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Report No. 57

Benami Transactions

Chapter 1


1.1. Genesis and scope of the Report.-

The question of prohibiting benami transactions has been taken up by the Law Commission on a reference made on the subject by the Union Government.

1. Letter No. 2462/72/Adv. F, dated 20th December, 1972, of the Minister of Law to the Chairman, Law Commission.

1.2. In the letter of reference sent to the Law Commission, it is stated:-

"The problem of property held benami has been causing concern to the taxing authorities for some time. The Select Committee on the Taxation Laws (Amendment) Bill, 1969 had also suggested that Government should examine the existing law relating to benami transactions with a view to determining whether such transactions should be prohibited. This suggestion was re-iterated in Parliament during the debate on the Taxation Laws (Amendment) Bill, 1971."

Accordingly, the Law Commission has been asked to examine the matter and let Government have the benefit of its advise on the question of prohibiting the practice of holding property benami.

1.3. The letter addressed by the Government refers to the views expressed by the Select Committee on the Taxation Laws (Amendment) Bill, 1969. It appears that the Committee made the following comment1:-

"45. Clause 43 (New Clause 34)-As explained in paragraph 13, the Committee have decided to drop the new procedure for 'recognition' of partnership firms and to continue the existing procedure for registration of such firms with a few modifications.

During the course of the discussion of the modifications given effect to in this clause, it was suggested that Government should examine the existing law relating to benami transactions with a view to determine whether such transactions should be prohibited, and the Committee had agreed to this suggestion."

1. Taxation Laws (Amendment) Bill, 1969-Report of the Select Committee (3rd August, 1970), p. XVII.

1.4. During the debate1 on the 'Taxation Laws' Amendment Bill 1971, one of the Members2 commenting that the proposed amendment of the Income-tax Act was inadequate, observed as follows:-

"Even now, benami transactions are not debarred by law. A very drastic remedy is needed. That is the point that I am making. Merely saying that he will suffer in a certain way and that it will be discouraging the benami transactions is not enough. All benami transactions should be debarred under the law. And I want to know why it has not been done. Why do you want to encourage benami transactions indirectly by a supposed penalty or harm or by saying that the party may suffer because he has done that? Why not debar it completely?"

1. Rajya Sabha Debates.

2. Shri T.N. Singh.

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