1-Day Delay in PF Due to Technical Glitch Can’t Lead to Disallowance; Excess DDT on UK Dividends Refundable: ITAT
Pranav B Prem
The Delhi Bench of the Income Tax Appellate Tribunal has granted relief to Intertek India Pvt. Ltd. on two substantive issues, holding that a one-day delay in depositing employees’ provident fund contribution caused by technical glitches cannot lead to disallowance, and that excess Dividend Distribution Tax (DDT) paid on dividends remitted to a UK parent company is refundable in view of the applicable treaty provisions.
The Bench comprising Challa Nagendra Prasad (Judicial Member) and M. Balaganesh (Accountant Member) was dealing with appeals for Assessment Years 2016–17 and 2017–18 arising from a common order of the NFAC. For AY 2016–17, the Assessing Officer had disallowed a sum of ₹33.38 lakh representing employees’ contribution to provident fund on the ground that the amount for January 2016 was deposited on 16 February 2016, one day beyond the statutory due date of 15 February 2016. The disallowance was made by placing reliance on the Supreme Court judgment in Checkmate Services Pvt. Ltd. v. CIT, which mandates strict adherence to timelines for depositing employees’ contributions.
Before the Tribunal, the assessee explained that the delay occurred solely due to technical glitches on the provident fund payment portal on the due date. It was pointed out that attempts were made to remit the amount through net banking on 15 February 2016, but the payment gateway displayed an error message stating, “We are experiencing network delays. Apologies for the inconvenience.” The assessee placed on record screenshots evidencing the error, issuance of a cheque dated 15 February 2016 for both employees’ and employer’s contributions, and an email grievance lodged with the PF authorities on the same day.
The Tribunal noted that the existence of technical glitches was not disputed by the Revenue and that sufficient evidence had been produced to establish the impossibility of making payment on the due date. Applying the principle of lex non cogit ad impossibilia—that the law does not compel a person to do the impossible—the Bench held that the assessee could not be penalised for circumstances beyond its control. It further observed that the bona fide intention of the assessee to make timely payment stood established beyond doubt. On this factual matrix, the Supreme Court decision in Checkmate Services was held to be distinguishable. Accordingly, the Tribunal directed the Assessing Officer to allow the deduction by treating the employees’ PF contribution as having been remitted within the due date.
Another major issue, common to both assessment years, related to the refund of excess DDT paid on dividends distributed to a non-resident shareholder in the United Kingdom. The assessee had paid DDT at the domestic rate of 20.36 per cent under Section 115-O of the Income Tax Act, but later claimed that under Article 11 of the India–UK Double Taxation Avoidance Agreement, the applicable rate should be restricted to 10 per cent. The refund claim had been rejected by the tax authorities by relying on the Special Bench decision of the Mumbai Tribunal in DCIT v. Total Oil India Pvt. Ltd., which had held that treaty benefits do not apply to DDT.
The Tribunal, however, took note of the subsequent reversal of the Special Bench ruling by the Bombay High Court in November 2025, wherein it was held that treaty provisions override domestic law even in the context of DDT. Following the High Court’s decision, the Delhi Bench held that dividends paid to a UK parent company are entitled to the concessional treaty rate and directed the Assessing Officer to refund the excess DDT paid by the assessee.
The Tribunal further directed the Assessing Officer to grant TDS credit as per the revised return, subject to factual verification. The ground relating to levy of interest under Section 234B was held to be consequential. The challenge to computation of book profit under Section 115JB was dismissed as not pressed, and the initiation of penalty proceedings under Section 271(1)(c) was held to be unsustainable in view of the relief granted on merits. For AY 2017–18, the Tribunal applied its findings from AY 2016–17 mutatis mutandis, except in respect of the PF issue, which did not arise in that year. Both appeals were accordingly partly allowed for statistical purposes.
Cause Title: Intertek India Private Limited Versus ACIT
Case No.: ITA No.2903/Del/2025
Coram: Challa Nagendra Prasad (Judicial Member) and M. Balaganesh (Accountant Member)
