Q. Benami transaction - Addition under section 68

Question

Q- 1     A company raising share capital who is not able to produce its shareholders to the concerned authorities can fall under the ambit of benami transactions

Q-2 - If the company  had raised the capital in past , got assessed under section 143(3) / 147/ 153 a/ 153 C , however at present who is not able to produce its shareholders to the concerned authorities can fall under the ambit of benami transactions

Q-3  If the company  had raised the capital in past , got assessed under section 143(3) / 147/ 153 a/ 153 C , and these shares were transferred or buy back  by promoters at different / lower / FMV  (  before the applicability of section 56(vii) or after applicability  also ) however at present unable  produce its erstwhile shareholders to the concerned authorities can fall under the ambit of benami transactions.

q-4  If the company  had raised the capital in past , got assessed only u/s 143(1)  , and these shares were transferred or buy back  by promoters at different / lower / FMV  (  before the applicability of section 56(vii) or after applicability  also ) however at present unable  produce its erstwhile shareholders to the concerned authorities can fall under the ambit of benami transactions.

Q5   If a person takes a loan and is not able to substantiate the genuinity of the lender or is not able to produce the lender may also fall under the ambit of the Benami Act.  as loan is not an  assets in any capacity  , only obligation / debt

Answer 1

Ajay Ji, a very good and controversial question.

In all these cases, the company does not own the property... the shareholder or giver of loan does.

However, the company being part of the transaction... need to prove that it is not a party to any benami holding... if benami is proved (mere non production of shareholder is not an issue.... however NON-EXISTENCE of shareholder could be a big issue).. then the company could be in trouble

Answer 2

Ajay ji, please find my opinion on different issues raised by you.

# as rightly mentioned by Pramod Jain ji, non production of shareholders is not an issue, Non-existence of shareholders could be a BIG Issue. For a company, there are lots off precautionary measures are available under law. Like Annual General Meeting where every company requires to maintain Quoram. Update KYC of present shareholders every year. For listed companies, ask your company merchant banker to do this job for you through KYC of demant account holder.

# shares were transferred or buy back  by promoters at different / lower / FMV  (before the applicability of section 56(vii) or after applicability  also) however at present unable produce its erstwhile shareholders to the concerned authorities can fall under the ambit of benami transactions. - NO. Already settled transactions are out of the four corners of the effective The Benami Transactions (Prohibition) Amendment Act, 2016.

# If a person takes a loan and is not able to substantiate the genuinity of the lender or is not able to produce the lender may also fall under the ambit of the Benami Act - YES. Firstly, loan taken from person other than Banks and NBFC are not supported by any law. Secondly, if the transaction happened in past and loan taker is not under obligation to return back the loan then it is a Benjamin Transaction.

Regards,
CA Rahul Gupta
SAI FinBiz Advisors LLP