Profitmaking should not be punished: R Ashoka

Home and transport minister R Ashoka has alleged that the income-tax department’s act of freezing the accounts of the state’s transport corporations and declassifying them from the status of ‘charitable institutions’ will send a bad signal to state corporations and prevent efforts to make profit.

The resistance with regard to taxing the profit made by the BMTC and KSRTC was on principle, he said. “We have surplus money, but why should we pay this to the central government? This will only prevent other transport corporations to step up efforts to make profit. We are the only transport corporation in the country to make profit,” he said. “Profit making should not be punished,” he added.

But the fact of the matter is that the BMTC had an operational loss of Rs18 crore in 2009-10, according to KR Srinivas, managing director, BMTC. “If the BMTC makes a profit, it is from the commercial activities of the BMTC such as renting out spaces, advertisements and so on. This covers about 80% of the costs of operation,” he said.

The commercial revenue that the BMTC had for the previous year was Rs14 crore, he added. He also said most of the BMTC’s services were concession based. Citing the example of student passes, which forms a major chunk of the BMTC’s services, he said that 50% comes from the state government, which is about Rs60 crore per annum, paid in four instalments.

When asked if this is the BMTC’s argument against taxation, the MD said: “Leave that to us. The fact is that up till 2008, we were exempted from paying tax as we were a ‘charitable institution’.
But then an amendment to the Financial Act in 2008 said that if any institution made an income above Rs10 lakh from commercial revenue, this was taxable.”

It does not matter that we are at operational loss as the I-T department looks at the revenue as a whole and not in isolation. Even as the discussion with the I-T department continues, officials continue to maintain that operations will not be hit.

Srinivas said that buses will continue to operate even along those routes where the operations were no feasible.

Officials in the BMTC maintain that with daily revenue of Rs3 crore to Rs3.5 crore, the BMTC will be able to manage services even if their accounts are frozen, at least for the time being.