Section 80-IA deduction cannot be denied where earlier eligible business losses were already set off against other income.

Section 80-IA deduction was available for profits of the eligible business, with the business treated as the only source of income for the relevant computation period. The fiction in Section 80-IA(5) was confined to calculating the deduction from the initial assessment year and did not allow the Revenue to reopen earlier losses that had already been set off against other income. Applying the settled Chapter VI-A interpretation and its earlier binding decision on the same issue, the court found no distinguishing facts and upheld the assessee's claim, rejecting the appeal.

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Issues: Whether the assessee was entitled to deduction under Section 80-IA of the Income-tax Act after earlier losses of the eligible business had already been set off against other income.

Analysis: The Court applied the settled interpretation of Chapter VI-A and Section 80-IA, holding that the deduction is for profits of an eligible business treated as the only source of income for the relevant computation period. It accepted that the fiction in Section 80-IA(5) is limited to the purpose of determining the quantum of deduction from the initial assessment year onward, and does not permit the Revenue to reopen losses of earlier years that had already been absorbed against other income. Following the earlier binding decision on the same issue, and finding no distinguishing factual feature, the Court held that the assessee's claim could not be denied on the basis of prior set-off losses.

Conclusion: The deduction claim was upheld and the appeal was rejected.

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