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TMI Tax Updates - e-Newsletter
March 30, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Customs
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Rate of exchange of conversion of each of the foreign currency with effect from 1st April, 2012. - Ntf. No. 26 / 2012 - Customs (N.T.) Dated: March 28, 2012
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Amends Notification No. 64/1994 - Ports for Coastal Trade. - Ntf. No. 25/2012 - Customs (N. T.) Dated: March 23, 2012
DGFT
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Extension of prohibition on export of Pulses (except Kabuli Chana and 10,000 tonnes of organic pulses) upto 31.03.2013– regarding. - Ntf. No. 109 (RE – 2010)/2009-2014 Dated: March 27, 2012
Central Excise
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Payment of arrears from Cenvat Credit earned at a later date. - Cir. No. 962/05/2012-CX Dated: March 28, 2012
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Seeks to amend the CENVAT Credit Rules, 2004 (Fourth Amendment). - Ntf. No. 21/2012 – Central Excise (N.T.) Dated: March 27, 2012
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Revised Treaty of Trade between India and Nepal. - Cir. No. 961/04/2012-CX Dated: March 26, 2012
Case Laws:
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Income Tax
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2012 (3) TMI 336
Addition made by TPO rejected by CIT(A) - In respect of international transactions the assessee filed a report u/s 92E in Form no. 3CEB - The entire controversy in the present appeal revolves around the determination of ALP in respect of the Distribution segment - learned CIT(A) went by the assessee's declared Operating Profit (OP) margin at 1.63% ignoring the fact that TPO had rejected such OP rate and had instead determined operating loss at Rs. 14,86,852 - The contention is that since the assessee's OP rate of 1.63% falls within 1.405% to 10.795% (i.e. +-5%), it would require no addition - Since this standard price constitutes the basis for making addition in the hands of the asssessee on account of its international transactions with the associated enterprises, the legislature, in order to iron out the creases, inserted proviso to section 92C(2) - When we refer to plus minus 5% of the value determined under this method as per proviso to section 92C(2), it inevitably refers to the figure determined under this method, which is price and not profit embedded in the price - it is noticed that the assessee argued before the learned CIT(A) that plus minus 5% adjustment to 6.1% margin of the remaining 2 comparable cases would give the range of 1.405% to 10.795% - it is sine qua non to decide the correctness of the operating profit/loss earned/incurred by the assessee from the international transactions - it will be just and fair if the impugned order is set aside and the matter is restored to CIT(A) - Appeal is allowed for statistical purpose
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2012 (3) TMI 335
Penalty u/s 271(1)(c) - Depreciation - Whether the assessee has been able to discharge onus under Explanation 1 to Section 271(1)(c) of the Act - the ownership of the property was not transferred to the partnership firm - Only right to use was given to the partnership firm - The said provision stipulates that the share of profit received by a partner, from the partnership firm which is separately assessed is exempt, subject to certain conditions - Assessees do take legal opinion and in the present case the return of income was duly audited. Claim for depreciation is a technical claim based on interpretation of legal provision - Delhi High Court in the case of Commissioner of Income-Tax Vs. Zoom Communication P. Ltd. [2010 (5) TMI 34 - DELHI HIGH COURT] - Decided in favor of the assessee
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2012 (3) TMI 334
Reopening - Time limitation - Moreover it was stated that the relevant records are inspected by the Excise authorities in the course of Excise audits and the percentage of melting loss will vary from factory to factory depending on the type and quality of raw material, machinery and process used - The jurisdictional condition is that in such case before an assessment can be validly reopened, there must be a failure on the part of the assessee to state fully and truly all the material facts necessary for the assessment - Assessing Officer could not have reopened the assessment on the basis of this subsequent decision of the Tribunal unless the jurisdictional requirements in the proviso to Section 147 were fulfilled - it is evident that the Assessing Officer has transgressed the limits on his jurisdiction for seeking to reopen an assessment beyond a period of four years from the end of the relevant assessment year - Decided in favor of the assessee
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2012 (3) TMI 333
Recovery and issuance of garnishee notice - Legitimacy of demand - Assessing Officer assessed the Trust as an Association of Persons (AOP) - Assessing Officer has invoked the provisions of Section 177(3) and has called upon the petitioner to pay the aforesaid amount as its share of the outstanding demand for investment made by the petitioner - it would be necessary for the Court to clarify that the issue in these proceedings is confined to whether the Revenue should be permitted to enforce the demand of Rs.9.63 crores and to take coercive steps under Section 226(3) in the form of a garnishee notice which has been issued to the bankers of the petitioner - The submission of the petitioner is that if at all, an assessment could have only been made in the hands of the petitioner as the transferor of a revocable trust, in which event the income would be exempt under Section 10(23D) - the assessing officer has made an assessment, he must objectively decide the application for stay considering that an appeal lies against his order : the matter must be considered from all its facets, balancing the interest of the assessee with the protection of the Revenue - Held that: the assessee in the present case has a serious issue to urge as regards the legitimacy of the demand which has been raised by the impugned notice dated 29 February 2012, including in regard to the applicability of Section 177(3) of the Income Tax Act, 1961 on which the demand has been founded - Attachment stand lifted.
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2012 (3) TMI 332
Revision u/s 263 - Capital or revenue expenditure - There is no finding of CIT that the order passed by the Assessing Officer was erroneous and prejudicial to the interest of the Revenue. The question of “lack of enquiry” and “inadequate enquiry” has been explained by this Court in Commissioner of Income Tax v. Sunbeam Auto Ltd., (2009 -TMI - 204642 - Delhi High Court) - the question of warranty claim was reopened in the assessment year 1999-2000 after an order u/s 263 of the Act It is noticed that the claim for deduction under Section 35DDA was made by the assessee for the first time in assessment year 2002-03. 1/5th of the amount payable under the voluntary retirement was allowed as a deduction - Held that: assessee had stated before the CIT and explained the position that an amount of Rs. 5,37,14,119/- was incurred under Section 35DDA in the assessment year 2002-03 and 1/5th thereof being Rs. 1,07,42,824/- was amortised and claimed and allowed as a deduction - Decided in favor of the assessee
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2012 (3) TMI 331
Whether the expenditure incurred on education of one of the directors, who had undergone a course called Master of Science in Entrepreneurship at United Kingdom from University of Nottingham, was not expenditure wholly and exclusively incurred for the purpose of business - in the present case said director had not executed any bond that she would work for the appellant company after she completes the course and on failure shall return the money spent - The alleged board resolution has rightly not been relied upon as it was not relied and filed before the Assessing Officer. Considering the facts and circumstances of the case, the aforesaid expenditure, it has been held, cannot be regarded as wholly and exclusively incurred for the purpose of business - Appeal is dismissed
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2012 (3) TMI 330
Depreciation - Notification No. 890(E) dated 26.09.2000 - website development cost as 'software' instead allowing the deprecation treating it as an intangible asset - assessee claimed depreciation on website development expenses under the block of intangible assets - Assessing Officer observed that the expenditure incurred by the assessee on development of website was capital in nature - AR of the assessee submitted that as per old Appendix-I applicable for Assessment Years 2003-04 to 2005-06, intangible assets fall under Part-B and are eligible for depreciation @ 25%. In earlier Assessment Years i.e. upto Assessment Years 2001-02 to 2003-04 the Department has allowed depreciation - Website enables companies to do what the printed brochures did but, in a much more efficient manner as well as in a much shorter period of time and covering a much larger set of people worldwide - It would fall under the definition of intangible asset on which depreciation @ 25% is allowable - Appeal is dismissed
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2012 (3) TMI 329
Reopening - Commissioner of Income Tax, Delhi-III issued a certificate under Section 68(2) of the VDIS on 13.01.1998 and in this certificate mentioned the fact, inter alia, that for the assessment year 1997-98 a sum of Rs.7,23,490/- has been declared as business income under the VDIS - It appears that in the year 2005 the respondents filed their counter affidavit before the Allahabad High Court to the writ petition on the ground of lack of territorial jurisdiction and accepting the plea the Allahabad High Court dismissed the petitioner‟s writ petition by order dated 19.10.2007 - It was next contended that the reasons recorded for re-opening the assessment show that on a perusal of the return filed by the petitioner for the assessment year 1998-99 it was observed that in the previous year the petitioner had shown a taxable profit of Rs.42,79,340/-, but no return was found to have been filed by the petitioner for the assessment year 1997-98 and it was for this reason that notice under Section 148 of the Act was issued on the ground that income chargeable to tax for the assessment year 1997-98 had escaped assessment the petitioner was entitled to the deduction under Section 80-O of the Act in respect of its consultancy income of Rs.71,11,695/- which has been declared in its profit and loss account for the year ended 31.03.1997 - the assessee deducted 50% of Rs.71,11,695/- which comes to Rs.35,55,848/- as deduction under Section 80-O. If this figure is reduced from the profit figure of Rs.42,79,340/-, the balance comes to Rs.7,23,492/-. It was on this basis that the petitioner declared income of Rs.7,23,490/- for the assessment year 1997-98 under the VDIS - aDecided in favor of the assessee
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2012 (3) TMI 325
Claim of bad debt - Business or Capital loss - In the assessment order dated 29th August, 2006, the Assessing Officer disallowed bad debt of Rs.44,28,000/- on the ground that provisions of Section 36(1)(vii) read with Section 36(2) of the Act were not satisfied as the amount had not been taken into account in computing income of the earlier years - It is not in dispute that the assessee is also in the business of constructing and developing buildings - The amount of Rs.44,28,000/- receivable from M/s. Gulmohar Estate Ltd. paid towards purchase of flats were shown under the head “loans and advances” in the balance sheet as on 31.03.1991 - It is also an admitted position that the possession of the fats agreed to be purchased by the assessee was not given to the assessee and, thus, the transfer of flats within the meaning of Income Tax Act was not completed - the transaction to purchase property from M/s. Gulmohar Estate Ltd. was related or incidental to the assessee’s business. After taking into account the intention of the assessee, it is well settled that it is the intention of the assessee which would matter in deciding as to whether the property purchased were intended for carrying on business or to hold it as an investment coupled with the line of the business carried on by the assessee - Decided in favor of the assessee
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2012 (3) TMI 324
Deemed dividend - The reduction was made by the CIT(Appeals) on the ground that certain amounts had been repaid and that cannot be treated and regarded as deemed dividend - The tribunal also examined the merits of the case and held that the transactions between the assessee and the East India Impex (Delhi) Private Limited were business transactions and cannot be treated as loans or advance - The fact that the shareholders of the assessee company were also shareholders of the company which had given “loan/advances” is not suffice and does not meet the requirement of Section 2(22)(e) - Decided in favor of the assessee
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2012 (3) TMI 323
Condonation of delay - Revision u/s 263 - dividend stripping - Commissioner of Income Tax noticed that the two transactions were accepted by the Assessing Officer without verification about the genuineness, nature and purpose of the transaction and without obtaining necessary details - Held that: it has been held that order of the Assessing Officer cannot be treated as erroneous and therefore revisable under Section 263 of the Act, as Section 94(7) relating to dividend stripping became a part of the statute and is applicable from Assessment Year 2002-03 onwards and is not applicable to earlier assessment years - The purchase and sale of units by the Assessee was undoubtedly bona fide and this was accepted by the Assessing Officer - Decided in favor of the assessee Regarding failure of the Assessing Officer to invoke Section 40A (2)(b) in respect of Rs.2,37,500/- paid to Rajesh Mehta, CA, who is also a director of the respondent-assessee - Tribunal has observed and held that the Commissioner of Income Tax had recorded an entirely incorrect finding - It is not pointed out and shown to us how and why the finding recorded by the Tribunal is factually incorrect or perverse - Decided in favor of the assessee
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2012 (3) TMI 322
Rectification - Rule 19 of the AAR(Procedure) Rules, 1996 - Certain typographical mistakes have been pointed out in the Ruling pronounced on 28th February, 2012 - Revised corrected order is being issued separately
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2012 (3) TMI 321
Capital or revenue expenditure - enduring nature - The contention of the Revenue is that the construction of flyovers, pedestrian facilities etc. was capital expenditure as the facilities being constructed had an enduring benefit and had resulted in creation of permanent facilities - held that the expenditure incurred on construction of flyovers etc was revenue expense and not capital expense - Decided in favor of the assessee. Regarding diversion - The concept of diversion of income by way of overriding title for the purpose of income tax was expounded and explained by the Supreme Court in CIT vs. Sitaldas Tirathdas, (1960 -TMI - 49527 - SUPREME Court) - The nature of obligation by reason of which income becomes payable to a person other than the one entitled to it, is the relevant and the determinative factor - A part of the said amount i.e. 5 paise per bottle was retained by the assessee to meet their administrative and other corporate expenses and the other part of that was to be used for construction of flyovers and pedestrian facilities by the assessee. The said 95 paise was not transferred or paid by the assessee to the Delhi Administration - held that the amount standing in TIUF was not diverted at source by way of overriding title and, therefore, was to be included in the taxable income of the assessee - Decided against the assessee. Taxability of part of sale proceeds kept in separate account - held that:- Mere fact that the amount was retained in the bank account of the assessee under the head ‘OGES’, does not show or prove that it was the income of the assessee. Mere realization of an amount in course of trading was not determinative whether the amount received was income. The court/authorities must determine the nature and character of the receipts before the amount can be taxed as income. This part of the sale consideration i.e. OGES was kept in a deposit unrelated to the business of the respondent assessee. The assessee did not exercise dominion over the said fund/deposit and deal with the said fund/deposit. Keeping in view the aforesaid elucidation of law and applying the same to the factual matrix, noting the nature and character of the OGES, it has to be held that the same was not taxable income of the assessee. The same has to be excluded from the profit. The aforesaid receipts were not income earned and do not have character of income earned by the assessee over which it had dominion or right.
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2012 (3) TMI 320
Penalty u/s 272A - The assessee, who is deriving income from its business of cold storage, was required to deduct tax at source from interest payable/paid to certain creditors and in case the creditors were not liable to pay any income tax, the assessee was required to obtain declarations in Form No.15H which were to be filed with the Commissioner of Income Tax (CIT) under section 197A of the Act - Mr. M. R. Bhatt learned senior advocate submitted that the proviso to section 272A of the Act has been inserted by the Finance Act, 1991 with effect from 1.10.1991 - It was submitted that the proviso to section 272A of the Act being substantive in nature and having been made expressly applicable with effect from 01.04.1999 is neither expressly nor by implication retrospective in effect - Failure to file the declaration in Form No.15H prior to 1.6.1992 not being a default under section 272A(2)(f) of the Act - Decided in favor of the assessee. Maximum limit of penalty - retrospective effect - Held that: it is evident that there is no loss of revenue in case of failure to file declarations under section 197A of the Act as the provision relates to cases where no tax is deductible - Once it is held that the proviso is remedial in nature, in the light of the law laid down by the Supreme Court in the decisions cited hereinabove, the proviso is required to be treated as retrospective in operation. The Tribunal was, therefore, right in law and on facts in directing that the penalty should be calculated in accordance with the proviso to section 272A (wherein it is stipulated that the penalty should not exceed the tax deductible) by giving retrospective effect to the proviso. - Decided in favor of the assessee
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2012 (3) TMI 319
Deemed income u/s 41(1) - refund of excise duty - The ground given by the tribunal for deleting the said addition is that the Excise Department had appealed against the judgment passed by the learned single Judge of this Court pursuant to which refund of Rs.42,05,173/- was granted - Held that: the furnishing of bank guarantee itself when payment has been received, will not make any difference as the language of Section 41(1) is clear that the amount should have been received either in cash or in any other manner - Decided against the assessee
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Customs
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2012 (3) TMI 328
Writ petition- petitioner had submitted that the petitioner would deposit 25% of the total amount payable by the petitioner, as duty and penalty, as pre-deposit, for the hearing of the appeal, in Appeal No.49/2011, pending on the file of the second respondent - first respondent had no objection - the first respondent is directed to hear the appeal and pass appropriate orders thereon, within a period of three months from the date of receipt of a copy of this order - appeal will stand dismissed on the failure of the respondent to compny with the laid conditions as per the order of the second respondent.
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2012 (3) TMI 311
Waiver of pre-deposit - the learned counsel appearing on behalf of the respondents had submitted that the petitioner has been directed to pay the penalty, as he had abetted in the irregularities committed by the original assessee - Held that: the original assessee, namely, Visaka Industries Limited, had already paid nearly four and half crores, as pre-deposit for the hearing of the appeal filed by the said assessee - Decided in favor of the assessee
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2012 (3) TMI 310
Clearance of import goods - 104 units of old and used Digital Multifunction Printing and Copying Machines and 10 units of old and used photocopying machines - circular no.42/2001 issued by CBEC, New Delhi, providing for speedy clearance of goods imported - Held that :- while the authorities insisted for proper documentation to clear the consignment, a statement was made by the petitioner before the authorities concerned stating that he was unaware of the import consignment and documents and it is a settled legal position that once a statement is made under Section 108 the petitioner's claim for assessment or provisional assessment cannot be considered - thus the petitioner as a matter of right, cannot claim release of the goods as long as the statement made by him is still in force - mere production of Bill of Entry, Invoice of the goods, packing list and Bill of Lading, will not give any right over the property - the burden is on the petitioner to prove his ownership - Writ Petition stands disposed of
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Corporate Laws
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2012 (3) TMI 309
winding up petition - For a winding up petition to be allowed, the petitioner is required to show that the alleged admission is clear and unambiguous. In the present case, the respondent-company has not denied the letter dated 26th March, 1998 but at the same time has set up the defence that subsequent to the abovesaid letter, two debit notes dated 30th June, 1998 had been issued by the sister concern of the respondent-company. the jurisdiction of Company Court is summary in nature and the issues of inter-se transactions between the parties and the veracity of the debit notes cannot be examined in the present case as it involves disputed questions of fact and would require evidence to be led. Certainly, the defence set out by the respondent in its reply to the statutory notice cannot be said to be a moonshine or sham. - Consequently, the present petition dismissed
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Service Tax
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2012 (3) TMI 337
'Construction Service' – civil construction for BSNL, MHADA and MTDC - period involved September 2004 to March, 2008 – assessee contending no liability to pay service tax since services are not rendered to commerce or industry - Held that:- With regard to the construction of civil structure on behalf of MHADA - it is a construction of buildings under re-development scheme of the State Government for the welfare of the poor people for their rehabilitation - service does not come under ‘construction service' as defined under the Finance Act, 1994. MTDC - said structure has been constructed for development of that area for tourism purposes and tourism itself is an industry - said civil construction comes under the category of ‘Construction Service'. With regard to the structure constructed for BSNL – leveling platforms for installation of tower is also under the nature of ‘civil construction' and BSNL is also engaged in telecommunication industry - covered under the category of ‘Construction Service' However, since activity of ‘construction service' came under the service tax net w.e.f 10.09.2004, therfore, no service tax is payable on the service rendered prior to 10.09.2004 – Decided partly in favor of asseseee
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Central Excise
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2012 (3) TMI 327
Interest u/s 11AA - Appellants have not raised the issue of provisional assessment before the lower authorities - Held that: interest liability under rule 7(4) of the 2001 Rules would arise only if the provisional assessments were made after 1/7/2001 and in the present case, the provisional assessment, if any, being prior to 1/7/2001, the interest liability would not apply - Decided in favor of the assessee
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2012 (3) TMI 326
Classification - poultry keeping equipment - poultry cages, welded wire mesh for poultry industry etc. - parts of Rearing and Laying Units or Batteries viz top, bottom and partition made from G.I. wire - held that:- there can be no doubt that the Wire mesh manufactured by the petitioner even if sold to a poultry farmer for assembling of cages for poultry or battery of such cages cannot qualify as machinery under heading 84.36 and would be an article of iron and steel wire within the meaning of heading 7314.
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2012 (3) TMI 308
Classification of the fermented milk product and non-fermented milk based beverage under the Central Excise Tariff Act,1985 - Claming exemption under Notification No. 01/2011-CE dated 01/03/2011 - applicant is engaged in trading of dairy products set up a manufacturing unit in which they propose to manufacture a fermented milk product and non-fermented milk based beverage - The applicant has expressed the view that the product “Yum Creamy” will be classifiable under heading 04039090 of CETA and the product “Yum Chusky” would get classified under heading 22029030 of the CETA and will also be eligible for the exemption under notification No. 1/2011 – CE dated 01/03/2011 as it satisfies the description “flavoured milk of animal origin” mentioned in the said notification - Held that:- The products “Yum Creamy” and “Yum Chusky” shall be classifiable under headings 04039090 and 22029030 respectively of the Central Excise Tariff Act, 1985; - The product “Yum Chusky” will be eligible for exemption under the Notification No. 01/2011 – CE dated 01/03/2011, subject to the applicant fulfilling the conditions prescribed in the said Notification.
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2012 (3) TMI 307
Condonation of delay - Time limitation - The submission of the Petitioner is that notwithstanding the fact that the Legislature under the proviso to Subsection (1) of Section 35 has laid down an outer limit of a further period of thirty days, beyond the original period of sixty days, for condonation of delay, this does not oust the power of the Court under Section 5 of the Limitation Act, 1963 - Counsel appearing on behalf of the Petitioner submits that unlike Section 35H which provided an absolute period of limitation of 180 days, Section 35 to which the present Petition relates, does provide a power to condone a delay beyond sixty days though upto an extent of thirty days - Once the legislature has laid down a period within which an appeal has to be filed and has prescribed the extent to which a delay beyond that period can be condoned, recourse to the provisions of Section 5 of the Limitation Act, 1963 would stand “ expressly excluded” within the meaning of Section 29(2) of the Limitation Act, 1963 - Decided against the assessee
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