just indent your code correctly:

def determine_period(universe_array):
    period=0
    tmp=universe_array
    while True:
        tmp=apply_rules(tmp)#aplly_rules is a another function
        period+=1
        if numpy.array_equal(tmp,universe_array) is True:
            return period
        if period>12:  #i wrote this line to stop it..but seems its doesnt work....help..
            return 0
        else:   
            return period

You need to understand that the break statement in your example will exit the infinite loop you've created with while True. So when the break condition is True, the program will quit the infinite loop and continue to the next indented block. Since there is no following block in your code, the function ends and don't return anything. So I've fixed your code by replacing the break statement by a return statement.

Following your idea to use an infinite loop, this is the best way to write it:

def determine_period(universe_array):
    period=0
    tmp=universe_array
    while True:
        tmp=apply_rules(tmp)#aplly_rules is a another function
        period+=1
        if numpy.array_equal(tmp,universe_array) is True:
            break
        if period>12:  #i wrote this line to stop it..but seems its doesnt work....help..
            period = 0
            break

    return period

Stick with your first solution. Loops can become very involved and one or more clean breaks can be a lot easier on you, anyone else looking at your code, the optimizer, and the program's performance than elaborate if-statements and added variables. My usual approach is to set up a loop with something like the "while (true)" and get the best coding I can. Often I can and do then replace the break(s) with a standard loop control; most loops are pretty simple, after all. The ending condition should be checked by the loop structure for the reasons you mention, but not at the cost of adding whole new variables, adding if-statements, and repeating code, all of which are even more bug prone.