The Financial Express

Benami transactions galore

| Updated: October 22, 2017 08:46:30

Benami transactions galore

Property is defined in Section 2 (c) of the transfer of property Act as property of any kind, whether movable or immovable, tangible or intangible, and includes any right or interest in such property.
The word 'Benami' has its origin in Persian vocabulary and it literally means 'property without a name'. Benami purchase of property is done in the name of a person who does not pay the consideration but merely lends his name, while the real title vests in another person who actually purchases the property and is the real owner. This is a transaction or arrangement in respect of a property where the owner of the property is not aware of, or, who denies knowledge of, such ownership.
In a benami transaction a property is transferred to surrogate owner to gain undue advantage. The benami transactions are made in order to circumbent the land ceiling laws, so that the real owners can have more landed properties  than provided in laws. Some persons also transfer properties in the name of any close relatives to evade taxation and conceal black money obtained through corruption. One of the motives for a benami deal is often as much to keep property out of the reach of other members of one's own extended family. The motive for a benami deal is often as much to keep property out of the reach of other members of one's own extended family, as from officialdom.
There are a few exceptions as this applies to a benami transaction entered into by any person in the name of his (a) spouse, (b) brother or sister, or (c) any lineal ascendant or descendant. This also applies in the case of 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, agent, director of a company or legal adviser, 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 Government for this purpose. However, if the conveyance is to the wife or child of the purchaser, then the presumption under the English law is the other way round, namely, that the purchaser intended to benefit the child or wife.
Persons having the possession of black money take advantage of benami transactions by purchasing properties in the names of their nearest relatives and such transactions increase corruption in society.
Many countries have laws for prosecution and blocking generation and holding of black money in the form of benami properties, especially in real estate. In many countries, it provides that a benami property arising out of prohibited Benami transaction is liable to confiscation by the Government and such property shall vest absolutely in the Government without paying any compensation, prohibits right of the 'benamidar' to recover property held benami. The properties held benami are acquired by the Government or confiscated to indicate the deterrence of the legislation and if any person enters into a benami transaction in order to defeat the provisions of any law or to avoid payment of statutory dues or to avoid payment to creditors. The beneficial owner, benamidar and any other person who abets or induces any person to enter into such benami transaction, are also charged for committing a punishable offence.
Benami transactions have been practised in the Sub-continent before the advent of the British. Though was not considered harmless, it was a legally recognised concept. Benami transactions were often used to resort to furthering illegal or questionable objects, including the evasion of taxes. These were sometimes also resorted in order to defeat creditors.
Modern methods of record-keeping, initiated by the British, were dictated by the need for revenue. Tax on agricultural land, an important source of government revenues, required identification of those responsible for paying it. The record, updated to reflect changes of ownership, was and continues to be maintained by land registration department and National Board of Revenue (NBR). The British rulers had no intention to address the issue of benami transactions. The person shown on the records is responsible for paying land revenue or property tax, and is, consequently, presumed to be the owner, unless it can be proved to the contrary.
Sections 81 and 82 of Trusts Act, 1882, as adapted by Bangladesh, give legislative recognition to the practice of benami transactions and but it is barred in the Land Reform Ordinance, 1982, Section 5 (1) of which states that no person shall purchase any immovable property for his own benefit in the name of any other person/persons.  But Bangladesh has two unique laws. After the liberation, a law has passed to limit the ownership of land with a ceiling by the government. The main points of the Land Reform Policy of 1972 were as follows: (i) the ceiling of maximum land ownership was reduced again to 33.33 acres (100 bighas) from 125 acres (375 bighas1); (ii) surplus land was to be acquired by the government and distributed amongst landless peasants; (iii) new diluvia and accreted land would be acquired by the government and treated as khas (public state-owned) land; (iv) land owners holding less than 25 bighas or 8.33 acres were exempted from paying land revenue (tax).
Subsequently, the Land Reforms Ordinance of 1984 was promulgated following a long struggle by the country's landless people's movement and was based on the recommendations of a specially formed committee, which emphasised the distribution of khas land among landless families. The main features of the 1984 reform were as follows: (i) the maximum land ceiling was reduced from 33.33 acres to 20 acres; (ii) "benami" transactions i.e. the purchase or transfer of land in the name of another person to conceal the actual possession of the land holding were prohibited.
Unfortunately, the Income Tax law permits the haze transaction for purchase and sell of properties. It does not ask for source of money but legalises the untaxed or illegal money for 10 per cent "penalty tax".
The benami deals are widespread and are one of the main causes for proliferation of black money. Benami transactions are one of the most notorious sources of circulation and investment of black money. The 10 per cent tax is lower than the regular tax paid by the honest taxpayers. It gives opportunity of purchasing properties under name of any person. The law has apparently made the land reform act non-effective.
Section-2 of the Bangladesh Transfer of Immovable Property (Temporary Provisions) Order, 1972 states that "In this Order, unless there is anything repugnant in the subject or context, 'transfer' includes transfer by sale, exchange, gift, heba, will, mortgage, lease, sub-lease or any other manner of transfer or any agreement for such transfer or change of management through a power of attorney or otherwise." The Transfer of Property Act 1882 allowed deals in the name of wife or unmarried daughter.
We need a law prohibiting benami transition and also transfer by sale, exchange, gift, heba, will, mortgage, lease, sub-lease or any other manner of transfer or any agreement for such transfer or change of management through a power of attorney or otherwise.
The writer is a Legal Economist.
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