Development rebate reserve can be created before assessment is completed, without an implied year-end deadline.

The proviso requiring creation of a development rebate reserve under section 10(2)(vib) of the Indian Income-tax Act, 1922 was construed as demanding that the reserve be created, but not as imposing any implied deadline before the close of the accounting year or before preparation of the profit and loss account. The reserve entries could validly be made after year-end, provided they were made before assessment was completed. The reasoning also drew support from the assessee's ability to revise a return before assessment, indicating that corresponding accounting entries could likewise be corrected until assessment. The question was answered in favour of the assessee and against the department.

---

---

Issues: Whether the requirements of proviso (b) to section 10(2)(vib) of the Indian Income-tax Act, 1922, for creation of a development rebate reserve were satisfied when the reserve entries were made after the close of the accounting year but before the assessment was completed.

Analysis: The statutory condition was held to require that a development rebate reserve be created, but not necessarily before the close of the accounting year or before preparation of the profit and loss account. The Court declined to read into the proviso any additional temporal restriction not expressed by the legislature. Reference was made to the assessee's statutory ability under section 22(3) of the Indian Income-tax Act, 1922, to revise the return before assessment, supporting the view that corresponding entries in the books or profit and loss account could also be corrected before completion of assessment. The entries remained capable of being accepted or rejected by the Income-tax Officer until assessment was made.

Conclusion: The requirements of proviso (b) to section 10(2)(vib) were satisfied, and the question was answered in the affirmative in favour of the assessee and against the department.

Ratio Decidendi: Where the statute requires creation of a development rebate reserve, the reserve may validly be created and reflected in the accounts at any time before assessment is completed, unless the statute expressly requires the entries to be made before the close of the accounting year.

---