Cooperators across the board have reacted strongly against the statement made by Union Finance Minister Arun Jaitley in the Lok Sabha on Friday ruling out Income Tax exemption for profit making cooperative banks.
“Income tax is a tax on profits and there is no rationale for exempting profit-making cooperative banks from payment of income tax,” Jaitley has said during the Question Hour.
Comparing Corporate and cooperative, NCUI President Chandra Pal Singh said ”our repeated requests for income tax exemption for the cooperative sector have gone unheeded. Corporate serves the interest of a few individuals while cooperatives serve the interest of society; the benefit to corporates is pocketed by a few while sops to cooperatives would benefit the masses, he added.
In Lok Sbaha the government ruled out giving income tax exemption to profit-making cooperative banks saying they functioned like commercial banks and should be treated on a par with them.
Explaining the rationale behind his decision Jaitley said the principle of mutuality, which is central to granting exemption under Section 80P of the Income Tax Act, does not apply to cooperative banks because their area of operations extends to non-members.
Jaitley said most of these banks provided standard banking facilities like opening of letters of credit, bill discounting and collection, lockers and safe deposit vaults and bank guarantees. “These banks are thus no different from commercial banks and therefore are required to be treated at a par with them,” he said.
The government ’ becoming blasé about co-op banks’ persistent demand for tax exemption has agitated cooperators for long with Karnataka governor Vajubhai Vala calling upon the people associated with cooperative banks to come out in protest against the central govt’s decision. He also urged people not to vote for the govt if it does not withdraw the decision.
In pre-budgetary discussions with the Minister held recently, NCUI Chief Executive again demanded IT exemption as it has done a number of times in the past. The cooperative sector’s main argument rests on the basis that it serves the poor especially the weaker sections of society.