The government''s commitment to the International Monetary Fund (IMF) to submit draft legislation against "Benami" transactions by end-January 2016 is likely to be challenged in court as it is against the injunctions of Islam. The government in its Letter of Intent dated 23 December 2015 stated that "by end-January we will prepare and submit to the National Assembly draft legislation against "Benami" transactions in which assets are held by or transferred to a person, but have been provided for, or paid by, another person."
According to experts, Benami transactions are presently covered under the Trust Act 1882. The government would be bound to amend the Trust Act to give legal cover to the proposed Benami Transaction (Prohibition) Act. However, Article 227(1) of the Constitution stipulates that "All existing laws shall be brought in conformity with the Injunctions of Islam as laid down in the Holy Quran and Sunnah and no law shall be enacted which is repugnant to such Injunctions".
If Trust Act is amended, the government would be changing or restricting the scope of the provisions of laws which are permissible in Islam, sources argued. Thus, the proposed Benami Transaction (Prohibition) Act is likely to be challenged in the court.
The proposed Benami Transaction (Prohibition) Act proposes 1 to 7 year imprisonment to a person found guilty of involvement in Benami transactions and imposition of 25 percent penalty of the fair market value of Benami property. Benami Transaction (Prohibition) Act has also proposed the establishment of adjudication authorities to deal with cases of Benami transactions.
The adjudication authorities would be empowered to constitute as many as benches as they deem necessary to handle the cases of Benami transactions. The Benami Act would be separately moved to the parliament, as it is not part of the Finance Bill 2015, sources added.
Under the proposed Benami Transactions (Prohibition) Act, 2015, it would be an Act to prohibit holding property in Benami and restrict right to recover or transfer property held Benami and provide a mechanism and procedure for confiscation of property held Benami and for matters connected therewith or incidental thereto. Under the said Act, the authority would be empowered for attachment of properties, ie, prohibition of transfer, conversion, disposition or movement of property, by an order issued under the said Act. The "Benami property" means any property which is a subject matter of Benami transaction and includes the proceeds from such property, it said.
Tax Reform Commission (TRC) had asked the Federal Board of Revenue (FBR) to introduce the Benami Transaction (Prohibition) Act.
According to the TRC, the Act must be promulgated and framed to consolidate and amend the law relating to Benami transactions, prohibit holding property in Benami and restrict right to recover or transfer property held Benami, and provide a mechanism and procedure for confiscation of property held Benami and for matters connected therewith or incidental thereto.