Development rebate claim cannot be denied solely for no reserve in a loss year if statutory conditions can still be met later.

Development rebate under the statutory scheme could not be rejected merely because no reserve had been created in the loss year. The court held that the claim had to be examined on merits, including whether the reserve could be created within the permissible period and whether the rebate could then be allowed or carried forward in accordance with the Act. The absence of a reserve at the initial stage was not by itself fatal where the statutory conditions might still be satisfied later. The reference was answered against the Revenue and the assessee's claim was directed to be reconsidered under the governing provisions.

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Issues: Whether the assessee was entitled to claim development rebate for the assessment year 1965-66 without first creating a development rebate reserve.

Analysis: The reference was decided in the light of the principle that creation of the reserve is necessary for actual allowance of development rebate, but the mere absence of such reserve in the relevant year, where the assessee had suffered a loss, did not justify denial of the claim at the threshold. The matter was required to be examined on merits, including whether the reserve could be created in a later year within the permissible period and whether the claim could then be adjusted under the statutory scheme governing development rebate.

Conclusion: The question was answered against the Revenue and in favour of the assessee; the Tribunal was held to be justified in not ignoring the claim and in directing reconsideration of the development rebate issue.

Final Conclusion: The reference was disposed of by holding that the assessee's claim for development rebate could not be rejected merely because no reserve had been created in the loss year, and the matter was to be considered in accordance with the statutory conditions for allowance and carry forward.

Ratio Decidendi: A claim for development rebate cannot be denied solely for want of a reserve in the year of loss if the statutory scheme permits the reserve to be created and the rebate to be allowed within the prescribed period.

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