One-Day PF Delay Due to Tech Glitch Allowed; Excess DDT on UK Dividends Refundable

Intertek India Pvt. Ltd. filed appeals for AYs 2016-17 and 2017-18 against a common NFAC order. For AY 2016-17, the Assessing Officer disallowed Rs. 33.38 lakh being employees’ PF contribution paid one day late, despite the assessee showing that payment on the due date failed due to technical glitches on the PF portal. The assessee also sought refund of excess dividend distribution tax (DDT) paid at 20.36% on dividends remitted to its UK parent, claiming the lower 10% rate under Article 11 of the India-UK DTAA.

The AO and NFAC rejected both claims. Additional grounds related to TDS credit, MAT computation, interest, and penalty initiation were also raised.

Main Issues: Whether a one-day delay in depositing employees’ PF contribution caused solely by technical failure could still be allowed as a deduction and whether DDT on dividends paid to a UK parent could be restricted to 10% under the India-UK DTAA, entitling the assessee to a refund of excess tax paid.

ITAT’s Order: The tribunal held that the PF delay was due to proven technical glitches, supported by screenshots, cheque issuance on the due date, and grievance emails.

Applying the principle lex non cogit ad impossibilia, the Tribunal treated the PF payment as made within time and allowed the deduction, distinguishing the Supreme Court’s ruling in Checkmate Services on facts.

ITAT held that dividends paid to a UK parent fall under Article 11 of the India-UK DTAA. Thus, tax was restricted to 10%, and the AO was directed to refund the excess DDT.

The Tribunal also directed the grant of the correct TDS credit after verification. Appeals for both years were partly allowed, with AY 2017-18 following the same reasoning except for the PF issue.

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