Statutory service regulations can trigger the section 40A(9) exception, allowing welfare fund contributions as deductible.

Service regulations framed under statutory authority and with prior Government sanction were treated as having statutory force, so a corporation's contribution to a Staff Welfare Fund made under those regulations was regarded as a payment required by or under another law. On that basis, the exception in section 40A(9) of the Income-tax Act, 1961 applied and the disallowance provision did not apply. The welfare fund contribution was therefore held allowable, and the disallowance was deleted in favour of the assessee.

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Issues: Whether the assessee's contribution to the Karmachari Welfare Fund was disallowable under section 40A(9) of the Income-tax Act, 1961, or was protected as an amount required by or under any other law.

Analysis: The contribution was made by the assessee, a statutory corporation, under its Staff Service Regulations framed with prior Government sanction under section 42 of the Warehousing Corporation Act, 1962. Such regulations governing service conditions were held to have statutory force and to bind the corporation. A payment mandated by those regulations therefore fell within the exception in section 40A(9) for sums paid as required by or under any other law, and the disallowance provision did not apply.

Conclusion: The contribution was not disallowable under section 40A(9) and the deduction had to be allowed in favour of the assessee.

Final Conclusion: The assessee succeeded on the sole issue, and the disallowance made towards the welfare fund contribution was deleted.

Ratio Decidendi: Service regulations framed under statutory authority, having the force of law, can constitute a legal requirement for the purpose of the exception to section 40A(9) of the Income-tax Act, 1961.

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