Development rebate allowed without reserve where assessed income was nil, and the carry-forward claim was also accepted.

Where the assessed income for the relevant year was nil, the assessee was not required to create a development rebate reserve as a condition for claiming development rebate. Applying binding precedent, the Court held that the rebate was allowable despite the absence of such a reserve in that year, and the consequential claim to carry it forward to the following year also succeeded. The operative principle was that nil assessed income removes the reserve-creation condition otherwise linked to the allowance of development rebate.

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Issues: (i) Whether the assessee was entitled to development rebate notwithstanding that no development rebate reserve had been created in the assessment year in which the assessed income was nil. (ii) Whether the assessee was entitled to have the development rebate carried forward to the following year.

Issue (i): Whether the assessee was entitled to development rebate notwithstanding that no development rebate reserve had been created in the assessment year in which the assessed income was nil.

Analysis: The assessment year was one in which the income assessed was nil, though the books reflected commercial profits. The question was governed by the earlier binding decision of the Court which held that where there was no taxable income in the relevant year, the assessee was under no obligation to create a development rebate reserve as a condition for earning the benefit of development rebate.

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

Issue (ii): Whether the assessee was entitled to have the development rebate carried forward to the following year.

Analysis: Once it was held that the assessee was entitled to development rebate despite the absence of a reserve in a year of nil assessed income, the consequential claim for carry forward of the rebate followed on the same legal basis. The Court applied the binding precedent and accepted the Revenue's reference to the circular consistent with that position.

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

Final Conclusion: The reference was decided in favour of the assessee by holding that development rebate could be allowed and carried forward even though no reserve had been created in the year in which the assessed income was nil.

Ratio Decidendi: Where the assessed income for the relevant year is nil, the assessee is not required to create a development rebate reserve as a condition for claiming and carrying forward development rebate.

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