Appellate Tribunal rules employees can hold cash for employers without it being 'benami transaction'

The appellate tribunal overseeing benami transactions has ruled that employees can hold cash on behalf of their employers without it being categorised as a benami transaction.

"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," said Ashwani Taneja, an advocate representing the employees.


According to the tribunal, cash held by employees in a fiduciary role is exempt from the definition of a 'benami transaction' under Section 2(9)(A)(ii) of the Prohibition of Benami Property Transactions Act, 1988.

However, Taneja stressed that it's crucial for the trust relationship to be clearly established, with no conflicts of interest or personal gain involved. While the tribunal's ruling is not legally binding, it could influence future cases.

In the specific case involving Jiten Pujari and others, nearly Rs 10 crore was discovered in multiple bank lockers belonging to employees during a search conducted under the Income-tax Act.

The employees did not claim the cash, stating it belonged to their employers, who also did not deny this ownership. Moreover, the amount was included in the employers' income and taxed accordingly.

The tribunal concluded that the employees were merely holding the cash for safekeeping, which aligns with their fiduciary duties, rather than participating in a benami transaction.

If the transaction had been classified as benami, the assets would be confiscated by the government, and the individuals involved could face up to seven years in prison along with heavy fines.

(With inputs from TOI)