Hounded by IT notices credit co-ops rush to NCUI

Cooperators connected with credit c-operative societies from across the country assembled at NCUI to find a solution to what many of them call tax terrorism. After urban cooperative banks, credit societies have begun to get notices from IT dept for tax on their income, which was hitherto exempted.

Sensing their predicament NAFCUB-the apex body of UCBs and credit co-ops along with NCUI organized a workshop in Delhi. The three day workshop is also aimed at making them competitive and helping them learn the tricks of changing times.

More than 70 delegates from Kerala to Kashmir are participating in the exercise which started at the NCUI headquarters on Monday. Both NCUI and NAFCUB are coordinating the programme with their Chief Executives N Satyanarayan and Subhas Gupta respectively overseeing the event.

It needs no repetition that urban coop banks have so far failed to get the exemption from 80P of the IT Act from even the NDA govt. Readers would recall it was P Chidambaram who in 2006 removed the special provision and imposed Income tax on the income of UCBs.

For the last two years credit co-ops exempted from income tax have been receiving notices from the department. Representative of credit co-ops such as Citizen Co-op Society of Hyderabad or Sahyadri Multi State Coop Credit Society, Kerala have also taken the matter to court. While Citizen Co-op Credit Society have lost the case in the Supreme Court, Sahyadri Multi State Coop Credit Society is still hopeful after a favorable response from Income Tax Tribunal.

While dismissing the petition of Citizen Co-op Society the highest court of the land observed that sub section 4 of 80 P clearly says that the IT Act would not apply on credit societies as they are not banks. But the Income Tax assessment officers think otherwise, said R.Venkata Subbaiah, MD of Citizen Co-op.

The main issue where the matter gets unfavorable for credit co-ops is the business transaction with nominal members. The court observed there is no problem so far as they deal with members and the principle of mutuality is very much there in such transactions.

But the ring of Principle of Mutuality gets broken once they deal with non-members-an argument forwarded by Arun Jaitley also while rejecting the plea of exemption for UCBs from Income Tax in the Parliament recently.

Explaining the confusion NCUI Chief Executive said ”while the Centre through the MSCS Act 2002 allows multi state co-op societies to treat nominal members as normal, the Act varies from state to state with some rejecting nominal members as normal; they treat them as doing business on the lines of commercial banks”, Satyanarayana added.

Several others such as Subhas Gupta or the tax expert CA Ravi Bhatia tried to sooth the anxious participants who saw income tax notices dangling on their head. “Thank the efforts of NAFCUB, NCUI and some of the leaders that we are sitting here and debating; for a situation had arisen from the Banning Bill which could have killed the credit co-op movement in one stroke”, said Gupta in a bid to solace the participants by reminding them of even worse situation than this.

It bears recall that the obnoxious Banning Bill was nixed by the Union Minister Radha Mohan when the report came to him. Satish Marathe, Jyotindra Mehta and several other Sahakar Bharati leaders played a crucial role in convincing the Minister of its dangerous implications.