According to the brief Federal Board of Revenue (FBR) submitted to the National Assembly Standing Committee on Finance, the proposed bill restricts the right of any person who is claiming to be the real owner to recover such property. In addition, no person would be able to retransfer such property to the beneficial owner. The FBR stated that the problem of property held Benami has been causing concern to the tax authorities and past practice and experience shows that Benami transactions have often been resorted for furthering illegal or questionable objects, including the evasion of taxes. The assets, which are taken through illegally-earned money, can be used for evasion of material amounts of taxes or something more serious like financing terrorism.
The proposed legislation for regulation of the Benami transactions was initiated in 2008 by the Ministry of Finance; however the legislation could not materialise. The proposal has also been forwarded by Tax Reform Committee (TRC) in the consultative process of collecting budget proposals. Moreover there is a realisation that the Benami Transactions (Prohibition) Act is in operation in neighbouring country (India), while Pakistan is two decades late on the issue, the FBR said. The FBR stated that the legislation defines the Benami transaction as an arrangement where property is held by a person (other than in fiduciary capacity) on behalf of another person who has paid for it; or the transaction is made for a property in a fictitious name; or the owner of the property is not aware of or denies knowledge of such ownership. The Bill prohibits all persons from entering into Benami transactions. Any property held in “Benami” would he confiscated by the federal government. Once a property is confiscated, all rights as well as title of such property would vest completely with federal government and no compensation would be payable.
The proposed legislation would not be applicable retrospectively and it would be applicable to those transactions which will be executed after the said legislation will come in to force. Any person aggrieved by an order of the Adjudicating Officer would have the right to appeal to the Federal Appellate Tribunal proposed to be headed by a serving or retired Judge of a High Court. Appeal against the orders of the Tribunal would lie before the High Court. In addition to that, Special Courts will be established for trial of an offence punishable under the proposed legislation, FBR added. The bill would strengthen the law through empowering provisions prohibiting holding property as Benami and restricting the right to recover or transfer property held in Benami. The bill would also establish Adjudicating Authority, set up Appellate Tribunal and specify the penalty for entering into a Benami transaction and provisions for confiscation of Benami properties, it added.
