MUMBAI: The appellate tribunal which adjudicates benami matters has held that employees can hold cash in a fiduciary capacity for their employers, without it being classified as a benami transaction. This order can support both employers and employees who face a similar situation.
“Fiduciary relationships involve trust and confidence, often between employer and employee, where the employee is acting in the interest of the employer.In several business setups employees do hold cash in a fiduciary capacity,” explained Ashwani Taneja, one of the advocates who represented the employees.
Cash held by employees in a fiduciary capacity, falls under the exception to the definition of a ‘benami’ transaction under Section 2(9)(A)(ii) of the Prohibition of Benami Property Transactions Act, 1988. However, it is essential that the relationship of trust and safekeeping is well established, and there is no conflict of interest or intention of personal gain. Taneja said that while this tribunal order is not binding, it will have a persuasive impact and can be referenced in similar cases.
In this case of Jiten Pujari and others, following a search conducted under the Income-tax (I-T) Act, a sum of nearly Rs 10 crore was found in several bank lockers of the employees. The employees did not claim ownership of the cash and stated that it belonged to their employers. In turn, the employers also did not disown the ownership of the cash. In addition, the sum was added to the income of the employers and taxed in their hands.
Based on the facts, the tribunal noted that the employees were holding the cash for safekeeping, which falls under fiduciary duty, rather than being part of a benami transaction. On the other hand, if a transaction is treated as a benami transaction, the assets are confiscated by govt, the parties involved face imprisonment for up to 7 years and stiff penalties.
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