Sethuraman, J.:— The Appellate Tribunal has referred the following question under s. 256(1) of the I.T Act:

“Whether the contributions of Rs. 6,303, Rs. 4,395, Rs. 3,457 and Rs. 22,910, being the amounts contributed by the assessee to the foreign superannuation fund and other funds to the credit of its employees during the relevant previous years, have been rightly allowed under section 28 of the Income-tax Act, 1961, for the assessment years 1964-65, 1965-66, 1965-67 and 1967-68?”

2. The assessee carries on business in the manufacture and sale of cycles and cycle parts. In the returs filed for the years under consideration, the assessee deducted the contributions made by it to the superannuation fund, life insurance fund and Tube Investments Educational Policy Fund of M/s. Tube Investments Ltd., Birmingham, to the credit of the employees who were serving it in the relevant years. For instance, taking the assessment year 1965-66, the assessee had the benefit of the services of one Mr. Tracy and the amount paid on his account to the respective funds mentioned above came to Rs. 4,395. For the subsequent years there were similar payments in respect of the very same person and other technicians and similar claims for deduction. The ITO held that since the said funds were not recognised funds the allowance could not be made under s. 36(1)(iv) of the Act. The assessee appealed to the AAC, who, noticing that a similar claim had been allowed by the Appellate Tribunal by its order dated 26th February, 1969, in I.T.A No. 16265 of 1967-68, in the case of Carborundum Universal Ltd., a company belonging to the same group, held that the assessee's claim was liable to be allowed as deduction. The Tribunal, on appeal by the ITO, followed the earlier order in I.T.A No. 16265 of 1967-68, dated 26th February, 1969, and also another order of its dated 15th November, 1969, in I.T.A No. 3623 of 1966-68, in the case of this very assessee. It is against this order of the Tribunal that the present question has come to be referred. Section 36(1) of the I.T Act, 1961, in so far as it is material, runs as follows:

“36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28—

(iv) any sum paid by the assessee as an employer by way of contribution towards a recognised provident fund or an approved superannuation fund, subject to such limits as may be prescribed for the purpose of recognising the provident fund or approving the superannuation fund, as the case may be;”

3. The case of Carborundum Universal Ltd. referred to by the Tribunal in its order came up on reference to this court and, the decision of this court is reported in Commissioner Of Income-Tax, Madras-I. v. Carborundum Universal Ltd., [1977] 110 ITR 621. In that case also, the amount had been paid in respect of a person by name Jackson who worked as the general works manager in the factory of that company. In that case, the agreement with the foreign company was also annexed to the statement of the case and this court considered the allowability of the expenditure in the context of s. 36(1)(iv) and s. 28. At page 629 of the report, after referring to the decision in Badridas Daga v. Commissioner Of Income Tax, [1958] 34 ITR 10 (SC) and to a passage at p. 15 of the said report, it was observed:

“We are, of the opinion that this decision also has no application to the present case. On the other hand, this decision, in a way supports the conclusion which we have already reached, namely, that inasmuch as the payment in the present case is of a nature contemplated under section 36(1)(iv) of the Act, the said payment can be deducted only if the conditions specified in that sub-section are satisfied. From this it will follow that there is an implied prohibition in the Act itself for deducting the amounts falling within the scope of section 36(1)(iv) if the conditions mentioned therein are not satisfied. To hold otherwise will have the effect of rendering the specific provisions contained in the Act nugatory and to allow the assessee to circumvent the provisions of the Act and thereby making those provisions a dead letter. Therefore, we are of the opinion that once a payment is of the nature expressly dealt with in the particular provision of the statute, but does not qualify for deduction, since it does not fulfil the conditions prescribed in that particular statutory provision, the said payment cannot be allowed to be deducted on the general principle of ascertaining the profits and gains of business commercially. In view of this, the payment in the present case being of the nature mentioned in section 36(1)(iv) of the Act and being payment to the superannuation fund which is not approved for the purpose of that section cannot be claimed as a deduction for arriving at the profits and gains of the assessee's business in the present case.”

4. The learned counsel for the Commissioner contended that the answer rendered in that reference would squarely apply to the present case. Learned counsel for the assessee, however, contended that Mr. Tracy and other persons, in respect of whom payments to the superannuation fund were made, were not the assessee's employees, that they were persons whose services were merely lent to the assessee under the collaboration agreement which was approved by the Govt, of India and that in such a case, there was absolutely no scope for the application of s. 36(1)(iv). He, therefore, submitted that the decision in the case of Carborundum Universal Ltd., [1977] 110 ITR 621 (Mad) would not apply here. He also cited a decision of the Calcutta High Court in CIT v. Turner Morrison and Co. Ltd., [1978] 114 ITR 629. In that case, the assessee paid as contribution a sum of Rs. 6,826 to a provident fund in East Pakistan where it carried on business. The provident fund was recognised by the Pakistan authorities, but not by the Indian authorities. The claim for deduction failed before the ITO. But, on appeal, the AAC and the Tribunal allowed it. The Calcutta High Court held that the sums contributed to a provident fund in Pakistan could never be claimed by way of deduction under s. 36(1)(iv) and that the contributions could be allowed as expenditure allowable for the purpose of earning the foreign income under s. 37(1) of the Act.

5. The Calcutta decision proceeds on the basis that the employee in respect of whom the contribution was made was an employee of the assessee-company. On that aspect, there is dispute here. In a way, the decision is contrary to what has been decided in Commissioner Of Income-Tax, Madras-I. v. Carborundum Universal Ltd., [1977] 110 ITR 621 (Mad). In the decision of this court it was held that once the nature of the payment was one provided for in the statute, its eligibility for deduction has to be found within the four corners of the statutory provision and when once it is found that the payment is not eligible for deduction, it could not be held to be deductible under s. 28. The Calcutta decision is based on the reasoning that so long as the fund is incapable of being recognised on account of its being a foreign fund, it would be outside the scope of s. 36(1)(iv) and the claim for deduction of the amount paid to such a fund could be considered under other provisions. In view of this difference in approach, we would follow the decision of this court.

6. However, in the present case, the case of the assessee that Mr. Tracy and others were not its employees had not been gone into by the AAC and by the Tribunal. It is not clear, according to Mr. Jayaraman, whether the assessee raised this point that Mr. Tracy and others were not its employees. Apparently because the AAC and the Tribunal were inclined to accept the assessee's claim, the assessee had no opportunity to put forward the entire case before them. If Mr. Tracy and others were employees of the assessee, then the case decided by this court in Commissioner Of Income-Tax, Madras-I. v. Carborundum Universal Ltd., [1977] 110 ITR 621 would clearly apply. If, however, Mr. Tracy and others were not the assessee's employees and the amount was paid in accordance with an obligation undertaken under the collaboration agreement, then the question would have to be considered in a different context. Even though in the question there is an assumption that the persons in respect of whom the contributions were made were the assessee's employees by using the word “its”, we still do not find anywhere in the order of the Tribunal or of the AAC any finding that these persons were the assessee's employees. The word “its” may perhaps be a mistake which has been carried over from para. 2 of the Tribunal's order. In para. 2, the Tribunal, in stating the facts, has observed:

“While making the assessments, the Income-tax Officer disallowed Rs. 6,303 for the assessment year 1964-65, that being the contribution by the assessee to the superannuation fund, life insurance fund and educational policy fund of M/s. Tube Investments Ltd., Birmingham, to the credit of its employee, Mr. Tracy.” (underlining1 by us).

7. The word appears to have been used inadvertently, rather than deliberately. Learned counsel for the assessee argued that the word “its” would only mean that the employees were those of Tube Investments Ltd., Birmingham. But this is an aspect which would have to be considered by the Tribunal. Learned counsel for the Commissioner contended that this is an entirely new argument addressed on behalf of the assessee and that the assessee cannot be permitted to make out a new case at this stage. As we we have already pointed out, the AAC was inclined to allow the assessee's claim bn the basis of an earlier order of the Tribunal in the case of a sister concern of the assessee. However, in the grounds of appeal before the AAC, the assessee had pointed out:

“The Income-tax Officer should have held that the appellants were under an obligation to contribute to the said funds and that, therefore, such contribution was properly allowable either under section 28 or under section 37(1).”

8. The implication behind this ground is that the amount would not come within the scope of s. 36(1)(iv) and that would have to be considered only in the light of the other provisions. We do not consider that this is an entirely new argument taken for the first time before us by the assessee.

9. As the Tribunal has not gone into these aspects, we do not think it possible to answer the question referred to us. We, therefore, return the reference unanswered. The Tribunal will go into the facts and decide the matter de novo in accordance with law. There will be no order as to costs.