JUDGMENT : K.S. Jhaveri, J. 1. By way of the present appeal under section 260A of the Income-tax Act, 1961, the appellant-revenue has challenged the order of the Income-tax Appellate Tribunal, (hereinafter referred to as "the Tribunal") whereby the Tribunal dismissed the appeal of the revenue by confirming the order of the Commissioner of Income-tax (Appeals). 2. While admitting the appeal, this court has framed the following substantial question of law: "Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) deleting the addition of Rs. 94,02,799/- being the interest capitalized out of current year's finance charges to work in progress claimed by the assessee as revenue expenditure?" 3. The facts of the present case are that the return of income was filed on 30.11.1996. The Assessing Officer completed the assessment under section 143(3) of the Act on 30.9.1999 determining total income of the assessee at Rs. 34,99,608/-. While completing the assessment, the Assessing Officer disallowed the interest claim of the assessee of Rs. 94,02,799/-. Being aggrieved, the assessee carried the matter in appeal before the Commissioner of Income-tax (Appeals) who by his order dated 2.11.2000 allowed the claim of the assessee. Against that order of the Commissioner (Appeals), the revenue preferred appeal before the Tribunal. The Tribunal after hearing both sides and considering the material on record, dismissed the appeal of the revenue by confirming the order of the Commissioner (Appeals). 4. The learned counsel for the appellant-revenue has taken us through order of the Assessing Officer and contended that the Assessing Officer has, after considering the explanation given by the assessee, rightly disallowed the assessee's claim. Learned counsel for the revenue has contended that the Commissioner (Appeals) and the Tribunal have committed error in allowing the claim of the assessee. In that view of the matter, the order of the Tribunal is required to be interfered with. 5. Learned counsel for the assessee Mr. Soparkar has contended that the issue is squarely covered by the decision of this court in the case of Gujarat State Fertilizer & Chemicals Ltd. v. Asstt. Commissioner of Income-tax reported in (2009) 313 ITR 244 (Gujarat) wherein it is held as follows: "The Legislature has made no distinction in section 36(1)(iii) between the capital borrowed for a revenue purpose and the capital borrowed for a capital purpose. Commissioner of Income-tax reported in (2009) 313 ITR 244 (Gujarat) wherein it is held as follows: "The Legislature has made no distinction in section 36(1)(iii) between the capital borrowed for a revenue purpose and the capital borrowed for a capital purpose. The assessee is entitled to claim the interest paid on borrowed capital provided that the capital is used for business purpose irrespective of what may be the result of using the capital which the assessee has borrowed. Actual cost of an asset has no relevancy in relation to section 36(1)(iii). Thus where the capital borrowed is used for the purpose of business, whether it is for the capital purpose or revenue purpose, is immaterial while allowing deduction under section 36(1)(iii) and as such interest paid by the assessee, in respect of the capital borrowed for the purpose of its business being the second caprolactam plant under installation, was allowable under section 36(1)(iii). 5.1. He has further relying on the decision of the Apex Court in the case of Deputy Commissioner of Income-tax v. Core Health Care Ltd., reported in 298 ITR 194 (SC), contended that both Commissioner (Appeals) and the Tribunal have not committed any error in allowing the claim of the assessee. In the said decision the Apex Court has held as under: "Interest on moneys borrowed for the purposes of business is a necessary item of expenditure in a business. For allowance of a claim for deduction of interest under the said section, all that is necessary is that-firstly, the money, i.e. capital, must have been borrowed by the assessee; secondly, it must have been borrowed for the purpose of business; and, thirdly, the assessee must have paid interest on the borrowed amount (see: Calico Dyeing & Printing Works v. CIT (1958) 34 ITR 265). All that is germane is: Whether the borrowing was, or was not, for the purpose of business. The expression 'for the purpose of business' occurring in section 36(1)(iii) indicates that once the test of 'for the purpose of business' is satisfied in respect of the capital borrowed, the assessee would be entitled to deduction under section 36(1)(iii). The provision makes no distinction between money borrowed to acquire a capital asset and a revenue asset. The expression 'for the purpose of business' occurring in section 36(1)(iii) indicates that once the test of 'for the purpose of business' is satisfied in respect of the capital borrowed, the assessee would be entitled to deduction under section 36(1)(iii). The provision makes no distinction between money borrowed to acquire a capital asset and a revenue asset. All that the section require is that the assessee must borrow capital and the purpose of the borrowing must be for business which is carried on by the assessee in the year of account. What sub-section (iii) emphasizes on is the user of the capital and not the user of the asset which comes into existence as a result of the borrowed capital, unlike section 37 which expressly excludes an expense of a capital nature. The Legislature has, therefore, made no distinction in section 36(1)(iii) between 'capital borrowed for a revenue purpose' and 'capital borrowed for a capital purpose'. An assessee is entitled to claim interest paid on borrowed capital provided that the capital is used for business purpose irrespective of what may be result of using the capital which the assessee has borrowed. Further, the words 'actual cost' do not find a place in section 36(1)(iii), otherwise find place in sections 32, 32A, etc. The expression 'actual cost' is defined in section 43(1) which is essentially a definition section and is subject to the context to the contrary. Section 43 groups together all provisions in the nature of definitions or interpretations relevant to the computation of income under the head 'Profits and gains of business'. Section 43(1) defines 'actual cost'. The definition of 'actual cost' has been amplified by excluding such portion of the cost as is met directly or indirectly by any other person or authority. Explanation 8 has been inserted to section 43(1) by the Finance Act, 1986, with retrospective effect from 1.4.1994. It is important to note that the words 'actual cost' would mean the whole cost and not the estimated cost. 'Actual cost' means nothing more than the cost accurately ascertained. The determination of actual cost given in section 43(1) has relevancy in relation to section 32 (depreciation allowance); section 32A (investment allowance); section 33 (development rebate allowance) and section 41 (balancing charge). 'Actual cost' of an asset has no relevancy in relation to section 36(1)(iii). This reasoning flows from a bare reading of section 43(1). The determination of actual cost given in section 43(1) has relevancy in relation to section 32 (depreciation allowance); section 32A (investment allowance); section 33 (development rebate allowance) and section 41 (balancing charge). 'Actual cost' of an asset has no relevancy in relation to section 36(1)(iii). This reasoning flows from a bare reading of section 43(1). Section 43 defines certain terms relevant to income from profits and gains of business and, therefore, the said section commences with the words. 'In sections 28 to 41 and unless the context otherwise requires' 'actual cost' shall mean the actual cost of the assets to the assessee reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority. In other words, Explanation 8 applies only to sections like sections 32, 32A, 33 and 41 which deal with concepts like depreciation. The concept of depreciation is not there in section 36(1)(iii). That is why the Legislature has used the words 'unless the context otherwise requires'. Hence, Explanation 8 has no relevancy to section 36(1)(iii). It has relevancy to the aforementioned enumerated sections. Therefore, Explanation 8 had no application to the facts of the instant case. A proviso has since been inserted in section 36(1)(iii). That proviso has been inserted by the Finance Act, 2003 with effect from 1.4.2004. Hence, the said proviso will not apply to the facts of the instant case. Further, the said proviso would operate prospectively. In this connection, it may be noted that by the same Finance Act, 2003, insertions have been made by way of proviso in section 36(1)(viia), which is made effective from 1.4.2004. Same is the position with regard to insertion of a sub-section after section 90(2). This insertion also operates with effect from 1.4.2004. Therefore, the proviso inserted in section 36(1)(iii) has to be read as prospectively and with effect from 1.4.2004. In this case, the law concerned was as it existed prior to 1.4.2004. Section 36(1)(iii) has to be read on its own terms. It is a code by itself. Section 36(1)(iii) is attracted when the assessee borrows the capital for the purpose of his business. In this case, the law concerned was as it existed prior to 1.4.2004. Section 36(1)(iii) has to be read on its own terms. It is a code by itself. Section 36(1)(iii) is attracted when the assessee borrows the capital for the purpose of his business. It does not matter whether the capital is borrowed in order to acquire a revenue asset or a capital asset, because all that the section requires is that the assessee must borrow the capital for the purpose of his business. This dichotomy between the borrowing of a loan and actual application thereof in the purchase of a capital asset, seems to proceed on the basis that a mere transaction of borrowing does not, by itself, bring any new asset of an enduring nature into existence, and that it is the transaction of investment of the borrowed capital for the purchase of a new asset which brings that asset into existence. The transaction of borrowing is not the same as the transaction of investment. If this dichotomy is kept in mind it becomes clear that the transaction of borrowing attracts the provisions of section 36(1)(iii). The Assessing Officer was not justified in making disallowance of interest in respect of borrowings utilized for purchase of machinery." 5.2. In view of above decisions, the learned counsel for the assessee has contended that the Tribunal and the Commissioner (Appeals) have rightly allowed the claim of the assessee. 6. We have heard learned counsel for the parties. We have gone through the orders of the authorities below and the case laws cited by the learned counsel for the assessee. In view of the fact that the issue is squarely covered by the decision of this court in the case of Gujarat State Fertilizer & Chemicals Ltd. (supra) and the decision of the Apex Court in the case of Deputy Commissioner of Income-tax v. Core Health Care Ltd. (supra), we are of the opinion that the issue is required to be answered in favour of the assessee and against the revenue. Accordingly, we answer the question in favour of the assessee and against the revenue. Hence the appeal is dismissed.