Statutory service regulations can take employer welfare contributions outside section 40A(9) disallowance and support remand on depreciation.

Employer contributions made under statutory service regulations having the force of law fell within the exception to section 40A(9) because they were required by or under another law, so the payment was not disallowable. The additional ground on depreciation under Explanation 6 to section 43(6) raised a pure question of law and was admitted; however, because factual verification was still needed, it was remitted to the Assessing Officer for fresh consideration after hearing the assessee.

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Issues: (i) Whether the contribution made by the assessee to the Employees Welfare Fund was hit by section 40A(9) of the Income-tax Act, 1961 or fell within the exception for sums required by or under any other law for the time being in force. (ii) Whether the additional ground relating to depreciation based on Explanation 6 to section 43(6) of the Income-tax Act, 1961 was liable to be admitted and, if so, how it should be disposed of.

Issue (i): Whether the contribution made by the assessee to the Employees Welfare Fund was hit by section 40A(9) of the Income-tax Act, 1961 or fell within the exception for sums required by or under any other law for the time being in force.

Analysis: Section 40A(9) disallows employer contributions to specified funds and institutions, but carves out an exception where the payment is required by or under any other law. The assessee's staff service regulations were framed with previous governmental sanction under the Warehousing Corporation Act, 1962. On the legal character of such regulations, the Court relied on the principle that regulations made by statutory corporations under statutory powers have the force of law and bind the corporation. Since the contribution was made under those regulations, it was treated as a payment mandated by law rather than a mere contractual arrangement.

Conclusion: The contribution fell within the statutory exception and was not disallowable under section 40A(9); the assessee succeeded on this issue.

Issue (ii): Whether the additional ground relating to depreciation based on Explanation 6 to section 43(6) of the Income-tax Act, 1961 was liable to be admitted and, if so, how it should be disposed of.

Analysis: The additional ground raised a pure question of law and did not require fresh factual investigation. Applying the principle governing admission of new legal grounds at appellate stage, the Court admitted the ground. Since factual appreciation was still necessary for deciding the depreciation claim, the issue was sent back to the Assessing Officer for decision in accordance with law after hearing the assessee.

Conclusion: The additional ground was admitted and remitted to the Assessing Officer for fresh consideration.

Final Conclusion: The assessee succeeded on the disallowance issue under section 40A(9), while the depreciation-related additional ground was entertained and sent back for reconsideration.

Ratio Decidendi: Where employer contributions are made under statutory service regulations having the force of law, the payment is one required by or under law and falls outside the disallowance in section 40A(9) of the Income-tax Act, 1961.

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