Appeal filed by assessee is directed against order of learned CIT(A) on following grounds: "1.(a) learned CIT(A) erred in confirming disallowance of Rs. 7,72,980 in respect of depreciation claimed for plant and machinery of Rs. 30,91,920 out of total capitalization of pre-operative expenses of Rs. 59.46 lakhs, i.e., 52 per cent. Appellant claims that expenditure incurred represent pre-operative expenses in relation to plant and machinery of new unit at Panoli on basis of mandatory accounting policy followed by appellant. appellant explained before CIT(A) regarding allowability of depreciation in respect of pre-operative expenses capitalised during cause of hearing. Therefore, disallowance of claim for reason given by CIT(A) is against natural justice. (b) learned CIT(A) erred in confirming disallowance of Rs. 2,85,408 in respect of depreciation claimed for building of Rs. 28,54,000 out of total capitalization of pre-operative expenses of Rs. 59.46 lakhs, i.e., 48 per cent. Appellant claims that expenditure incurred represent pre-operative expenses in relation to building of new unit at Panoli on basis of mandatory accounting policy followed by appellant. appellant explained before CIT(A) in course of hearing regarding allowability of depreciation in respect of pre-operative expenses capitalised. Therefore, disallowance of claim for reason given by CIT(A) is against natural justice. Without prejudice to our claim in ground No. 1, appellant claims that pre-operative expenses which may not be considered in relation to plant and machinery and building should have been allowed by CIT(A) under s. 35D of IT Act. Appellant had given details of pre-operative expenses to AO at time of hearing and appellant requested CIT(A) that if those pre-operative expenses which are not allowed to be capitalised in plant and machinery and building should have been allowed under s. 35D of IT Act in appeal. Appellant further claims that expenditure incurred and allowable under s . 35D is to be granted 1/10th of expenses every year, therefore, though appellant claims that year under appeal is first year for claim under s. 35D. Even by rejecting valid claim of appellant CIT(A) should have allowed 1/10th of such expenditure assuming year under appeal is second year. CIT(A) therefore is not justified in ignoring claim of depreciation under s. 35D. Appellant claims that share transfer expenses incurred Rs. 2,23,655 but disallowed as Rs. 2,63,655 relates to transfer of shares after share capital is subscribed and as such these expenses are allowable under s. 37 of IT Act as incurred for purpose and in course of business. Appellant claims that in course of hearing it was submitted that share transfer expenses were incurred by way of payment to Sriven Corporate Service (P) Ltd. and Big Share Services (P) Ltd. share transfer agents towards services rendered by them. It is submitted that in facts circumstances of case and in law, no such addition was called for. Your appellant craves, leave to add, amend, alter and/or withdraw any of above ground of appeal." At time of hearing, learned counsel pressed only three issues for consideration and adjudication. First issue was whether assessee was entitled to claim depreciation allowance under s. 32 on capitalized amount of expenses on public issues, which, according to assessee, was utilized for procurement of plant and machinery. Second issue, which was by way of alternative ground, was whether assessee was entitled to benefit of s. 35D in respect of aforesaid expenses. Third issue was whether Departmental authorities were justified in disallowing expenses relating to transfer of shares after share capital had been subscribed. Since assessee has pressed and addressed us on aforesaid three issues only, we confine our decision to said three issues only. Briefly stated, facts of case are that assessee, existing pharmaceutical company, embarked upon expansion-cum-diversification project for manufacture of certain high tech bulk drugs at Chemical Zone of GIDC at Panoli, District Bharuch. For this purpose, assessee floated public issue of equity shares aggregating to Rs. 3.35 crores in March, 1994. It was stated in prospectus issued for purpose that proceeds of said issue would be utilized towards objects of issue. objects of issue, as stated in prospectus, were as under: "(i) To meet cost of expansion-cum-diversification project (ii) To meet cost of project for manufacture of new bulk drugs at various units (iii) To meet cost of expansion programmes for existing products (iv) To upgrade and modernize existing R&D and OCD facilities (v) To meet cost of normal on going capital expenditure (vi) To augment company s working capital requirements arising out of increased business (vii) To defray cost of issue expenses." (Emphasis, italicised in print, supplied) Cost of project and means of finance were also spelt out in prospectus. Total cost of project was spelt out at Rs. 672 crores out of which Rs. 3.35 crores were proposed to be met out of said public issue. case of assessee before AO was that it incurred expenditure of Rs. 34,19,172/69 on aforesaid public issue. assessee capitalized said expenditure and claimed depreciation under s. 32 on such capitalized expenditure on ground that public issue was made in order to raise finance for new project including plant and machinery required for project. In alternative, assessee claimed that capitalized expenditure should be amortised and considered for allowance under s. 35D. AO considered claim of assessee on both counts. As regards claim for depreciation allowance, AO held that impugned expenditure was incurred for raising equity capital and not for acquiring plant and machinery and hence disallowed claim of assessee for depreciation. As regards claim of assessee for amortisation and consequential allowance under s. 35D, AO held that since assessee did not make any such claim in first year, i.e., preceding year, assessee was not entitled to benefit of s. 35D this year." On appeal, learned CIT(A) confirmed order of AO in this behalf. Aggrieved by order of CIT(A), assessee is now in appeal before Tribunal. In support of appeal, learned counsel for assessee has invited our attention to factual aspects of case, which we have already narrated above. He submitted that entire public issue was made in order to raise finance for new project at Panoli including purchase of plant and machinery for said project and hence capitalized expenditure incurred on public issue should be taken into account for purpose of depreciation allowance. He sought to draw analogy by comparing case of capitalized expenditure incurred on public issue with that of interest on borrowed capital. He strenuously argued that capitalized expenditure on public issue should qualify for deduction in same way as capitalized interest on borrowed capital for purchasing plant and machinery would qualify. Placing reliance on decision in Challapalli Sugars Ltd. vs. CIT 1974 CTR (SC) 309: (1975) 98 ITR 167 (SC), he submitted that impugned capitalized expenditure should be held to be eligible for depreciation. He further submitted that AO himself has allowed depreciation in subsequent years and hence there was no basis to sustain disallowance of depreciation this year. As regards his alternative plea, he submitted that Departmental authorities ought to have considered claim of assessee for amortisation of impugned expenditure for allowance under s. 35D on merits instead of rejecting same on ground that assessee had not claimed it earlier. In reply learned Departmental Representative supported orders of Departmental authorities. We have considered rival submissions. There is no doubt that impugned expenses were incurred for raising share capital. One of objects for raising share capital was also to defray cost of issue expenses. Besides, objects of present issue as stated at p. 14 of prospectus were not only to meet cost of expansion-cum-diversification project but also to meet cost of normal ongoing capital expenditure, working capital requirements, up-gradation and modernization of existing R&D and OCD facilities as also to meet cost of project for manufacture of new drugs at various units. Another important point to be noted here is that impugned expenses were capitalized because they related to raising of equity capital and not because that they related to purchase of plant and machinery. This distinction is subtle and fine but, at same time, crucial in deciding matter under appeal. Sec. 32 of IT Act grants depreciation allowance with reference to written down value of block of assets. term "written down value" has been defined in sub-s. (6) of s. 43 to mean, inter alia, actual cost of assets in previous year to assessee. term "actual cost" has been defined in sub-s. (1) of s. 43 to mean actual cost of assets to assessee. In other words, s. 43(1) does not really define term "actual cost". ordinary dictionary meaning of word "actual" is "existing in fact or fact as opposed to imaginary or past state of things". dictionary meaning of word "cost" is to "what is laid out or suffered to obtain anything". Depreciation allowance as understood in commercial world is deduction from profits, which businessman ordinarily makes with view to making good capital investment, which, sooner or later, will have to be replaced on account of wear and tear of assets during course of business. In our opinion, therefore, meaning of expression "actual cost to assessee" as used in sub-s. (1) of s. 43 of Act would be what assessee has, in fact, expended or laid out for purpose of acquiring depreciable assets. In other words, term "actual cost" would mean cost which has been paid or agreed to be paid for purpose of acquiring asset. Thus, there must be direct and proximate nexus between expenditure so incurred and acquisition of asset. In case before us, impugned expenses were incurred for purpose of raising equity capital and not for purpose of acquiring plant and machinery. Therefore, impugned expenses though capitalized cannot be held to have direct nexus with cost of acquisition of assets in question. As stated above, impugned expenses were capitalized because they were related to raising of equity capital and not because of fact that they were related to procurement/purchase of plant and machinery. assessee in our view has been correctly denied depreciation on impugned expenses. Reliance placed by assessee on decision in Challapalli Sugars Ltd. vs. CIT (supra) does not also assist assessee. In said case, Hon ble Supreme Court has held that accepted accountancy rule for determining cost of fixed assets is to include all expenditure necessary to bring such assets into existence and to put them in working condition. In case money is borrowed by newly started company which is in process of constructing and erecting its plant, interest incurred before commencement of production on such borrowed money can be capitalised and added to cost of fixed assets created as result of such expenditure. As evident on bare perusal of said decision that it is expenditure on borrowed capital which can be capitalized for purpose of depreciation. case before us is not of expenditure on borrowed capital but of expenditure incurred on raising equity capital, i.e., own capital of assessee-company. distinction between owned capital and borrowed capital is too well-known to warrant any further discussion here. analogy drawn by learned counsel for assessee between interest/expenditure on borrowed capital and expenditure incurred on raising one s owned capital is also misplaced. It is well-known that while interest and expenditure on borrowed capital utilized for purchase of plant and machinery can form basis for claiming depreciation if amount of interest/expenditure has been capitalized. No authority has been placed before us to show that has been capitalized. No authority has been placed before us to show that expenses incurred on raising equity capital can also qualify for similar treatment. This is perhaps for reason that while expenses and interest on borrowed capital affect profitability of business, interest and expenses on raising equity capital or owned capital affect dividend or profit that will accrue to owner of business. While interest on borrowed capital qualifies for deduction from business profits, interest incurred to raise one s own capital does not qualify for similar treatment. It therefore, follows that expenses/interest incurred on borrowed capital and on equity capital or owned capital are treated differently in law. learned counsel has kly urged that Department itself has allowed depreciation on impugned expenses in subsequent years and hence there was no reason to disallow similar claim on exactly similar facts in assessee s own case. We do not wish to comment upon working of Department. It is for senior officers of Department to take such action as they may deem fit on such inconsistent stand taken by officers of Department. Be whatever it may, matter has now been placed before us for adjudication and hence we are obliged to decide matter in accordance with law and not necessarily in accordance with inconsistent decisions taken by Department in matter. There is no estoppel against statute and hence claim of assessee as made before us is required to be examined in accordance with law which we have examined and found to be not tenable. In view of foregoing, issue No. 1 is decided against assessee. As regards claim of assessee for amortisation of share issue expenses under s. 35D, learned CIT(A) has disallowed same with following observations: "4. On going through record, I find that infact public was relevant to asst. yr. 1995-96 and hence claim under s. 35D should have been made in that year. assessee has not done so but has not tried to capitalize expenses by adding them to block of assets of Panoli Plant which commenced production during this assessment year. appellant s representative has not pressed any evidence on record to show that any of this expenditure was related to assets. Hence, question of adding it to block of assets does not arise. I therefore, uphold action of AO in disallowing depreciation on these expenses and also not entertaining claim under s. 35D in second year after issue of shares. addition made on this point is confirmed." learned CIT(A) has not examined claim of assessee with reference to provisions of s. 35D. It is, therefore, considered appropriate to set aside order of learned CIT(A) and restore matter to his file for fresh decision in accordance to law and more particularly provisions of s. 35D. Alternative ground taken by assessee stands allowed for statistical purposes. As regards third issue relating to share transfer expenses, it was submitted by learned counsel that these expenses related to transfer of shares after public issue had been closed. learned CIT(A) has dealt with this issue in para 7 of his order. CIT(A) has not accepted version of assessee on ground that assessee could not clarify whether impugned expenses related to share transfer of previous year when public issue was made or to subsequent transactions. assessee has filed details of share transfer expenses before us. assessee has certified that similar details were filed before AO as well as before CIT(A). It is categorically stated in said statement that they pertained to assessment year under consideration and that they were incurred for affecting transfer of shares after public issue had been closed. Besides, amount of share transfer expenses claimed by assessee was Rs. 2,23,655 and not Rs. 2,63,655 as taken by AO and CIT(A). Having considered details filed by assessee, we find nothing to support order of learned CIT(A) that said expenses did not pertain to share transfer or to year under consideration. In this view of matter, issue No. 3 raised by assessee is allowed. Appeal filed by assessee is partly allowed. *** BOMBAY DRUGS & PHARMAS LTD. v. DEPUTY COMMISSIONER OF INCOME TAX