System delay can’t hurt taxpayer, rules ITAT; drops ₹1.23 crore interest on Dream11

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has ruled in favour of Sporta Technologies Pvt. Ltd., parent of Dream11 deleting an interest levy of ₹1.23 crore imposed under Section 234C of the Income Tax Act, after holding that the company had paid its advance tax within the statutory due date and could not be penalised for system-related delays in challan generation.

In its order (a copy of which is with Storyboard18), the Bench of the tribunal—comprising Judicial Member Kavitha Rajagopal and Accountant Member Omkareshwar Chidara—allowed the appeal filed by the fantasy gaming company against the Centralised Processing Centre (CPC) and the Commissioner of Income Tax (Appeals).

Sporta Technologies, a private limited company engaged in operating a fantasy gaming platform, filed its return of income for the assessment year 2024–25 declaring a total income of ₹1,782.63 crore and claiming a refund of ₹48.24 crore. The return was processed under Section 143(1) of the Income Tax Act by the CPC.

While processing the return, the CPC levied interest of ₹1,23,80,937 (₹1.23 crore) under Section 234C, alleging a delay in payment of the third instalment of advance tax due on December 15, 2023. The interest was levied on the ground that the challan for the advance tax payment bore a tender date of December 16, 2023, i.e., one day beyond the prescribed due date.

The company challenged the levy before the CIT(A), but the first appellate authority upheld the CPC’s action, prompting the assessee to move the tribunal.

Before the ITAT, Sporta Technologies contended that it had initiated the advance tax payment through electronic mode via net banking on December 15, 2023, the last permissible date, and that the amount had been debited from its Axis Bank account on the same day.

The assessee submitted bank statements and challan details showing that ₹196 crore, representing the third instalment of advance tax, was debited from its bank account on December 15, 2023. However, due to technical or system-related issues beyond the assessee’s control, the challan was generated on December 16, 2023, despite the payment having already been made.

The company argued that it had complied with Rule 125 of the Income Tax Rules and that interest under Section 234C could not be levied for procedural delays attributable to banking or system processes.

The tax department maintained that the challan tender date was decisive for determining the timeliness of the payment. Since the challan reflected December 16, 2023, the CPC was justified in levying interest, the revenue contended, while supporting the findings of the CIT(A).

After examining the records, the tribunal observed that the bank statement clearly showed the debit of ₹196 crore on December 15, 2023, and that the challan generated on December 16, 2023 carried the same bank reference number. This, the bench held, established that the assessee had initiated and completed the payment within the statutory due date.

The tribunal noted that the subsequent generation of the challan was a backend process not within the control of the taxpayer. Relying on judicial precedents, including the Bombay High Court’s ruling in CIT (LTU) vs Asian Paints Ltd., the ITAT reiterated that for tax payments, the relevant date is the date on which the payment is made or initiated, and not the date on which it is credited to the government’s account.

The bench also referred to decisions of the Madras High Court and the Supreme Court, which have consistently held that payment relates back to the date of initiation when there is no default on the part of the taxpayer.

Holding that there was “no justification” for levying interest under Section 234C when the advance tax had been paid within the prescribed time, the tribunal allowed the assessee’s primary ground of appeal and set aside the interest levy of ₹1.23 crore.

The tribunal dismissed the ground relating to violation of principles of natural justice, noting that no arguments were advanced on that issue. As a result, the appeal was allowed in favour of Sporta Technologies.

The ruling reinforces the principle that taxpayers should not be penalised for system- or bank-related delays in the processing of electronic tax payments, and is likely to offer relief in cases where timing mismatches arise between bank debits and challan generation despite payments being made within statutory deadlines.