PROHIBITION OF BENAMI TRANSACTION

The word Benami means anonymous and the term Benami Transaction is used to describe a transaction where one person pays for property but the property is transferred to or held by somebody else. The person who pays for the property is the real beneficiary but is not recorded as the legal owner of the property. This enables the payer to achieve undesirable purposes such as utilizing black money, evading the payment of tax and avoiding making payments to creditors. The old Benami Transactions (Prohibition) Act, 1988 was enacted in the year 1988 to prohibit all benami transactions.

The Hon'ble Supreme Court in Bhim Singh v. Kan Singh AIR 1980 SC 727, explained Benami Transaction as "Where a person buys a property with his own money but in the name of another person without any intention to benefit such other person, the transaction is called benami. In that case the transferee holds the property for the benefit of the person who has contributed the purchase money, and he is the real owner."

However, the old Act was not comprehensive enough and lacked to make a big impact. The Rules of the old Act was not properly framed and benami transactions continued in India. The old Act had several loopholes, including the absence of an appellate mechanism and lack of provisions for vesting of the confiscated property with the Central government. The Benami Transactions (Prohibition) Amendment Act, 2016 amended the old Act and is aimed at catching those with black money in the domestic economy hidden through benami properties. So, the main purpose of amended Act was mainly to amend the definition of benami transaction, establishing adjudicating authorities and an appellate tribunal and enhance the penalties for benami transaction

The Act is necessary to reduce generation and utilization of unaccounted black money. Real estate is considered as one of the major avenues for investment of unaccounted money in India. All real estate transactions shall now be in the name of the actual owner who is paying the consideration from his known sources. The practice of including the correct name in property transactions will bring transparency in the sector. With increased transparency, title risks would be minimised and buyer confidence in property transactions will get a boost. A fresh breath of professionalism will be ushered in. This will also increase the tax revenue for the Government by curbing unaccounted money into the system.