Benami Law Power of Attorney Transactions visavis Benami Law

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The Tax Publishers Power of Attorney Transactions vis-a-vis Benami Law CA. Manoj Gupta Power of attorney transaction are known as General Power of Attorney Sales (for short GPA Sales) or Sale Agreement/General Power of Attorney/Will transfers (for short SA/GPA/WILL transfers). There cannot be a sale by execution of a power of attorney nor can there be a transfer by execution of an agreement of sale and a power of attorney and will. These kinds of transactions were evolved to avoid prohibitions/conditions regarding certain transfers, to avoid payment of stamp duty and registration charges on deeds of conveyance, to avoid payment of capital gains on transfers, to invest unaccounted money (black money) and to avoid payment of unearned increases due to Development Authorities on transfer. The learned author examines the applicability of Benami Law to the case of power of attorney transactions. 1. Modes operandi of power of attorney transactions Power of attorney transaction are known as General Power of Attorney Sales (for short GPA Sales) or Sale Agreement/General Power of Attorney/Will transfers (for short SA/GPA/WILL transfers). There cannot be a sale by execution of a power of attorney nor can there be a transfer by execution of an agreement of sale and a power of attorney and will. These kinds of transactions were evolved to avoid prohibitions/conditions regarding certain transfers, to avoid payment of stamp duty and registration charges on deeds of conveyance, to avoid payment of capital gains on transfers, to invest unaccounted money (black money) and to avoid payment of unearned increases due to Development Authorities on transfer. The modus operandi in such SA/GPA/WILL transactions is for the vendor or person claiming to be the owner to receive the agreed consideration, deliver possession of the property to the purchaser and execute the following documents or variations thereof: (a) An Agreement of sale by the vendor in favour of the purchaser confirming the terms of sale, delivery of possession and payment of full consideration and undertaking to execute any document as and when required in future. Or An agreement of sale agreeing to sell the property, with a separate affidavit confirming receipt of full price and delivery of possession and undertaking to execute sale deed whenever required. (b) An Irrevocable General Power of Attorney by the vendor in favour of the purchaser or his nominee authorizing him to manage, deal with and dispose of the property without reference to the vendor. Or A General Power of Attorney by the vendor in favour of the purchaser or his nominee authorizing the attorney holder to sell or transfer the property and a Special Power of Attorney to manage the property. (c) A will bequeathing the property to the purchaser (as a safeguard against the consequences of death of the vendor before transfer is effected). These transactions are not to be confused or equated with genuine transactions where the owner of a property grants a power of Attorney in favour of a family member or friend to manage or sell his property, as he is not able to manage the property or execute the sale, personally. These are transactions, where a purchaser pays the full price, but instead of getting a deed of conveyance gets a SA/GPA/WILL as a mode of transfer, either at the instance of the vendor or at his own instance. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Power of Attorney Transactions vis-a-vis Benami Law

CA. Manoj Gupta

Power of attorney transaction are known as General Power of Attorney Sales (for short GPA Sales) or Sale Agreement/General Power of Attorney/Will transfers (for short SA/GPA/WILL transfers). There cannot be a sale by execution of a power of attorney nor can there be a transfer by execution of an agreement of sale and a power of attorney and will. These kinds of transactions were evolved to avoid prohibitions/conditions regarding certain transfers, to avoid payment of stamp duty and registration charges on deeds of conveyance, to avoid payment of capital gains on transfers, to invest unaccounted money (black money) and to avoid payment of unearned increases due to Development Authorities on transfer. The learned author examines the applicability of Benami Law to the case of power of attorney transactions.

1. Modes operandi of power of attorney transactions

Power of attorney transaction are known as General Power of Attorney Sales (for short GPA Sales) or Sale Agreement/General Power of Attorney/Will transfers (for short SA/GPA/WILL transfers). There cannot be a sale by execution of a power of attorney nor can there be a transfer by execution of an agreement of sale and a power of attorney and will. These kinds of transactions were evolved to avoid prohibitions/conditions regarding certain transfers, to avoid payment of stamp duty and registration charges on deeds of conveyance, to avoid payment of capital gains on transfers, to invest unaccounted money (black money) and to avoid payment of unearned increases due to Development Authorities on transfer.

The modus operandi in such SA/GPA/WILL transactions is for the vendor or person claiming to be the owner to receive the agreed consideration, deliver possession of the property to the purchaser and execute the following documents or variations thereof:

(a) An Agreement of sale by the vendor in favour of the purchaser confirming the terms of sale, delivery of possession and payment of full consideration and undertaking to execute any document as and when required in future.

An agreement of sale agreeing to sell the property, with a separate affidavit confirming receipt of full price and delivery of possession and undertaking to execute sale deed whenever required.

(b) An Irrevocable General Power of Attorney by the vendor in favour of the purchaser or his nominee authorizing him to manage, deal with and dispose of the property without reference to the vendor.

A General Power of Attorney by the vendor in favour of the purchaser or his nominee authorizing the attorney holder to sell or transfer the property and a Special Power of Attorney to manage the property.

(c) A will bequeathing the property to the purchaser (as a safeguard against the consequences of death of the vendor before transfer is effected).

These transactions are not to be confused or equated with genuine transactions where the owner of a property grants a power of Attorney in favour of a family member or friend to manage or sell his property, as he is not able to manage the property or execute the sale, personally. These are transactions, where a purchaser pays the full price, but instead of getting a deed of conveyance gets a SA/GPA/WILL as a mode of transfer, either at the instance of the vendor or at his own instance.