Technical payment failure and treaty override can relieve provident fund disallowance, dividend tax burden, and TDS-credit disputes.

Proved technical failure in the payment gateway may excuse a one-day delay in remitting employees' provident fund contribution, applying impossibility of performance where contemporaneous records show the payment could not be completed on time. Treaty relief may also override the domestic dividend distribution tax rate where dividends paid to a UK resident shareholder fall within Article 11 of the India-UK DTAA, limiting the tax burden to the treaty rate. A claim for TDS credit made in a revised return requires factual verification and may be remitted for examination in accordance with law.

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Issues: (i) Whether the delay of one day in remittance of employees' provident fund contribution was liable to disallowance where payment failure was caused by technical glitches in the payment gateway; (ii) Whether dividend distribution tax paid on dividends remitted to a UK resident shareholder could be restricted to the lower treaty rate under Article 11 of the India-United Kingdom DTAA instead of the domestic rate under section 115O of the Income-tax Act, 1961; (iii) Whether credit of TDS claimed in the revised return was to be granted.

Issue (i): Whether the delay of one day in remittance of employees' provident fund contribution was liable to disallowance where payment failure was caused by technical glitches in the payment gateway.

Analysis: The delay was found to be occasioned by admitted technical glitches in the payment gateway interface, supported by the contemporaneous record including the screenshot of the error message, the cheque issued on the due date, and the grievance email lodged with the provident fund department. On these facts, the inability to remit on the due date was treated as a genuine case of impossibility of performance, and the maxim lex non cogit ad impossibilia was applied to hold that the assessee could not be penalised for an act that could not be performed because of the system failure.

Conclusion: The disallowance on account of employees' provident fund contribution was deleted and the deduction was allowed in favour of the assessee.

Issue (ii): Whether dividend distribution tax paid on dividends remitted to a UK resident shareholder could be restricted to the lower treaty rate under Article 11 of the India-United Kingdom DTAA instead of the domestic rate under section 115O of the Income-tax Act, 1961.

Analysis: The dividend paid by the resident company to its UK parent was treated as dividend covered by Article 11 of the DTAA, and the treaty benefit was held to prevail over the higher domestic levy. The earlier view relied upon by the revenue was held to stand displaced by the later High Court ruling recognising that the tax on such dividend distributions was restricted to 10 per cent under the treaty.

Conclusion: The assessee was held entitled to refund of the excess dividend distribution tax paid, in favour of the assessee.

Issue (iii): Whether credit of TDS claimed in the revised return was to be granted.

Analysis: The claim required factual verification and was therefore restored to the assessing authority for examination in accordance with law.

Conclusion: The TDS credit issue was allowed for statistical purposes in favour of the assessee.

Final Conclusion: The substantive reliefs on provident fund disallowance and dividend distribution tax were granted, while the TDS credit claim was directed to be verified by the assessing authority, resulting in a partial allowance of the appeals.

Ratio Decidendi: A remittance delay caused by proved technical failure may be excused on the basis of impossibility of performance, and treaty relief under a double taxation avoidance agreement can restrict the domestic tax burden where the treaty provision governs the character and rate of tax on the payment.

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