The Central Government vide notification dated October 25, 2016 has notified that unless and until the Adjudicating Authorities are appointed and the Appellate Tribunal is established under this Act, the Adjudicating Authorities which are duly appointed under sec 6(1) of the Prevention of Money Laundering Act, 2002 and the Appellate Tribunal established under sec 25 of the Prevention of Money Laundering Act, 2002 shall discharge the functions of the Adjudicating Authority and Appellate Tribunal, respectively, under this Act.

2.5.11 Beneficial Owner [Section 2(12)] Section 2(12) of the Act states that: “Beneficial Owner means a person, whether his identity is known or not, for whose benefit the benami property is held by a benamidar.” Beneficial owner is a person who pays the consideration of the benami property transaction. Accordingly, he reaps the fruits of the property, though held by the benamidar.

2.5.12 Board [Section 2(13)] Section 2(13) of the Act states that: “Board” means the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963; The Central Board of Direct Taxes constituted under the Central Board of Revenue Act, 1963 is the apex body and authority to administer the laws relating to direct taxes.

2.5.13 Director [Section 2(14)] Section 2(14) of the Act states that: “Director shall have the same meaning as assigned to it in clause (34) of section 2 of the Companies Act, 2013” As per sec 2(34) of the Companies Act, 2013, a director means a director appointed to the board of a company; Further, the erstwhile Companies Act, 1956 provides for the requirement of having minimum two directors in a private company whereas three directors in a public company which was retained under the Companies Act, 2013.

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2.5.14 Executor [Section 2(15)] Section 2(15) of the Act states that: “Executor shall have the same meaning as assigned to it in clause (c) of section 2 of the Indian Succession Act, 1925” As per sec 2(c) of the Indian Succession Act, 1925, “executor” means a person to whom the execution of the last will of a deceased person is, by the testator’s appointment, confided.

2.5.15 Fair Market Value [Section 2(16)] Section 2(16) of the Act states that: “Fair market value, in relation to a property, means— (i) the price that the property would ordinarily fetch on sale in the open market on the date of the transaction; and (ii) where the price referred to in sub-clause (i) is not ascertainable, such price as may be determined in accordance with such manner as may be prescribed” Fair market value in reference to a benami property shall mean the market price of the property at which the property would have been sold in the open market at the time of benami transaction. Where the fair market value as referred to in sub- clause (i) of sec 2(16) is not ascertainable then the process for ascertaining the said fair market value (price) of the said property shall be as per the process laid down in the Chapter 10 of this book i.e. the Prohibition of Benami Property Transaction Rules, 2016.

2.5.16 Firm [Section 2(17)] Section 2(17) of the Act states that: “Firm shall have the same meaning as assigned to it in section 4 of the Indian Partnership Act, 1932 and shall include a limited liability partnership as defined in the Limited Liability Partnership Act, 2008” As per sec 4 of the Indian Partnership Act, 1932, ‘‘Partnership” is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Persons who have entered into partnership with one another are called individually “partners” and collectively a “firm”, and the name under which their business is carried on is called the “firm name”. Therefore, firm is the collective name of partners who have gathered together to carry out business to share the profits of the business.

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As per provisions of Limited Liability Act, 2008, limited liability partnership formed and registered under that Act and partner in relation to limited liability partnership means any person who becomes partner in the limited liability partnership in accordance with the limited liability partnership agreement.

2.5.17 High Court [Section 2(18)] Section 2(18) of the Act states that: “High Court means— (i) the High Court within the jurisdiction of which the aggrieved party ordinarily resides or carries on business or personally works for gain; and (ii) where the Government is the aggrieved party, the High Court within the jurisdiction of which the respondent, or in a case where there are more than one respondent, any of the respondents, ordinarily resides or carries on business or personally works for gain” The jurisdiction of the High Court will be where the aggrieved party resides or carries out the business for gain, however, where the aggrieved party is the Government; the jurisdiction will be where the respondent ordinarily reside or carries out business for gain.

2.5.18 Initiating Officer [Section 2(19)] Section 2(19) of the Act states that: “Initiating Officer means an Assistant Commissioner or a Deputy Commissioner as defined in clauses (9A) and (19A) respectively of section 2 of the Income-tax Act, 1961” Initiating Officer is generally lower cadre officer in the hierarchy and carries out inspection and investigations. They are usually assistant commissioner or deputy commissioner of income tax appointed under Income Tax Act, 1961.

2.5.19 Member [Section 2(20)] Section 2(20) of the Act states that: “Member means the Chairperson or the Member of the Adjudicating Authority or the Appellate Tribunal, as the case may be” Member is a person constituting the Adjudicating Authority or the Appellate Tribunal as the case may be. At least three members constitute an Adjudicating Authority or the Appellate Tribunal out of which one is a Chairperson.

The Law and Practice of The Prohibition of Benami....

Chapter 2

2.5.20 Notification [Section 2(21)] Section 2(21) of the Act states that: “Notification” means a notification published in the Official Gazette and the expression “notified” shall be construed accordingly;

2.5.21 Partner [Section 2(22)] Section 2(22) of the Act states that: “Partner” shall have the same meaning as assigned to it in section 4 of the Indian Partnership Act, 1932, and shall include,— (a) any person who, being a minor, has been admitted to the benefits of partnership; and (b) a partner of a limited liability partnership formed and registered under the Limited Liability Partnership Act, 2008; “Partnership” is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Persons who have entered into partnership with one another are called individually, “partners” and collectively “a firm”, and the name under which their business is carried on is called the “firm-name”. Partner in relation to limited liability partnership means a person who becomes a partner in the limited liability partnership in accordance with limited liability partnership agreement.

2.5.22 Partnership [Section 2(23)] Section 2(23) of the Act states that: “Partnership shall have the same meaning as assigned to it in section 4 of the Indian Partnership Act, 1932, and shall include a limited liability partnership formed and registered under the Limited Liability Partnership Act, 2008”

2.5.23 Person [Section 2(24)] Section 2(24) of the Act states that: “Person shall include— (i) an individual; (ii) a Hindu undivided family; (iii) a company; (iv) a firm; (v) an association of persons or a body of individuals, whether incorporated or not;

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(vi) every artificial juridical person, not falling under sub-clauses (i) to (v)” The definition of person has been taken from sec 2(31) of the Income Tax Act, 1961. A local authority which includes the person under the Income Tax Act, 1961 has not been included as a person under the Prohibition of Benami Property Transaction Act, 1988. Individual: Individual would include association of individuals even a person of unsound mind who may be represented by guardian. A Karta of Hindu Undivided Family: However, would not be covered under “individual”. A Hindu Undivided Family: Hindu Undivided family has not been defined under the Income Tax Act. It is defined under the Hindu Law as a family. Thus, Hindu Undivided family includes all the persons lineally descended from common ancestors including wife and unmarried daughters. It is rightly said that a Hindu is never born as an individual. A Hindu who is born always joins other members of the family. Company: Company is not defined under the Income Tax Act or this Act. It is however provided that, the terms which are not defined in the Act shall have meanings defined in other Acts. The company has been defined under Companies Act, 2013, according to which “Company” means a company incorporated under the Companies Act or under any previous company law. A Firm: has already been defined under the Act. An association of persons or a body of individuals, whether incorporated or not: An association of persons, or a body of individuals is deemed to be a person whether or not association of persons or a body of individuals incorporated with the common object of deriving income, or gains. The phrase “association of persons” is very comprehensive. Under sec 3(42) of the General Clauses Act, person includes any company or association or body of individuals, whether incorporated or not. The Hon’ble Supreme Court in the case of Commissioner of Income Tax (CIT) vs Indira Balkrishna 1960 AIR 1172 has observed that the word ‘associate’ means according to the ‘Oxford Dictionary’, to join in common purpose, or to join in an action’. Therefore, an ‘association of persons’, must be one in which two or more persons join in a common purpose or common action, and as the words occur in a section, which imposes a tax on income, the association must be one the object of which is to produce income, profits or gains. Artificial juridical person: An artificial juridical person is also deemed to be a person whether or not such juridical person has been established or incorporated with the object of gaining income or profit. Artificial juridical person, thus, is the one who can sue and be sued, can own property, earn income, etc.

The Law and Practice of The Prohibition of Benami....

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2.5.24 Prescribed [Section 2(25)] Section 2(25) of the Act states that: “Prescribed means prescribed by rules made under this Act.” Prescribed means prescribed by rules and the Central Government by virtue of sec 68 of the Act, can make rules to carry out the provisions of the Act.

2.5.25 Property [Section 2(26)] Section 2(26) of the Act states that: “Property means assets of any kind, whether movable or immovable, tangible or intangible, corporeal or incorporeal and includes any right or interest or legal documents or instruments evidencing title to or interest in the property and where the property is capable of conversion into some other form, then the property in the converted form and also includes the proceeds from the property” The definition of property has been made more comprehensive which includes assets of any kind, corporeal or incorporeal, or legal documents or instruments evidencing title. Under the pre-amended Benami Act, the definition of property [Section 2(c)] was very limited, which read as under: “property means property of any kind, whether movable or immovable, tangible or intangible, and includes any right or interest in such property.” The property has also been defined under sec 2(1) (v) of the Prevention of Money Laundering Act, 2002, which is as under: “Property means any property or assets of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located” The definition of property has been amended vide the Benami Property Transaction (Prohibition) Amendment Act, 2016 keeping in view the pre-amended definition of the Act and definition available under the Prevention of Money Laundering Act, 2002. The new definition of property is comprehensive and includes assets of any kind, whether movable or immovable, tangible or intangible, corporeal or incorporeal and includes any right or interest or legal documents or instruments evidencing title to or interest in the property and where the property is capable of conversion into some other form, then the property in the converted form and also includes the proceeds from the property.

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2.5.26 Public Financial Institution (Section 2(27)] Section 2(27) of the Act states that: “Public financial institution shall have the same meaning as assigned to it in clause (72) of section 2 of the Companies Act, 2013” The list of public financial institution are provided in clause 72 of Sec 2 of the Company Act 2013, further, the Central Government in consultation with Reserve Bank of India may by notification declare any other financial institution as public financial institution. Such financial institutions however, shall not be notified if such institutions are not established by the Central or the State Act or 50 percent of such financial institutions are held/ controlled by the Central or the State Government as the case may be. As per clause 72 of sec 2 of the Company Act, 2013 the public financial institutions are as below: “public financial institution‖ means— (i) the Life Insurance Corporation of India, established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956); (ii) the Infrastructure Development Finance Company Limited, referred to in clause (vi) of subsection (1) of section 4A of the Companies Act, 1956 (1 of 1956) so repealed under section 465 of this Act; (iii) specified company referred to in the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002); (iv) institutions notified by the Central Government under sub-section (2) of section 4A of the Companies Act, 1956 (1 of 1956) so repealed under section 465 of this Act; (v) such other institution as may be notified by the Central Government in consultation with the Reserve Bank of India: Provided that no institution shall be so notified unless— (A) it has been established or constituted by or under any Central or State Act; or, (B) not less than fifty-one per cent. of the paid-up share capital is held or controlled by the Central Government or by any State Government or Governments or partly by the Central Government and partly by one or more State Governments;”

The Law and Practice of The Prohibition of Benami....

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2.5.27 Special Court [Section 2(28)] Section 2(28) of the Act states that: “Special Court means a Court of Session designated as Special Court under sub-section (1) of section 50” The Central Government in consultation with Chief Justice of High Court may designate one or more Session Court(s) as Special Court by notification for such area or areas or for such case or cases or group of cases for speedy trial of offenses punishable under the Act. Such special courts shall also try an offence along with same trial under the Act where the accused is charged under the Code of Criminal Procedure, 1973.

2.5.28 Transfer [Section 2(29)] Section 2(29) of the Act states that: “Transfer includes sale, purchase or any other form of transfer of right, title, possession or lien” The definition of transfer is comprehensive and includes sale, purchase or any other form of transfer of right, title, possession or lien.

2.5.29 Trustee [Section 2(30)] Section 2(30) of the Act states that: “Trustee means the trustee as defined in the section 3 of the Indian Trusts Act, 1882” Section 3 of the Indian Trust Act, 1882 is as under: “A “trust” is an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner: “author of the trust”; “trustee”; “beneficiary”; “trust property”; “beneficial interest”; “instrument of trust”. The person who reposes or declares the confidence is called the “author of the trust”; The person who accepts the confidence is called the “trustee”; the person for whose benefit the confidence is accepted is called the “beneficiary”; the subject-matter of the trust is called “trust property” or “trust money”; the “beneficial interest” or “interest” of the beneficiary is his right against the trustee as owner of the trust property; and the instrument, if any, by which the trust is declared is called the “instrument of trust”; “breach of trust”—A breach of any duty imposed on a trustee, as such, by any law for the time being in force, is called a “breach of trust”; ” 48

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2.5.30 Interpretation clause [Section 2(31)] â&#x20AC;&#x153;words and expressions used herein and not defined in this Act but defined in the Indian Trusts Act, 1882, the Indian Succession Act, 1925, the Indian Partnership Act, 1932, the Income-tax Act, 1961, the Depositories Act, 1996, the Prevention of Money-Laundering Act, 2002, the Limited Liability Partnership Act, 2008 and the Companies Act, 2013, shall have the same meanings respectively assigned to them in those Acts.â&#x20AC;?