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ShareMumbai: Cooperative banks which were brought under the tax net in 2006 have demanded restoration of income tax exemption arguing retained earnings of the banks cannot be considered as profit given the nature of cooperative banking.
In a memorandum given to the finance minister Pranab Mukherjee, National Federation of Urban Cooperative Banks and Credit Societies has said the retained earnings is a major source for cooperative banks to increase their capital base.
K D Vora, director of the federation said the government collects only about Rs 400 crore by taxing the earnings of the 2,000 odd cooperative banks which is a minuscule amount.
The memorandum has listed several peculiarities of cooperative banks and demanded the government adopt a hand holding attitude.
It pointed out cooperatives can raise their capital base mainly through members which cannot be tapped beyond a level.
Absence of any correlation between net worth of cooperative banks and its share value, absence of any trading platform for transfer of shares at market value and non-perpetual nature of shares negates the presumption that "retained surplus" of cooperatives are "profits"," it said.
