Banking ATM charges and bad debt write-offs: common facility payments escape technical services TDS, and actual write-off supports deduction.

Payments for NPCI NFS ATM charges were treated as a common banking facility rather than specialised technical service, so section 194J did not apply and the related section 40(a)(ia) disallowance was deleted. Bad debts written off by debiting the profit and loss account and reducing the corresponding advances were held allowable under section 36(1)(vii), without any need to close each borrower account individually. Depreciation on HTM securities was also disallowed by the Revenue unsuccessfully, following the settled banking treatment of such investments. The section 14A and section 115JB issues were sent back for fresh examination in light of the governing legal position and incomplete earlier consideration.

---

---

Issues: (i) Whether payments made for NPCI NFS ATM charges attracted tax deduction at source under section 194J of the Income-tax Act, 1961 and consequent disallowance under section 40(a)(ia); (ii) whether bad debts written off under section 36(1)(vii) were allowable; (iii) whether depreciation on HTM securities was allowable; (iv) whether disallowance under section 14A required fresh examination; (v) whether the applicability of section 115JB and the related book-profit adjustments required fresh examination.

Issue (i): Whether payments made for NPCI NFS ATM charges attracted tax deduction at source under section 194J of the Income-tax Act, 1961 and consequent disallowance under section 40(a)(ia)

Analysis: The payment was treated by the tax authorities as consideration for technical services. The Tribunal followed the binding view that a standard, common facility available to all users does not amount to specialised technical service. The nature of the service rendered by NPCI was held to be a facility and not a customised or exclusive technical service.

Conclusion: The payments did not attract section 194J and the disallowance under section 40(a)(ia) was deleted in favour of the assessee.

Issue (ii): Whether bad debts written off under section 36(1)(vii) were allowable

Analysis: The Tribunal applied the settled principle that a banking assessee is entitled to deduction when the bad debt is actually written off by debiting the profit and loss account and reducing the corresponding advances in the balance sheet. Closing each individual borrower account was not treated as a prerequisite for allowance.

Conclusion: The bad debt claim was allowable and the Revenue's challenge failed.

Issue (iii): Whether depreciation on HTM securities was allowable

Analysis: The Tribunal followed earlier binding decisions in the assessee's own case and the jurisdictional High Court's view that bank investments are to be treated as stock-in-trade for tax purposes, and diminution in value of the relevant securities is allowable in accordance with the settled banking valuation approach.

Conclusion: The disallowance of depreciation on HTM securities was not sustainable and the Revenue's ground was rejected.

Issue (iv): Whether disallowance under section 14A required fresh examination

Analysis: The Tribunal noted that the issue had to be reconsidered in light of later legal developments, including the Supreme Court's ruling in Maxopp Investment Ltd., and that the earlier orders did not conclude the matter under the current legal position.

Conclusion: The issue was remitted for fresh consideration.

Issue (v): Whether the applicability of section 115JB and the related book-profit adjustments required fresh examination

Analysis: The Tribunal found that the controversy turned on the assessee's status under the banking law framework and the effect of the relevant statutory provisions, which had not been fully examined by the first appellate authority. The book-profit adjustment issue was dependent on the outcome of that threshold question.

Conclusion: The matter was restored for fresh adjudication.

Final Conclusion: The assessee succeeded on the TDS disallowance issue and the Revenue failed on the bad debt and HTM securities issues, while the MAT and section 14A controversies were sent back for reconsideration, leaving the appeals only partly concluded on the merits.

Ratio Decidendi: A common banking facility without exclusivity or specialised, customer-specific features is not technical service for section 194J, and an actual write-off of bad debt reflected through the accounts is sufficient for deduction under section 36(1)(vii).

---