02 November 2016 Current Affairs: The Benami Transactions (Prohibition) Amendment Act, 2016 came into effect on 1 November 2016. The Act was formulated to curb black money.
An official release of Central Board of Direct Taxes said, after coming into effect, the existing Benami Transactions (Prohibition) Act, 1988 will be renamed as the Prohibition of Benami Property Transactions (PBPT) Act, 1988.
The new legislation provides for seven years imprisonment and fine for those indulging in illegal transactions. The previous Act provided for up to three years if imprisonment or fine or both. It says that properties held as Benami are liable for confiscation by the government without payment of compensation.
The act has amended the definition of benami transactions and establishes adjudicating authorities and an Appellate Tribunal to deal with benami transactions.
Highlights of Benami Transactions (Prohibition) Amendment Act : It expands the definition of benami transaction by including following
Transaction is made in a fictitious name
Owner is not aware of and denies knowledge of the ownership of the property
Person providing the consideration for the property is not traceable
Earlier, it defined benami transaction as a transaction where a property is held by or transferred to a person, but has been provided for or paid by another person.
Exemptions : Specific cases will be exempted from the definition of a benami transaction. These include cases when a property is held by
A member of a Hindu undivided family, and is being held for his or another family member’s benefit, and has been provided for or paid off from sources of income of that family.A person in a fiduciary capacity.
A person in the name of his spouse or child, and the property has been paid for from the person’s income.
Section 58 empowers government to exempt the genuine properties of religious organisation like a church or a mosque or a gurdwara or a temple from the action. But the exemption to such entities cannot be a pretext for tax evasion.
Four Authorities for conducting Inquiry : The Act establishes four authorities to conduct inquiries or investigations regarding benami transactions and they are
Penalty : Rigorous imprisonment from one year to seven years, and a fine which may extend to 25% of the fair market value of the benami property. The previous penalty under the Act for entering into benami transactions was imprisonment up to three years, or a fine, or both. Specifies the penalty for providing false information to be 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.Certain session courts would be designated as Special Courts for trying any offences which are punishable under the Act.