New Delhi, February 15: Prime Minister Manmohan Singh has promised to sympathetically consider the demand of some cooperative banks for removal of the 33 per cent income tax on their profits, a measure that was imposed in the current year's budget.

He gave this assurance to a delegation of representatives of nine cooperative banks from Karnataka, which met him in New Delhi on Wednesday night. The delegation was led by CPI(M) MP Basudeb Acharia.

The delegation brought to his notice that the tax exemption enjoyed by the cooperative banks was withdrawn in the current year's budget which they said hit hard at the foundations of the cooperative sector that catered mainly to the needs of the poor, middle and the salaried class and other marginalised sections.

The representatives of the small banks told Singh that it was wrong to equate the cooperative sector with the huge commercial banks that made profits in crores of rupees every year, thus providing no level playing field.

They said the rationale given by Finance Minister P Chidambaram that the tax on profits would bring about discipline in their audited and filing of tax returns would improve the standards of accountability and governance did not hold any water because these banks already functioned under the strict RBI norms and the government audit through Registrar of Cooperative Societies.

In the memorandum given to the Prime Minister, the cooperative bankers welcomed the income tax rebate given under Section 80C on five-year deposits but pleaded for extension of the facility to the cooperative banks.

It said that the amount sought to be realised from the tax on cooperative banks was meagre, considering the government's kitty, while the damage potential on the small sector was immense.

After a patient hearing, the Prime Minister told the delegation that he would forward the memorandum to the Finance Minister.

The delegation included C V Kumar, President, Comptroller's Office Cooperative Bank, a bank of the LIC employees, and Convener of the Forum of Urban Cooperative Banks, N Prem Kumar, RBI Employees Cooperative Bank, Syed Umar, Ramnagaram Urban Cooperative Bank, K Umapathy, LICCO Bank, Udupi, Badrinath, Bhavasara Kshatriya Cooprative Bank, Bangalore, and H K Srinivas, Visweswarayya Cooperative Bank,

Bangalore.