Tax

Benami Law causes havoc among companies as old deals resurface

The Indian tax authorities are swamped with requests from trade bodies to ease up on the Benami Law activated two years ago. The law was implemented to address the anomaly of holding properties and assets on someone else’s name to get away from paying taxes and bypass regulations to even cheating creditors.

Following incidents and transactions that turned out to be an absolute sham, the tax department decided to call upon the Benami Law. Incidents in Kolkata where members of the tribal communities were roped in as partners for shell companies to acquire land in the tribal belt are just some of the many such incidents.

Tax practitioners state that the law is being used to issue notices to corporates that don’t have a transparent structure involved in building land banks and to those who have been known to employ locals to buy properties to avoid state laws.

According to a senior tax official, the law will be diluted if the many representations for the amendment are enacted. While the Income Tax Act is efficient in tracking down the generation of black money, it is the Benami Law that is far efficient as it focuses on where the black money is being used.

Chartered Accountants and lawyers have a contrasting view of the law and argue that it touches upon some grey areas and leaves a question mark on the previously accepted practices.

The official spokesperson for the Central Board of Direct Taxes stressed on the importance of the law stating that one of the main reasons for buying and holding property in a Benami name is to evade taxes.

Moreover, the Income Tax Department is not aiming to question who comply with the Benami Transactions (Prohibitions) Act 1988, but those who have irregularity in their transactions.

Owing to the scope of the law, there are several deals from the past that are served notices with regards to their land deals. While in some cases there have been clear cases of Benami deals, there are also events where the law is invoked solely on the basis of a declaration by the Benamidar.

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