H.N. Seth, J.
1. This is a reference under Section 66(1) of the Income-tax Act, 1922, at the instance of the assessee, Messrs. L. H. Sugar Factory and Oil Mills Ltd., Pilibhit. The Tribunal has referred the following question for the opinion of this court:
' Whether, on the facts and in the circumstances of the case, the sums of Rs. 22,332 and Rs. 50,000 were admissible deductions in computing the taxable profits and gains of the company's business ?'
2. The relevant assessment proceedings relate to the assessment year 1956-57.
3. During the year 1954-55, relevant to the assessment year 1956-57, the assessee paid a sum of Rs. 22,332 to the District Magistrate, Pilibhit, as its contribution towards the cost of construction of Deoni Dam Majhola Road. It also contributed a further sum of Rs. 50,000 in connection with the second five year plan sponsored by the U. P. Government for the construction of a net work of roads in the State. These two contributions were made under a scheme known as Sugarcane Development Scheme under which one-third of such cost was to be met by the Central Government, one third by the State Government and the remaining one-third by the sugar factories and sugarcane growers The assessee claimed that it Was entitled to a deduction in respect of these two amounts under the provisions of Section 10(2)(xv) of the Income-tax Act, 1922.
4. The Income-tax Officer and the Appellate Assistant Commissioner disallowed the claim of the assessee on the ground that the expenditure was of a capital nature and was not allowable under Section 10(2)(xv) of the Act. The assessee then went up in second appeal before the Income-tax Appellate Tribunal. In the Tribunal, there was a difference of opinion between the two Members constituting the Bench.
5. The Judicial Member observed that the amounts were paid by the assessee in pursuance of a development plan formulated by the State Government under which various sugar factories in the State agreed tocontribute a portion of the funds needed for financing the scheme. In his opinion, as a result of the contribution made by the assessee under the scheme, no asset or advantage of an enduring nature accrued to the assessee. The expenditure incurred by the assessee was not of a personal nature. It did not bring into existence any direct asset. It was incurred by the assessee on the ground of commercial expediency It may be that the expenditure was voluntary but it was commercially expedient and its ultimate object was the continuation and furtherance of the business and an eventual augmentation or stabilisation of profits. He concluded that the expenditure in question was incurred wholly and exclusively for the purposes of the business. It was neither an expenditure of a personal nature, nor was it a capital expenditure. The assessee was, therefore, entitled to a deduction of these amounts under Section 10(2)(xv) of the Act.
6. The Accountant Member on the other hand observed that there were two aspects of the question, viz. :
(1) Whether any asset or advantage accrued to the assessee and, if so, is it of a capital nature ?
(2) If not, is it still admissible as revenue expenditure
7. On the first aspect, he observed that although as a result of this expenditure no asset was credited to the assessee of which it could become owner, still as a result of construction of the roads for which money was spent, an advantage of an enduring nature accrued to the assessee. Relying on Atherton's case,  10 T.C. 155 (H.L.)., he held that the expenditure in this case was without doubt capital expenditure and could not be classed as revenue expenditure. According to him, the expenditure involved in this case was of the same nature as it would be in a case where an approach road is built to a factory by the Government and the factory agrees to make contribution towards the cost of its construction. In such a case ownership of the road does not vest with the factory and it does not become the owner of any asset. However, since an advantage of a permanent character results to the factory and its valuation improves, the expenditure is to be classified as capital expenditure.
8. On the second aspect, the Tribunal observed that if for the sake of argument it is conceded that the assessee neither became owner of a capital asset created by the expenditure nor any advantage accrued to him, even then the question that will still be whether such an expenditure is admissible. If no advantage accrued to the assessee then the expenditure could not be said to have been incurred for the benefit of the assessee or his asset. In such an event the expenditure would not be admissible because only such expenditure could be claimed as deduction which enuresto the benefit of the assessee's trade. In other words, the Accountant Member was of opinion that if for some -reason it is held that the expenditure in question was not capital expenditure it would still not be admissible as a deduction as it was not a business expenditure.
9. As a result of a difference of opinion between the two Members constituting the Bench, the matter was referred to the President of the Tribunal for his opinion. According to the President the two questions that arose for consideration were whether the expenditure in question was capital in nature and whether the same was laid out wholly and exclusively for the purposes of business.
10. It was contended on behalf of the assessee that the contribution made by it towards the cost of repairs was actuated because of business expediency. When asked to explain as to why it considered the transaction to be commercially expedient, the assessee's representative contended that the contribution was made because as a prudent businessman the assessee could not afford to displease the District Magistrate and the Government in any capacity and, therefore, it had to make the aforementioned contributions. It may be noticed at this stage that it is not the case of the assessee that the scheme under which the contributions were made was a statutory scheme or that the assessee was bound under any law to make that contribution. The claim on behalf of the assessee was based purely on the ground that as a prudent businessman it could not, while carrying on its business, afford to displease either the district authorities or the State Government and, therefore, it agreed to make the contribution for development of roads as required by them.
11. The third Member came to the conclusion that the contribution made by the assessee for the development and construction of roads was of the same nature as a contribution made by any other person at the request of the district authorities or the State Government. The assessee made the contribution as a good citizen rather than as a person who carried on a particular business. These contributions depended upon one's own ideas about his duty as a citizen and his ability to make them. Construction of roads was the duty of the Government, and it was undertaken as a part of the five year plan. The plan did not depend upon any of those contributions. In the instant case, the expenditure was clearly not undertaken by the assessee to preserve and maintain any existing business asset. There was no question of incurring the expenditure for preserving and maintaining any asset because there was in fact no threat of injury to any assent. He, therefore, concluded that the expenditure was not incurred to maintain conditions of making profits and could not be said to have been undertaken solely for the purposes of earning profit. The expenditure in this case was not incurred even indirectly to facilitate the carrying on of the business.
12. In his opinion, for the purposes of claiming deduction under Section 10(2)(xv) of the Act, one has to look to the direct concern and the direct purpose for which the money is laid out and the remote or indirect result which may possibly motivate the expenditure need not be taken into consideration. In the result he held that the assessee was not entitled to claim deduction in respect of the two sums of money.
13. The case was then decided in accordance with the opinion of the third Member and the claim made by the assessee was disallowed.
14. It will thus be seen that according to the opinion of the third Member and that of the Accountant Member, the claim of the assessee had to be disallowed on the ground that the expenditure was not laid out wholly and exclusively for the purposes of its business.
15. In order to bring the expenditure under Section 10(2)(xv) the assessee has to satisfy two conditions, firstly, it has to establish that the expenditure was wholly and exclusively laid out for the purposes of the business, profession or vocation, and, secondly, that it was not in the nature of capital expenditure. We have, therefore, to see whether on the findings recorded by the Accountant and the third Member, the assessee has been able to establish that the expenditure in question was laid out wholly- and exclusively for the purposes of its business.
16. Learned counsel for the assessee contended that there can be no doubt that the* expenditure incurred by it was not of a personal nature. According to him the expenditure was incurred because of a scheme sponsored by the Government under which the sugar factories had agreed to contribute part of the cost for the construction and development of roads. The assessee agreed to make the contribution as while running its factory it could not afford to displease either the State Government or the district authorities. The business expediency, therefore, required incurring of this expenditure. Incidentally, the expenditure also resulted in more convenient supply of sugarcane to the factory. In the circumstances, the expenditure was connected with the assessee's business. Apart from business consideration, there was no other consideration which prompted the assessee to make the contributions. The expenditure was, therefore, laid out wholly and exclusively in connection with the assessee's business. The Tribunal was not right in rejecting the claim of the assessee on this limited ground.
17. Learned counsel then contended that the expenditure in this case was actually for earning greater profits. It did not bring into existence any assets for the assessee. In the circumstances the expenditure incurred by the assessee was a revenue expenditure and not a capital expenditure contemplated by Section 10(2)(xv) of the Act. According to him, the assessee has succeeded in showing that the expenditure was incurred inconnection with the business. It was neither a personal expenditure nor expenditure of a capital nature. The assessee was, therefore, entitled to deduction under Section 10(2)(xv) of the Income-tax Act.
18. Learned counsel for the revenue, however, refuted both the arguments raised on behalf of the assessee. According to him the assessee has not succeeded in showing that the expenditure in question was capital expenditure. He has also not succeeded in showing that the expenditure in question was laid out wholly and exclusively in connection with the assessee's business. So far as the question whether the expenditure in question was capital expenditure or not is concerned, learned counsel for the revenue relied upon a decision of this court in the case of Dewan Sugar and General Mills P. Ltd. v. Commissioner of Income-tax,  77 I.T.R. 572, 574 (All.)., where while considering similar expenditure incurred by the Dewan Sugar and General Mills, this court observed as follows :
'When new roads are constructed, a capital asset comes into existence. It may be that the land on which the road in question was 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. '
19. Aforesaid observations made in the case of Dewan Sugar and General Mills were quoted with approval in a subsequent Division Bench case of Lakshmi Sugar and Oil Mills Ltd. v. Commissioner of Income-tax,  77 I.T.R. 690 (All.). .
20. Learned counsel for the assessee conceded that so far as the ratio underlying these two decisions is concerned it is completely applicable to the facts and circumstances of the present case. If these two cases lay down correct law, the question referred by the Tribunal will have to be answered against the assessee. He, however, contends that these two decisions require reconsideration. He contends that there are two cases decided by the Supreme Court which lay down the criteria for determining when an expenditure would be capital and when it would be revenue. These two decisions were not brought to the notice of the Division Bench. The decision given in the case of Dewan Sugar Mills and Lakshmi Oil Mills is contrary to the criteria laid down in the Supreme Court cases. In this connection learned counsel for the assessee cited the case of Bombay Steam Navigation Co. (1953) Private Ltd. v. Commissioner of Income-tax,  56 I.T.R. 52, 59, 60;  1S.C.R. 770 (S.C.)., where it was held as follows:
' Whether a particular expenditure is revenue expenditure incurredfor purposes of business must be determined on a consideration of ail thefacts and circumstances and by the application of principles of commercial trading. The question must be viewed in the larger context of business necessity or expediency. If the outgoing or expenditure is so related to the carrying on or conduct of the business, that it may be regarded as an integral part of the profit earning process and not for the acquisition of an asset or a right of a permanent character, the possession of which is a condition of the carrying on of business, the expenditure may be regarded as revenue expenditure.'
21. Aforesaid observations were quoted with approval by the Supreme Court in the case of Commissioner of Income-tax v. Kirkend Coal Co.,  77 I.T.R. 530 (S.C.). Learned counsel contends that if the aforesaid test as laid down by the Supreme Court is applied to the facts of the case before us, it will be found that the expenditure was related to the carrying on or conduct of assessee's business. It was an integral part of the profit earning process. By this expenditure the assessee did not acquire any asset or right of a permanent character in property. Such an expenditure was necessary for carrying on the business and, therefore, it should be regarded as revenue expenditure admissible as a deduction under Section 10(2)(xv) of the Act and the decisions relied upon on behalf of the revenue do not lay down correct law. He also relied upon the case of Security Printers of India (P.) Ltd. v. Commissioner of Income-tax,  78 I.T.R. 766 (All.)., where a question arose whether the expenditure incurred by an assessee in respect of a foreign tour undertaken by its agent to acquaint himself with new and modern techniques is revenue expenditure. This court observed that such an expenditure was incurred only with a view to earn greater profits in a competitive market and not to acquire a new asset. Learned counsel contended that, in the instant case also, by incurring the expenditure no new asset was acquired by the assessee. Contribution for developing roads in the area was made so that cane may be transported to the factory in a more convenient manner and the assessee may be able to earn greater profits. On the basis of this decision he contends that the expenditure in the case before us should also be treated as revenue expenditure.
22. Section 10(2)(xv) provides that the profits and gains of a business haveto be computed after making an allowance for any expenditure (not beingan allowance of the nature described in any of the Sub-clauses (i) to (xiv)inclusive and not being in the nature of capital expenditure or personalexpenditure of the assessee) laid out or expended wholly and exclusivelyfor the purposes of such business, profession or vocation. According tothis sub-section, it is only an expenditure which is laid out or expendedwholly and exclusively for the purposes of such business that can beallowed as a deduction. An expenditure which is wholly and exclusivelylaid out for the purposes of business may either be of a capital nature or it may be otherwise. It is only the expenditure which is wholly and exclusively laid out for purposes of the business and which is not of a capital nature that is allowed as a deduction under this section. It therefore follows that for the purposes of Section 10(2)(xv) the legislature contemplated an expenditure to be classified as being of capital nature or otherwise, only if it was laid out wholly and exclusively for the purposes of business, profession or vocation. In a case where the expenditure was not laid out wholly and exclusively for the purposes of business, profession or vocation, no question of classifying that expenditure as being a capital expenditure or otherwise (revenue expenditure) arises.
23. In the case of Tata Hydro-Electric Agencies Ltd. v. Commissioner of Income-tax,  5 I.T.R. 202 (P.C.)., at page 209, their Lordships of the Privy Council observed as follows :
' What is money wholly and exclusively laid out for the purposes of the trade is a question which must be determined upon the principles of ordinary commercial trading. It is necessary, accordingly, to attend to the true nature of the expenditure and to ask oneself the question. Is it a part, of the company's working expenses. Is it expenditure laid out as part of the process of profit earning '
24. The question whether an expenditure is justified by commercial expediency and is laid out for purposes of business is a question which depends upon the facts of each case.
25. In the instant case, the third Member, to whom the matter was referred for opinion, came to the conclusion that the assesses made the contribution as a good citizen rather than as a person who carried on a particular business. The contribution for the development and construction of roads made by the assessee was of the same nature as contributed by any other person at the request of the district authorities or the State Government for the same purpose. According to him the expenditure was not incurred for the purposes of earning the profits. It had no connection with the preservation and maintenance of any asset belonging to the assessee. In the result he came to the conclusion that the expenditure was not incurred even indirectly for the purposes of or to facilitate the carrying on of the business. Apart from the fact that the expenditure was incurred by the company for the development of roads under the five year plan in accordance with a scheme of development agreed to by the assessee and other sugar factory owning units, there is nothing in the statement of the case or in any of the orders attached along with it to indicate any principle of ordinary commercial trading according to which such expenditures were to be incurred by the person like the assessee.
26. Learned counsel for the assessee argued that the expenditure was commercially expedient, inasmuch as it was incurred to keep the district authorities and the State Government, without whose goodwill and co-operation it was not possible to run the business, on the right side. It may be mentioned that such an object has not been recognised for classifying the expenditure as revenue expenditure even in the case of Bombay Steam Navigation Co. v. Commissioner of Income-tax, on which reliance was placed by the learned counsel for the assessee. In that case one of the questions that arose for consideration was whether interest paid by the assessee on the unpaid purchase price for acquiring the business was a capital expenditure within the meaning of Section 10(2)(xv) of the Act. One of the arguments raised on behalf of the assessee in support of the contention that payment of interest was revenue expenditure for the purposes of business was that, in the event of its failure to pay interest accruing due, the seller could enforce the lien and the business of the assessee-company would come to an end, and that in any event the expenditure was necessary on the ground of business expediency and was incurred directly or indirectly to facilitate the carrying on of the business. While rejecting this argument their Lordships of the Supreme Court observed as follows:
'If the principal or interest accruing due was not paid, the Scindias had undoubtedly a right to enforce their lien against the assets of the assessee-company's business, but that cannot be regarded as a ground for holding that the expenditure fell within Section 10(2)(xv). Even in respect of a liability wholly unrelated to the business, it would be open to a creditor to sequester the assets of the assessee's business and such sequestration may result in stoppage of the operation of the business. Expenditure for satisfying liability unrelated to the business even if incurred for avoiding danger apprehended or real to the conduct of the business cannot be said to be revenue expenditure. Nor can it be said that because a liability has some relation to the business which is carried on, expenditure incurred for the satisfaction of such liability has always to be regarded as falling within Section 10(2)(xv).'
27. In the case before us, on the findings recorded by the third Member of the Tribunal and on the view expressed by the Accountant Member it cannot be said that the expenditure was incurred by the assessee in the ordinary course of its business. Even though the expenditure was prompted by an idea to keep the district authorities and the State Government on the right side, it was not related to the business activity of the assessee. In the circumstances, it cannot be classified as revenue expenditure on the ground of commercial expediency. As the expenditure was not related to the business activity of the assessee as such, the Tribunal was justified in concluding that it was not wholly and exclusively laid out for the business and that the deduction claimed by the assessee, therefore, did not come within the ambit of Section 10(2)(xv).
28. In the result the question referred to us is answered in the negative and in favour of the revenue. The Commissioner of Income-tax is entitled to his costs which we assess at Rs. 200. Counsel's fee is also assessed at the same figure.