Section 80-IA deduction cannot revive already absorbed losses; deeming fiction stays limited to eligible business computation.

Section 80-IA deduction is computed by applying the deeming fiction in sub-section (5) only for the limited purpose of quantifying profits of the eligible business for the initial and subsequent assessment years. Earlier years' losses or deductions that had already been absorbed against other income cannot be reopened, recomputed, or notionally set off again against current eligible-business profits. The statutory fiction cannot be extended beyond its intended scope, so the assessee was entitled to claim the deduction without bringing back already adjusted past losses.

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Issues: Whether, for the purpose of deduction under section 80-IA, losses of earlier years that had already been set off against other income could be notionally brought forward and adjusted again against the profits of the eligible business.

Analysis: Section 80-IA operates as a deduction provision for eligible business and sub-section (5) contains a non obstante and deeming clause for computing the quantum of deduction. The relevant computation is to be made with reference to the initial assessment year and the subsequent assessment years, treating the eligible business as the only source of income for that limited purpose. Losses or other deductions that had already been absorbed in earlier years against other income cannot be reopened and notionally set off again, since the statutory fiction cannot be extended beyond its intended scope.

Conclusion: The earlier years' losses already set off against other income could not be recomputed or brought forward notionally under section 80-IA(5); the deduction claimed by the assessee was allowable.

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