M K Nayak, President of Cuttack Co-op which is based in Odisha is a harassed man today as he narrated his tax woes in the seminar organized by NCUI-NAFCUB in Delhi recently.
“We received a demand notice from Income Tax of Rs 73 lacs for the year 2014-15”, narrated Nayak. While 80 P 2A (1) says the entire income of credit co-op is exempt, another clause 2(D) of 80 P says that the dividend earned from another co-op entity is alright but earning from a commercial venture is taxable, Nayak said.
Our fault was that we had deposited Rs1.58 crore with the Odisha State Co-op Bank which in turn might have earned on account of transacting with a non-cooperative entity. “This muddied our dividend from the State Co-op Bank and we are issued notice,” said Nayak to the utter amusement of the audience.
Once a credit co-op deals with non-members, the ring of the Principle of Mutuality gets broken. This is what Arun Jaitley, Finance Minister said in the House recently denying IT relief to urban co-op banks.
The confusion, according to experts emanates from the fact that while the Centre through the MSCS Act 2002 allows multi state co-op societies to treat nominal members as normal, the co-op acts of states vary.
Cuttack co-op has meanwhile represented to Income Tax department after which his tax liabilities were brought down to Rs 35 lack. Now happy Nayak wishes to go to Tribunal and if the need be- to the High Court.
It bears recall that cooperators connected with credit co-operative societies from across the country assembled at NCUI to find a solution to what many of them call tax terrorism has meant more and more credit societies getting notices from IT dept in recent times.
