Arguing with a compliment is like returning a gift at the register while the giver watches.

Deflecting praise feels like modesty and functions as a rejection. Somebody has just handed you something, and telling them they are wrong puts them in the position of arguing for their own kindness. The awkwardness you were trying to avoid simply gets transferred to them. Taking it is the generous move, which is the opposite of how it feels.

Say thank you and stop, the next time it happens, without adding the correction. You do not have to agree with it internally, only to let them have given it. Watch how much smoother the exchange is, and notice how rarely anyone says a plain thank you.