The law has been stretched to slap notices on corporates for buying properties in the name of local residents to circumvent state laws
Companies have asked the Income Tax Department to soften the benami law that was activated in 2016 to curb the menace of black money and prohibit the holding of properties and assets in someone else's name to escape tax, according to a report by The Economic Times.
Tax authorities are said to have received pleas from various trade bodies requesting them to amend the law. The law has been stretched to slap notices on corporates for buying properties in the name of local residents to circumvent state laws, tax practitioners told the paper.
The authorities feel making these amendments would tone down the law to a great extent. "There are several representations for amendments which, if enacted, would dilute the law to a great extent. The I-T Act can point out generation of black money, but the benami act focuses on application of black money and is thus more effective," a senior tax official told the paper.
Lawyers and chartered accountants, however, are of the view that the law touches upon grey areas and questions old and accepted practices such as holding land in the name of the local, who serves as a partner of the firm financing the acquisition.
For taxmen, such transactions are benami in nature as the son of the soil are the benamidar while other partners are beneficial owners. "One of the reasons for holding property in a benami name can be utilisation of untaxed black money. Apart from this, there can be several other reasons like defrauding creditors, including banks, circumventing laws, etc," Surabhi Ahluwalia, Commissioner of Income Tax (Media and Technical Policy) and official spokesperson for Central Board of Direct Taxes, the apex direct tax body, told the paper.
The department is not questioning regular transactions under the Benami Transactions (Prohibition) Act, 1988. Benami properties are only being provisionally attached, and that too with approval of the relevant senior officer, Ahluwalia said.
The Revenue Department has issued preliminary notices to around 10,000 people under the benami law, asking them to produce details regarding their source of income.
While some are clear cases of benami deals, there are others where the law is invoked on the basis of a declaration by the benamidar, senior Chartered Accountant Dilip Lakhani told the paper."Say a chauffeur with a salary of Rs 20,000 is found to have a flat on Nepean Sea Road registered in his name. If he admits that the property actually belongs to his employer, there is a good reason to invoke the benami act. But consider this: a company receives Rs 50 crore cheque as loan from a bogus company. Earlier, this loan would have been treated as income and taxed. And if the promoter of the shell company, during the course of interrogation, says the money actually belongs to the borrower, then the law is invoked merely on the basis of a statement by a person, and not any evidence," Lakhani explained.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.