Tags:
Journalism of Courage
Its not just banks abroad that are proving tax havens to stash money in. In Kerala,the Income Tax Department has not yet managed to bring Rs 68,000 crore,deposited in the states s co-operative banking sector,under its net on account of stiff resistance from politicians leading to a Supreme Court stay.
Commercial banks are exposed to the Income Tax Departments drive to get details on accounts and customers; the co-operative banks,managed by politicians,have so far managed to evade it. As per Section 133(6) of the Income Tax Act,the department is free to ask for details of depositors whose accounts have over Rs 2 lakh.
An I-T effort to unlock the co-operative accounts in Kerala began in 2009 after it detected that a large chunk of unaccounted money was stashed in the cooperative sector,virtually a tax-free zone. However,the drive was suspended following a SC stay in February 2010. Fifty-six primary co-operative banks had rushed to the SC after the High Court rejected their petitions,saying co-operative banks could not challenge Section 133(6) of the Act. The I-T department has moved the SC for getting the stay lifted.
Last month,a delegation of CPM and Congress leaders from Kerala met Union Finance Minister Pranab Mukherjee after the I-T Department issued fresh notices to the co-operative banks to submit returns as per Section 142 of the Act.
CPM leader and president of the State Co-operative Bank M Mehaboob said the partys stand against black money hoarded in foreign countries is different from that on money deposited in Keralas co-operative banks. We cannot allow the I-T department to examine the accounts in co-operative banks. The I-T department has been targeting state co-operative sector with a malicious intent… We have our own system in place to check flow of unaccounted money into co-operative banks, said Mehaboob. He added the departments attempt to tax these banks and their customers will upset depositors. More than 60 per cent of deposits belong to pensioners,he said.
We have seized documents which attest that politicians and real estate dealers have parked huge sums of money in the tax-free zone,expecting the I-T department could be kept away using their political muscle, an I-T source said.
Although primary co-op banks claim to support agriculture,one with a Rs 350-crore deposit had given less than one per cent as farm loans. Some are engaged in activities that violate RBI guidelines. Scheduled banks offer several add-on facilities but these banks have no attractions other than being tax havens, a source said.
As per banking statistics,the total deposits in Kerala banks as on March 2011,was Rs 1,66,700 crore,of which
Rs 38,556 crore was in NRE (non-resident external) deposits. Co-operative banks that cannot collect NRE deposits or maintain accounts of public sector firms have managed to garner Rs 68,000 crore.
A state bankers committee review shows that 54 per cent of the total deposits come from semi-urban areas. The rural areas account for only 6 per cent of the deposits. The co-op sector,working in rural areas,still managed a huge deposit base.
