Development rebate can be carried forward without reserve creation when the relevant year has no taxable income or loss.

Development rebate under section 33 may be carried forward where the assessee had no assessable profits or suffered a loss in the relevant year. The statutory reserve requirement under section 34(3)(a) arises only when income is available in that year from which the reserve can actually be created; if there is no taxable income, creation of the reserve is not a condition precedent to claiming the rebate in a later year when profits arise. The issue was therefore answered in favour of the assessee, and the Revenue's challenge failed.

---

---

Issues: Whether development rebate under section 33 could be allowed and carried forward to subsequent years without creation of the reserve required by section 34(3)(a) when the assessee had no assessable profits or had incurred a loss in the relevant year.

Analysis: The Court accepted the settled position that where there is no total income or there is a loss, no development rebate can be actually allowed in that year, but the rebate may be carried forward. It further held that the obligation to create the statutory reserve arises only out of income available in the relevant year from which such reserve can actually be created. If there is no taxable income, the assessee is not bound to create the reserve as a condition precedent to claiming the rebate in a later year when profits arise.

Conclusion: The issue was answered in the affirmative, in favour of the assessee.

Final Conclusion: The reference was answered in favour of the assessee on the development rebate issue, and the Revenue's challenge failed.

Ratio Decidendi: Development rebate may be carried forward where the assessee had no taxable income or suffered a loss in the relevant year, and the statutory reserve requirement does not arise unless income is available to create such reserve in that year.

---