Company act
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
05 May 2012
if a company purchase a property in the name of the Director as "A.B.C. Dirctor of XYZ Co." and the payment is made by company,
whether this transaction is Benami?
and if property is purchased in personal capacity of Director and the payment is made by Company.
Whether this will amount to Benami?
whether this transaction is Benami?
and if property is purchased in personal capacity of Director and the payment is made by Company.
Whether this will amount to Benami?
24 November 2012
Having the same doubt
19 July 2024
The concept of Benami transactions in India is governed by the Benami Transactions (Prohibition) Act, 1988, as amended from time to time. Here’s how it applies to the scenarios you mentioned:
1. **Property purchased in the name of Director but payment made by the Company:**
- If a property is purchased in the name of a Director of a company (e.g., "A.B.C. Director of XYZ Co.") and the payment is made by the company, the transaction may potentially be considered as Benami.
- As per the Benami Transactions (Prohibition) Act, a transaction is considered Benami if property is held by one person (the Director, in this case) but the consideration for it has been provided, paid, or provided by another person (the company).
- The Act prohibits Benami transactions, and the consequences can include confiscation of the property and penalties.
2. **Property purchased in the personal capacity of the Director but payment made by the Company:**
- If the Director purchases a property in their personal capacity and the payment is made by the company, this situation also raises concerns under the Benami Transactions Act.
- Even though the property is in the name of the Director personally, if the funds used for the purchase originate from the company (which could be seen as an indirect benefit to the Director), it may be deemed a Benami transaction.
- The intention and purpose behind such transactions are crucial in determining whether they fall under the Benami Act.
### Conclusion:
In both scenarios described, there is a potential risk that the transactions could be considered Benami under the Benami Transactions (Prohibition) Act, 1988. The Act is aimed at preventing the practice of holding property in the name of one person while the consideration for it is provided by another, especially to evade taxes or other legal obligations.
Companies and Directors should exercise caution to ensure that property transactions are transparent, properly documented, and compliant with legal requirements. It’s advisable to consult with legal and tax professionals to ensure compliance with all applicable laws and to avoid unintended consequences under the Benami Transactions Act.
1. **Property purchased in the name of Director but payment made by the Company:**
- If a property is purchased in the name of a Director of a company (e.g., "A.B.C. Director of XYZ Co.") and the payment is made by the company, the transaction may potentially be considered as Benami.
- As per the Benami Transactions (Prohibition) Act, a transaction is considered Benami if property is held by one person (the Director, in this case) but the consideration for it has been provided, paid, or provided by another person (the company).
- The Act prohibits Benami transactions, and the consequences can include confiscation of the property and penalties.
2. **Property purchased in the personal capacity of the Director but payment made by the Company:**
- If the Director purchases a property in their personal capacity and the payment is made by the company, this situation also raises concerns under the Benami Transactions Act.
- Even though the property is in the name of the Director personally, if the funds used for the purchase originate from the company (which could be seen as an indirect benefit to the Director), it may be deemed a Benami transaction.
- The intention and purpose behind such transactions are crucial in determining whether they fall under the Benami Act.
### Conclusion:
In both scenarios described, there is a potential risk that the transactions could be considered Benami under the Benami Transactions (Prohibition) Act, 1988. The Act is aimed at preventing the practice of holding property in the name of one person while the consideration for it is provided by another, especially to evade taxes or other legal obligations.
Companies and Directors should exercise caution to ensure that property transactions are transparent, properly documented, and compliant with legal requirements. It’s advisable to consult with legal and tax professionals to ensure compliance with all applicable laws and to avoid unintended consequences under the Benami Transactions Act.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- GSTR-1A How to update Invoice
- Excess salary payment.
- INTEREST APPLICABLE ON ITC REVERSAL PORTION
- Stamp Paper for partnership firm change new income tax 2025
- Current Account Opening for Sole Proprietorship with Udyam Certificate - Zero Turnover
- TDS on Purchase of Immovable Property by NRI from NRI
- Capital gain from sale of house property
- Regarding TDS Applicability For Director Remuneration
- SFT Cash Deposit in Current Account
- FORM 26A APPLICABILITY
- TDS APPLICABILITY......
- Copyright software
- Cash gift by grand mother to her grand daughter
- Tax amount diff in Gstr1 and 3B in tax compare reports
- Tds on GST in connection with sale to public company
- Restoration of certificate of practice
- Regarding change in correspondence address in SSP portal
- No Compliences after incorporation
- USEFUL LIFE OF USED/SECOND HAND COMMERCIAL VEHICLES
- Claiming TDS deducted by builder on Hardship compensation and Corpus
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
CAclubindia
