V.G. Oak, C.J.
1. This is a reference under the Indian Income-tax Act, 1922. Messrs. Dewan Sugar and General Mills P. Ltd., Meerut, are the assessee. The assessment years are 1956-57 and 1957-58. The relevant previous years ended on June 30, 1954, and June 30, 1955, respectively. During the two accounting periods the assessee-company paid two sums of Rs. 40.000 and Rs. 3,000 as contribution to the Cane Centre Roads Development Fund. The assessee claimed these two amounts as deductionunder Section 10(2)(xv) of the Act, The claim was disallowed by the Income-tax Officer. This decision was upheld in appeal by the Appellate Assistant Commissioner and by the Appellate Tribunal. At the request of the assessee, the Tribunal has referred the following question of law to this court :
' Whether, on the facts and in the circumstances of the case, the expenditure of Rs. 40,000 in the assessment year 1956-57 and Rs. 3,000 in the assessment year 1957-58 were rightly treated as capital expenditure '
2. The assessee attempted to bring his case under Section 10(2)(xv) of the Act. Clause (xv) is :
' any expenditure ... and not being in the nature of capital expenditure or personal expenses of the assessee laid out or expended wholly and exclusively for the purpose of such business, profession or vocation. '
3. In order to bring an expenditure under Clause (xv), the assessee has to satisfy two conditions. Firstly, it has to be established that the expenditure was wholly and exclusively for the purpose of business, profession or vocation. Secondly, it has to be proved that the expenditure was not in the nature of capital expenditure. In the present case we may assume with the assessee that the expenditure in question was wholly and exclusively for the purpose of the business of the assessee. The question remains whether the expenditure was in the nature of capital expenditure.
4. The distinction between capital expenditure and revenue expenditure was brought out by the Supreme Court in Assam Bengal Cement Co. Ltd. v. Commissioner of Income-tax,  27 I.T.R. 34 ;  1 S.C.R. 972 (S.C.). Their Lordships observed on page 45 :
' If the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business it is properly attributable to capital and is of the nature of capital expenditure. If on the other hand it is made not for the purpose of bringing into existence any such asset or advantage but for running the business or working it with a view to produce the profits it is a revenue expenditure. If any such asset or advantage for the enduring benefit of the business is thus acquired or brought into existence it would be immaterial whether the source of the payment was the capital or the income of the concern or whether the payment was made once and for all or was made periodically. The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure.' We now proceed to apply that test to the present case. In order to decide whether the two payments for the two assessment years were in the nature of capital expenditure or revenue expenditure it is necessary to ascertain the true character of the payment. The assessee's claim was considered by the Income-tax Officer under two separate heads--(1) repairs ofroads, and (2) contribution to Cane Centre Roads Development Fund. The Income-tax Officer was not prepared to allow deduction under either of the two heads. The Appellate Assistant Commissioner was, however, prepared to treat expenditure on repairs of road as revenue expenditure. The Appellate Assistant Commissioner was not, however, prepared to treat contribution to Cane Centre Roads Development Fund as expenditure under Section 10(2)(xv) of the Act, This expenditure was discussed by the Appellate Assistant Commissioner in paragraph 6 of his order. This discussion began thus : ' This contribution was made by the company to the State Government for constructing roads.'
5. Again, the Appellate Tribunal observed in its appellate order dated June 28, 1962 :
' The company has admitted before us that the whole fund has been utilized in constructing roads for improving transport facilities. '
6. We, therefore, take it that the two payments in question were the assessee's contribution to the fund for constructing roads for improving transport facilities.
7. The learned counsel for the assesses strongly relied upon a decision of the Calcutta High Court in Commissioner of Income-tax v. Hindusthan Motors Ltd. In that case the assesses was a motor car manufacturing company, Location of its factory was at some distance from the main road. There was an approach road from the main road to the premises of the factory. That road belonged to the Government of West Bengal. The approach road fell into disrepair, and began to cause transport difficulties to the assessee. Government was not prepared to meet the expenses for repairing the road. The assessee thereupon offered to contribute a sum of Rs. 39,770 for improvement of the approach road. It was held that the money was spent not so much to bring about any asset or advantage of enduring benefit to itself but to run the business efficiently and conveniently. Expenditure was allowable expenses under Section 10(2)(xv) of the Act.
8. There is much resemblance between the facts of the present case and the facts in Commissioner of Income-tax v. Hindusthan Motors Ltd.,  69 I.T.R. 301 (Cal.) But there is one important difference. In that case the assessee contributed money for repairing an existing road. In the present case the assessee's contribution was for the purpose of constructing roads for improving transport facilities.
9. When new roads are constructed, a capital asset comes into existence. It may be that the land, on which roads in question were constructed, did not belong to the assessee. But that circumstance did not alter the fact that the contribution made by the assessee brought assets of capital nature into existence. Such expenditure must, therefore, be classed as capital expenditure. The Tribunal was right in not treating the expenditure as permissible expenditure under Section 10(2)(xv) of the Act.
10. We answer the question referred to this court in the affirmative, and against the assessee. The assessee shall pay the Commissioner of Income-tax, U.P., Rs. 200 as costs of this reference.